Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SMCP SA (XPAR:SMCP, Financial) achieved resilient sales performance across most regions despite challenging macroeconomic conditions.
- The company implemented essential measures to streamline its network, improve cost efficiency, and optimize production processes, leading to improved profitability in the second half of 2024.
- Strong cash management resulted in significant free cash flow generation, enabling a substantial reduction in net debt.
- The digital sales channel remains robust, contributing approximately 20% to overall sales.
- SMCP SA (XPAR:SMCP) made progress in sustainability initiatives, including adopting a biodiversity strategy and implementing a worldwide parental policy.
Negative Points
- Overall sales decreased by 1.5% at constant foreign exchange rates, with a notable decline in China due to network optimization and challenging economic conditions.
- The company faced short-term costs related to restructuring and network optimization, impacting profitability.
- Asia, particularly China, experienced an 18% organic sales decline due to decreased traffic and store closures.
- The EBIT margin was affected by exogenous factors such as inflation in rents and salaries, and restructuring costs.
- The company remains cautious about achieving a 10% EBIT margin target, now expected in the second half of 2026 instead of the full year.
Q & A Highlights
Q: Could you elaborate on the trends by geography for the beginning of the year, particularly in January and February?
A: Isabelle Guichot, CEO, noted that the market is currently not very supportive due to geopolitical and macroeconomic uncertainties. However, SMCP's four brands have had an encouraging start to their spring-summer collections. The company continues to gain market share in France, remains positive in EMEA, and is seeing a stabilization of like-for-like sales in China.
Q: In China, do you see any positive signs of recovery? Could you elaborate on the first encouraging KPIs in China mentioned in the presentation?
A: Isabelle Guichot explained that while it's difficult to comment on China at the beginning of the year due to the changing timing of the Chinese New Year, there is a stabilization and improvement in like-for-like sales. This improvement is attributed to the contraction of the network, with 65 stores closed, which may have been done earlier than competitors.
Q: At the group level, the network optimization cut sales by EUR16 million in 2024. Should we expect the same magnitude in 2025?
A: Patricia Despointes, CFO, indicated that the EUR16 million figure is a good proxy for the impact expected in 2025.
Q: What is the impact of tariffs on the business in the USA?
A: Isabelle Guichot stated that the impact of Chinese tariffs has been anticipated and should not significantly affect 2025. The company has already prepared a large part of the spring-summer and fall-winter collections and has mitigated risks by negotiating with suppliers and adjusting prices if necessary.
Q: What is the precise amount of restructuring one-off costs in 2024 factored into your OpEx?
A: Patricia Despointes mentioned that the total one-off costs are about EUR10 million, with EUR4 to 5 million attributed to restructuring and the rest mostly in depreciation and amortization.
Q: How did you manage to reduce your stock in 2024?
A: Isabelle Guichot explained that the reduction in stock was achieved through strict control of old collections and better monitoring of forecasts, demand planning, and store clustering. This collective effort has paid off, showing in the company's ability to manage inventory levels effectively.
Q: Can we expect an improvement in working capital in 2025, particularly in inventory?
A: Patricia Despointes noted that while the current inventory level is satisfactory, the company will focus on optimization rather than significant decreases, aiming for improvements in specific areas or brands.
Q: What are your ambitions for 2025 regarding partners? Do you plan to open new countries through partners?
A: Isabelle Guichot stated that the company aims to strengthen its partner activities, which gained one point in 2024, reaching 9% of total sales. Growth is expected in 2025, driven by Sandro and Maje, with developments in the Middle East, India, Southeast Asia, and South America.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
