Private equity giant Kohlberg Kravis Roberts & Co. LP, which holds a 70 percent stake in the group, is seeking a listing on the Euronext Paris stock exchange. SMCP filed an offer document with French stock market regulator AMF on Monday.
“The listing would be for this year, potentially within the first half, depending on market conditions,” SMCP president and chief executive officer Daniel Lalonde told a press conference on Tuesday.
“Some of the capital increase will be used to refinance a portion of the debt, and the rest to accompany the development of the group in its priorities,” he added.
The firm hopes the primary offering will raise between 150 and 175 million euros, or $163.8 million and $191 million at current exchange, which it plans to use mainly to pay back a portion of the high-yield bond it launched in 2013 to raise 290 million euros, or $385 million at average exchange, to help fund KKR’s acquisition.
Lalonde declined to comment further on the size of the planned offering.
SMCP’s operational debt was three times its earnings before interest, taxes, depreciation and amortization at the end of 2015, and through the potential IPO, the firm hopes to reduce its debt to a multiple of less than two times EBITDA, said Philippe Gautier, group chief financial officer.
It is not clear whether KKR wishes to exit SMCP after the IPO. “It is not out of the question that they will remain,” Lalonde said. “In the past, they have exited their investment entirely, and in Europe, sometimes they have maintained a shareholding.”
The news came as SMCP reported that revenues rose 33 percent in 2015 to 675 million euros, or $748 million at average exchange rates for the period. Sales were up 11 percent in comparable terms.
The fast pace surpassed the 20.5 percent increase in sales in 2014, when the Paris-based group marked its fifth consecutive year of growth in excess of 20 percent — and eclipses recent results from Europe’s big luxury players.
The group, which does not usually publish earnings, said EBITDA rose 44 percent to 107 million euros, or $118 million, and has increased on average 21 percent a year since 2012. The EBITDA margin was up 130 basis points to 15.8 percent.
Sales in France, which accounted for 49.6 percent of SMCP’s revenues in 2015 — the first time the company has reached parity between its domestic and international operations — grew 12 percent last year, or 9 percent on a like-for-like basis. In 2012, exports only accounted for 28 percent of the firm’s sales.
International revenues grew 61 percent, boosted by the three brands’ expansion in North America and Asia, especially China, and its entry into the Middle East via master-franchisee Royal Sporting House, part of Majid Al Futtaim. On a like-for-like basis, exports increased 15 percent.
Broken down by brand, 49 percent of sales came from Sandro, which saw growth of 25 percent. Maje accounted for 40 percent of business, and grew 46 percent, while Claudie Pierlot, with 11 percent of sales, saw a 28 percent rise in revenues.
One of the strongest growth drivers was digital, Lalonde said, with e-commerce sales via branded and partner sites growing 138 percent year-on-year to account for 6.2 percent of revenues, compared with 3.5 percent a year earlier.
Last year, SMCP upgraded its brands’ Web sites, simplifying navigation and adding new functionalities such as click and collect. “Often, our customers first discover our brands online,” Lalonde said.
Accessories, a category that the firm was virtually absent from until last year, were another growth driver, accounting for 6 percent of total revenues in 2015. Accessories sales grew 42 percent in the fourth-quarter versus the same period a year earlier, and Lalonde noted Maje had registered strong first-week sales for its M bag, which he hopes will become a bestseller.
The executive said prospects for the accessible luxury segment were bright.
“We are convinced it is the most dynamic and buoyant segment — more dynamic than luxury right now and more dynamic than mass,” he said.
Lalonde cited the results of a Boston Consulting Group study from October suggesting that the market should see a compound annual growth rate of 6 percent over the next five years. This compares to the 4 percent growth predicted for luxury and 2 percent for mass, he said.
“By putting up their prices in recent years, luxury brands have created a gap in the market between luxury and accessible luxury,” Lalonde said. “Our business model is very unique and difficult to copy and is based on two concepts: being a pure player in retail and combining the codes of luxury with the codes of fast fashion.”
For the next three years, SMCP is targeting a CAGR of 11 percent to 13 percent, or 3 percent to 5 percent on a like-for-like basis. It plans to open between 80 and 100 stores net this year. The group operated 1,118 stores in 33 countries as of Dec. 31. It opened a total of 139 stores last year, including 101 wholly owned points-of-sale, with new markets including the Middle East and Australia, both with franchise partners.
The priority markets for expansion are the U.S., Greater China, the U.K., Spain and Italy.
“There is a lot of room to grow in those markets in a very disciplined and targeted way in big cities. Frankly, we are just at the beginning of the international adventure,” Lalonde said. At year-end SMCP had 115 stores in the U.S., 70 in the U.K., 60 in Greater China, 57 in Spain and 13 in Italy.
Lalonde highlighted the potential of the Chinese market, noting that between 2011 and 2020, the number of households entering the middle class in China will grow from 33 million to 85 million. “They represent new customers for us,” he said.
SMCP is still absent from the Japanese market but hopes to establish a presence there within two to three years. “We strongly believe in the Japanese market,” Lalonde said.
KKR said in October that it was evaluating “strategic options” for the business with an eye toward supporting the “future growth and development of the company.”