PARIS – The slowdown in China is not just hitting luxury brands. Sales at SMCP, parent company of contemporary labels Sandro, Maje, Claudie Pierlot and Fursac, ticked down just under one percent on an organic basis in the third quarter due to weak sales in China.
Sales for the company were down 0.9 percent in the third quarter to 292.6 million euros, with the Asia-Pacific region leading the drag. Due to the ongoing weakness in China, sales for the APAC region were down 18.6 percent year-over-year to 47.7 million euros.
The group cited low consumer confidence in China as the reason behind the ongoing slowdown, and it has continued to shutter stores in the country. In the third quarter, it closed 10 stores in China.
“As anticipated, our growth in the third quarter progressively improved, but remains impacted by the deteriorated environment in China,” said SMCP chief executive officer Isabelle Guichot. “We continued to implement our action plan (particularly in China), and notably made significant progress in pursuing the store network optimization plan, as well as in renegotiations with our lessors.”
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“In China, third-quarter sales continue to be impacted by a deteriorated environment and a decline in traffic,” the company said in a statement.
The group is pushing ahead with its action plan announced earlier this year to realign its store make up in the region closing doors in China while accelerating its shift to new markets in India, Indonesia and the Philippines.
In April, the company said it would close 100 locations over the next two years, with the cuts focused on China. That will reduce its store footprint by 15 to 20 percent this year. Following the closings, it now operates 1,666 points of sale around the globe.
“Nevertheless, the group remains fully confident in the potential of the Chinese market and is implementing initiatives to capitalize on upcoming opportunities when demand picks up,” it said.
The Americas were a brighter spot. Sales were up 6.6 percent on an organic basis to 45 million euros in the third quarter on the strength of SMCP’s Sandro and Maje brands, despite five net closings during the time period in the region. It opened Sandro and Maje outposts in Montreal’s new Royalmount center alongside Louis Vuitton and Gucci.
The company is looking to capitalize on the growth in the region; it appointed former Stella McCartney executive Ida Simonsen as president and CEO for North America earlier this month to drive growth in its wholesale and retail business.
The outlook was more positive for Europe, outside of France, with sales up 5.4 percent on an organic basis in the third quarter to 102 million euros. The boost in sales in the region was credited to the company’s “strict full-price strategy,” another of the key pillars of its turnaround strategy.
“Like-for-like performance is positive in the largest retail markets. Retail partners trend remains positive, notably in the Middle East,” the company said.
It continued with targeted store closures in the region with its Claudie Pierlot brand, with 15 net closings in Europe during the third quarter, seven of those in its home country of France. That is in line with its turnaround plan announced earlier this year, to focus on wholesale and online operations for the Claudie Pierlot brand.
In France sales were flat, up less than half a percent to 97.8 million euros, even as the company took a hit during the Olympics “particularly in Paris, with touristic flows concentrated over just a few weeks, coupled with a drop in local consumer traffic,” the company said.
The fourth quarter should be looking up with an increase in footfall since the beginning of September. SMCP highlighted sales at star brands Sandro and Maje as being particularly strong.
Sales were down 2.7 percent on an organic basis in the first nine months of the year to 878 million euros, once again dragged by China sales, which were down 19.5 percent to 153.9 million euros.
Looking ahead, the company will remain focused on its turnaround plan. “In a macroeconomic environment that remains complex and uncertain, SMCP continues to focus on executing its action plan to ensure financial strength and support future growth,” it said. “The group remains committed to a sound management of cash and debt, through expense optimization and careful inventory management.”
