SMCP hit by tough finale to 2023 as profits fall, but sales still edged up

SMCP’s full-year results Wednesday saw it confirming that sales rose 4% at constant exchange rates (3% on an organic basis) to reach €1.231 billion. But net profits still plummeted and the company is intensifying its efforts to boost its brands and control costs.

The company said the average in-season discount rate had stayed “nearly stable vs 2022, despite a challenging and very promotional environment in several markets”. 

But while the group’s adjusted EBIT was down 28% year on year, it improved in the second half and reached €79.5 million (or 6.5% of sales) for the 12-month period. Adjusted EBITDA fell to €236 million from €267 million. 

Net profit plummeted to €11 million. It was €37 million excluding one-off items, but exactly a year ago it had reported net profit for January-December 2022 of €51 million.

However, SMCP saw an improvement in cash generation during the second half and its net debt reduced compared to 2022.

The firm faced the same major headwinds during the period that much of the fashion retail sector had to deal with and its performance varied across regions and brands.

Sales in France at €413 million were just about stable compared to a year ago. The second half was impacted by a traffic slowdown there, especially in December, “due to persistent inflation which affected consumer purchasing power”. But digital sales were good. 

In the rest of the EMEA region (excluding France) its annual sales rose 3.1% on a reported basis and 3.2% organic to reach €388.8 million. It saw good like-for-like sales, despite a high basis of comparison. But after a pleasing performance in the first half (+9%), H2 was impacted by inflation and a demand slowdown. Germany, Spain and the Middle East “performed well”, but the year was tougher in the UK and in Switzerland “due to low tourism flow”.

In America, reported sales fell 6% and organic sales fell 3% to €173.4 million “after two years in a row of outstanding performance”. But the second half saw an improvement. US sales remained resilient, and Canada returned to growth in Q4.

Meanwhile in Asia Pacific, reported sales were up 10.6% and organic sales up 12.5% at €255.2 million. Except for Korea and Taiwan, all the markets made progress. Greater China saw double-digit growth and the group also benefited from a good performance in Hong Kong, Macau, Singapore, and Malaysia, and “from the internalisation of Australia & New Zealand network”.

Brands in the spotlight

Looking at the overall performance for each of its brands, sales at the largest one – Sandro – were up 3.3% reported and 4.2% organic at €601.4 million. But another of its star brands – Maje – didn’t do so well with a 1.1% reported drop and flat organic sales at €462.5 million. Its ‘other brands’ – Claudie Pierlot and Fursac – were up 6.5% on both a reported and organic basis at €166.6 million.

However, in Q4 alone all of the brands saw declines on both a reported and organic basis ranging from a tiny 0.4% up to 4.2% with the ‘other brands’ declining the most.

CEO Isabelle Guichot talked of “a deteriorating macroeconomic environment marked by a slowdown in consumption and high inflation”. But she added that “we have been able to preserve the company’s financial strength”.

As for this year, she said “a similar trend is expected, at least in the first half”.

And what will the company do about that? “We have decided to accelerate our action plan to revive our profitable growth momentum,” she explained. “We will particularly intensify our efforts to enhance the desirability of our brands and in digital, optimise our store network across various regions and deeper delve into cost management, while maintaining our focus on profitability and cash generation. We expect to see the first benefits of this plan by 2024, with further acceleration from 2025 onwards.”