PARIS – It came as no surprise that Sandro, Maje and Claudie Pierlot’s sales were down in the third quarter, following the company’s warning to investors back in September that its numbers would decrease due to inflation in Europe and the slower than anticipated recovery in China.
The results delivered on that warning, with the French accessible luxury group SMCP posting a slight sales slump for the period, down 1 percent at constant exchange to 295 million euros.
“As expected, in a deteriorating economic environment, with a slowdown in consumer spending in Europe and America, a slow recovery in the Chinese economy and despite a more positive trend in the rest of Asia, we recorded a slight decline in sales over the quarter,” said SMCP chief executive officer Isabelle Guichot, in a statement.
“In this context, since several months we have been implementing an action plan based on pursuing our full-price strategy, prioritizing our investments, enhancing the quality of our physical and digital networks, and improving the productivity of our teams. This action plan is starting to bear fruit, and we expect to see an increasing impact in the fourth quarter. Despite the macroeconomic environment, we are confident that our action plan, supported by our dedicated teams and the strong desirability of our brands, will enable us to pursue our growth trajectory,” she added.
Despite the caution against Europe and China, it was the Americas where sales slowed the most, down 6.5 percent year-over-year in the third quarter.
The company cited Canada as the biggest weight, with the country “still heavily impacted by the deep reconstruction of the retail market environment and the lack of tourism,” the company said. The U.S. was steadier for the group, with key markets including Southern cities like Houston and Miami remaining resilient.
It’s continuing to invest in the U.S., opening nine points of sale there in the third quarter.
The inflation that has been hanging over Europe impacted company sales. In its home country of France, SMCP saw sales notch down slightly, falling 1.6 percent at constant currency. “The period was impacted by lower traffic due to persistent inflation, which mechanically affects the purchasing power of both local consumers and tourists,” the company said.
Online sales were the a positive note in the country, SMCP noted.
In Europe and the Middle East, sales were down 2 percent, particularly impacted by declines in the U.K. as it grapples with the cost of living crisis, and Italy, where tourist flows slowed.
In the Middle East region, the group opened 20 points of sale in the quarter, including expanding into Egypt, where it said sentiment was positive.
Asia was the slight bright note for the bottom line, where sales inched up 1 percent at constant currency. Still, the company had counted on a boom there that didn’t materialize. It cited a “weak economic recovery” in the quarter.
The boost in sales was mostly due to sales outside of China, including Singapore and Malaysia, and openings of new stores, as it added 17 points of sale in the region in the third quarter.
By brand, the twenties-targeted women’s line Maje saw the biggest decline, with sales down 3.2 percent in the third quarter. SMPC’s Sandro brand, which has both men’s and women’s lines, saw sales clipped 2.2 percent. The combined category grouping its women’s Claudie Pierlot and men’s brand Fursac together was a bright spot brand-wise, ticking up 2.4 percent.
SMPC is still pursuing its full-price strategy, plus cutbacks in its inventory. “Particular attention is being paid to controlling inventory levels; aiming to stabilize the level at year-end,” it said.
Staffing at the head office in Paris has also been reduced as the company is focusing on efficiency. “The savings plan is starting to deliver the expected positive effects, which will be consolidated in the fourth quarter,” the company said on adjusting its staffing levels.
Marketing and omnichannel spending will get a boost as the company seeks to up its brand value in key markets.
“Thanks to this action plan, supported by committed teams and strong brand desirability, and provided that the geopolitical situation and the macroeconomic and social context do not deteriorate further in the fourth quarter, SMCP is confident in its resilience, and confirms its annual targets revised in September,” it said.
For the full year, the company now targets mid-single-digit sales growth at constant currency and an adjusted earnings before interest and taxes margin of between 7 percent and 9 percent.