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SMCP SA (XPAR:SMCP) (Q2 2024) Earnings Call Highlights: Navigating Challenges with Strategic ...

Published 2024-10-09, 09:11 a/m
SMCP SA (XPAR:SMCP) (Q2 2024) Earnings Call Highlights: Navigating Challenges with Strategic ...
SMC
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GuruFocus -

  • Revenue: EUR 585 million, a decrease of 3.6% at constant FX and 5.5% like-for-like.
  • Gross Margin: Improved by more than 1 point, above 74%.
  • Adjusted EBIT Margin: 3.2% of sales.
  • Net Debt: Below EUR 300 million, lower than the same period last year.
  • Store Network: Decreased by 29 POS, mainly in China.
  • Digital Share: Remains above 20%.
  • France Revenue: EUR 202 million, flattish versus last year.
  • EMEA Revenue: EUR 192 million, 1% organic growth.
  • America Revenue: EUR 85 million, 6% organic growth.
  • Asia Revenue: EUR 106 million, 20% organic decrease.
  • Free Cash Flow: Minus EUR 9 million, stable compared to last year.
  • Debt-to-EBITDA Ratio: 3.05, higher than the contractual level of 2.5x.
  • CO2 Emissions: Reduced by 15% between '22 and '23.
Release Date: July 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • SMCP SA (XPAR:SMCP) reported a sequential improvement in sales performance in Q2 compared to Q1, with a decrease of only 2% in Q2 versus 5% in Q1.
  • The company achieved a gross margin ratio improvement of more than 1 point compared to last year, now standing above 74%.
  • Net debt was reduced to below EUR300 million, a decrease from the same period last year, due to effective inventory and CapEx control.
  • Sandro and Maje brands showed positive performance in all regions except China, contributing to overall resilience.
  • The company successfully reduced CO2 emissions by 15% between 2022 and 2023, highlighting its commitment to sustainability.
Negative Points
  • Overall half-year sales decreased by 3.6% at constant FX and 5.5% like-for-like, indicating a challenging market environment.
  • The adjusted EBIT margin was reported at 3.2% of sales, which is below the company's ambition, primarily due to under absorption of fixed OpEx and restructuring costs.
  • APAC region experienced a significant decrease in sales by 4 points, largely due to a challenging economic environment in China.
  • The company faced a decrease in wholesale revenues, attributed to a lower amount of price liquidation.
  • Net result landed at minus EUR28 million, with significant non-recurring charges, including impairments on goodwill and store assets.
Q & A Highlights Q: What is the current trading trend in July, and how does it compare to Q2?

A: The current trading in July is similar to the Q2 trend. However, July's trend may not necessarily reflect the entire Q3 trend, as an inflection was observed starting in August last year.

Q: What can we expect from the closure plan in China for H2, and how will it impact sales?

A: In H1, approximately 30 store closures were completed. In H2, about 40 closures are planned, mostly towards the end of Q3 and Q4. The impact on sales in H2 will be slightly higher than in H1.

Q: How do you foresee the impact of the Olympics on store traffic in Paris?

A: It's difficult to predict precisely. There are some tourist flows, but operations may be more complex in certain areas of Paris during the Olympics. Some stores are closed, and a decrease in traffic is observed in essential stores.

Q: What is the cost of restructuring mentioned for H1?

A: The restructuring cost is not significant, amounting to approximately EUR2 million in H1, with a bit more expected in H2.

Q: How do you explain the performance in France in Q2, and are you confident it will continue in H2?

A: The spring-summer collection performed very well in France for Maje and Sandro, as well as in Europe and America. The first wave of fall-winter collections is also performing well, so there is confidence in the quality of the upcoming collections.

Q: How does SMCP see its positioning in the fashion market between ultra-luxury and mass market?

A: There is a growing space between ultra-luxury and mass market. SMCP aims to gain market share in this challenging segment, and the company is achieving this in department stores, which is a significant accomplishment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This content was originally published on Gurufocus.com

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