Plan unveiled by SMCP to ensure profitability and support growth
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The French luxury conglomerate SMCP had a mixed 2023, with some successes and some disappointments. While their sales figures exceeded a 2% increase, totalling €1.23 billion, not all of their brands performed well. Sandro, for example, saw 3% growth and reached a turnover of €600 million while the French market remained strong, earning €413 million despite a decrease in consumer spending later in the year. However, the brand Maje only experienced a 1.1% growth, resulting in a final take of €462 million which was largely due to a couple of collections that failed to connect with consumers and margins that fell because of higher unexpected charges and financial costs.
SMCP CEO Isabelle Guichot discussed the company's plans for the future during the presentation of the annual results. She talked about a commitment to further social and environmental responsibility by rolling out an inclusivity policy worldwide and integrating more responsible products or materials into 59% of the Fall/Winter 2023 collections. In addition, the CEO emphasised the importance of the opening of flagship Sandro and Maje stores in New York and Los Angeles, as well as the role online sales now play, accounting for 22% of SMCP's total revenue, separate from their own brand websites and collaborations with third-party platforms such as Zalando, El Corte Inglès, and 24S.
SMCP's management managed to keep a stable proportion of full-price product sales in the challenging European market in the second half of 2023. Optimisation of costs started at the end of the year, and it resulted in improved gross margins through good cost management and monitored store cost growth during inflationary pressures.
Guichot explained that they have begun a thorough modernization plan in a conference call. "Our goal is to safeguard profitability and encourage growth, even in a challenging environment. There are opportunities to capture more market share," she said. The plan comprises four key elements. First, the perceived value of SMCP's brands needs to be enhanced. Second, they will adjust their operations to meet regional requirements, implement new services, and foster connections with various stakeholders. Third, they aim to extend their reach in underexploited areas. Lastly, they will evaluate the structure of their retail network.
To make the retail network more efficient, it is estimated that about 15% of the Chinese network comprising around 30 cities with underperforming operations will be shut down. According to Guichot, two to three-year lease agreements offer SMCP the flexibility to concentrate on stores that generate the most revenue. Their analysis will also guide them to areas where they may be able to run things differently. The aim is to move budgets to promising targets, especially in the United States, but also in areas like the Middle East and India.
SMCP's model, which accounts for just 8% of the revenue, may allow the group to expand into areas such as South America or the travel retail industry. These partnerships share risks with other parties. The company will also concentrate its investments on corners or pop-ups, which have been found to be more valuable per square meter.
Guichot clarified that there would be no significant impact on operations at brand headquarters despite the potential for employee reductions. By taking these steps, the group aims to achieve significant cost savings while remaining open to growth opportunities.
Meanwhile, the saga concerning the company's capital structure remains an ongoing saga. Former owner Shandong Ruyi defaulted on its debt in 2021 leading to the creditors BlackRock, Carlyle, Anchorage, Boussard et Gavaudan acquiring 28.8% of the group's shares avoiding a takeover. Currently, European Topsoho, a subsidiary of Shandong Ruyi, retains 8% of the shares pledged by creditors while 15.9% are held by Shandong Ruyi's founder's daughter. Further developments are expected and could potentially influence future operations for the French group.