SMCP, the parent company of well-known fashion brands Sandro, Maje, Claudie Pierlot, and Fursac, has recently unveiled its first-half (H1) results for the year, highlighting a mixed performance across various regions. Despite facing challenges in the Chinese market, the company reported resilient sales in other areas, particularly in the Americas and Europe.
According to the financial report, SMCP experienced a 3.6% decline in organic sales, totaling €585 million. However, the company noted a positive trajectory in the American market, where sales increased, and a sequential improvement in France during the second quarter (Q2). The report emphasized that the significant slowdown in consumption in China was a major factor affecting overall sales figures.
During the reporting period, SMCP’s flagship brands, Sandro and Maje, demonstrated growth in all regions except for China. The company attributed its performance to a strict full-price strategy, which resulted in a two-point decrease in the average in-season discount rate compared to H1 2023.
In examining the quarterly performance, Q2 proved to be more favorable for SMCP, with organic sales down only 2% at €298 million. However, the company’s profit took a hit, with adjusted EBIT (Earnings Before Interest and Taxes) dropping to 3.2% of sales, amounting to €19 million, a decline from the previous year’s 6% of sales and €36 million.
Several one-off factors contributed to this downturn, including restructuring costs and inflation. Nevertheless, these were somewhat counterbalanced by ongoing cost reduction initiatives. The net income reflected a loss of €27.7 million, a stark contrast to the €14 million profit reported a year earlier. This loss included €30 million in one-off expenses; without these, SMCP indicated that it would have achieved a break-even result.
Financial discipline remained a priority for SMCP, as evidenced by a 7% reduction in inventories and stringent control over investments. This approach led to a decrease in net debt and stable free cash flow, positioning the company for potential recovery.
Delving deeper into regional performance, sales in France saw a slight decline of 0.7%, totaling €202.5 million. However, the company reported a 6% increase in Q2 sales, bolstered by strong performance in physical stores, particularly in Paris and other regions, for its key brands.
In the broader EMEA (Europe, the Middle East, and Africa) region, organic sales rose by 0.8%, with reported sales increasing by 1.4% to €191.8 million. This growth came despite challenging comparisons to the previous year, when sales had surged by 9% in the first half.
The American market showed promising results, with organic sales up 8% and reported sales rising by 5.6% to €84.8 million. In contrast, the Asia Pacific region faced significant challenges, with organic sales plummeting by 19.9% and reported sales down 22.2% to €106.2 million, largely due to the ongoing slowdown in China.
By brand, SMCP’s largest label, Sandro, experienced a slight decline of 0.7% in organic sales and 1.1% in reported sales, totaling €292.3 million. Maje also faced a drop, with organic sales falling by 3.7% and reported sales down by 4.2% to €218.8 million, primarily attributed to difficulties in the Chinese market.
The performance of the ‘Other’ brands unit was also impacted, reflecting the overall challenges faced by SMCP in a rapidly changing retail landscape. The company continues to navigate the complexities of the global fashion market, focusing on maintaining operational efficiency and exploring growth opportunities in more favorable regions.
As SMCP moves forward, the emphasis on financial discipline and strategic brand management will be critical in addressing the challenges posed by declining sales in key markets, particularly China. The company remains committed to enhancing its market presence and adapting to evolving consumer preferences, while striving for recovery in the face of economic uncertainties.
