PARIS — Confident in its strategy of rapid expansion abroad, SMCP, the owner of French contemporary brands Sandro, Maje and Claudie Pierlot, has filed to list the group on the French stock market.
Analysts said the plans for an initial public offer, which exposes SMCP’s strategy to the scrutiny of financial markets, served as a display of the company’s optimistic outlook but also raised questions about the staying power of the Parisian fashion labels. The three Paris brands, which sell 300-euro cocktail dresses and 200-euro handbags, sit between the accessible and luxury spheres, competing with behemoths like fast fashion retailer Zara.
Mario Ortelli, an analyst with Bernstein, said the timing for the IPO comes against a backdrop of rising multiples in the luxury sector thanks to a bounce back in demand, particularly in Asia, that first appeared in the second half of last year.
However, he highlighted ever-changing consumer preferences as a potential longer-term challenge for the apparel company, whose brands have been worn by everyone from Gigi Hadid to Brad Pitt.
“The challenge is to be relevant to the consumer over time. It is a segment of the market that is highly competitive, in which it is very important to be the darling of the consumer thanks to innovation and ability to understand and tap into fashion trends,” noted Ortelli.
SMCP acknowledged the challenge by including evolving consumption habits among a list of potential business risks in its regulatory filing for the IPO, citing the rapid pace of changing tastes within the sector.
To assuage concern from prospective investors, the company pointed to its practice of complementing the release of two collections a year with a constant stream of additional products as well as capsule collections with other brands or stylists.
“Each week we offer 25 new products per brand in each store around the world,” Daniel Lalonde, president and chief executive officer of SMCP, told journalists Monday, wearing a black, fringed Sandro scarf with white specks.
“This is extremely important, Zara does this well, but there are a lot of ready-to-wear brands that don’t do this,” Lalonde added, noting that the company sees the frequent stocking of new products as an important way to draw customers into stores.
The company falls between fast fashion brands like H&M and Zara and accessible fashion labels like Ralph Lauren, Ted Baker, or Tory Burch, when it comes to speed in bringing clothes to market, executives said. Designing a piece and getting it into a store takes the company around a hundred days, compared to around 35 to 40 days for fast-fashion brands and upward of 135 days for some of its accessible fashion rivals, they said.
Owned by the Chinese conglomerate Shandong Ruyi Group, SMCP clocked an average of around 24 percent growth in sales over the past two years and aims to reach 900 million euros in sales this year. Sales over the first half grew 16.4 percent to 439 million euros, and earnings before interest, taxes, depreciation and amortization came to 73 million euros, a 19.5 percent rise from the previous year, the company said Monday. Funds generated from the listing, which the company aims to complete before the end of the year, will help finance the retail group’s development and reduce its debt.
SMCP, which targets women and men between the ages of 15 and 45, has nearly 500 stores in France, a level it plans to maintain while focusing on expansion in China, the U.K., Spain, Germany, Italy and North America. In the past three years it has set up more than a hundred stores in China.
The apparel maker aims to open 80 to 90 stores a year between 2018 and 2020 with sales growth around 11 to 13 percent over that period.
Lalonde also drew comparisons with Zara for sticking to its own store network for the sale of clothing and accessories for all three brands. One advantage is the ability to quickly identify and produce more of the most popular items, he explained.
Ortelli agreed that maintaining control of store networks offered brands like Zara and, on the higher end, Louis Vuitton, advantages associated with having direct contact with clients. But he also noted the fixed costs of a store network can pose a larger risk if business turns sour.
Speaking about the listing and SMCP’s robust growth targets, he said: “This is a story that many other companies have brought to the market, some of them in a very successful way for some time, some of them were successful in the beginning and then they had problems when the brand began to fade.”
Shandong Ruyi Group currently owns 82 percent of the company, which it plans to reduce to around 51 percent upon completion of the listing. The Chinese conglomerate, which oversees a vast textiles business, acquired the French apparel group last October in a deal estimated at 1.3 billion euros, including debt. SMCP’s founders and management reinvested as minority stakeholders, along with former owner private equity firm KKR, which retained around a stake of around 10 percent.
“We are about to reach a new milestone in SMCP’s life, with the support of our controlling shareholder Shandong Ruyi, and at a time when our three brands’ desirability continues to increase across the world,” said Lalonde.