Sandro Men's Fall 2019

PARIS — SMCP, the owner of Sandro, Maje and Claudie Pierlot, continues to push against the turbulence buffeting the global apparel sector with international expansion, posting a 7.9 percent rise in fourth-quarter sales despite disruption from the yellow vest protest movement at home.

Sales at the Paris-listed company were spurred on by growth abroad, particularly the Americas and Asia, along with digital business, which helped push it over the 1 billion euro mark for annual sales.

“An interesting milestone for us,” noted chief executive officer Daniel Lalonde in an interview with WWD. The executive has steered the group, which started out as the Maje fashion brand in 1984, into markets outside of France through an ambitious expansion program.

In the U.S., last year’s focus was on coastal cities, followed by Texas, where it has set up shop in Houston and Austin over the last quarter. Overall last year, the company, which is controlled by Chinese textile conglomerate Shandong Ruyi Group, added 134 new points of sale, a faster pace than the usual rate of around 110.

Sales for the last three months of the year totaled 255.8 million euros, with growth from all regions except France, which posted a 1.9 percent decline. Protests prompted store closures during the crucial holiday period, starting in mid-November and lasting through the end of the year.

Lalonde noted that online sales helped offset the disruption from the protests. Following an acceleration of digital commerce over the year, the channel now represents nearly 15 percent of total sales.

The group generated 41.5 million euros in sales in the Americas, with 26.8 percent growth. In the Asia-Pacific region, growth stood at 17.1 percent. In Europe and the Middle East, excluding France, sales rose 7.2 percent.

In China, where SMCP has set up 173 stores over the four years it has operated there, the plan is to add another online marketplace to its current partnership with Tmall, according to Lalonde. Two-thirds of the company’s business comes from its own web sites and the rest is external partners — which the company is selective about choosing — he explained.

“We think it’s the right time,” for another partner in that market, he said. “We think it’s a way to get a reach to new customers…that might not be shopping with us today,” he said. With a huge amount of transactions taking place on smartphones in the country, estimated as surpassing 90 percent, digital growth in the country is strong, he added.

In Lalonde’s view, brick-and-mortar and digital channels are “the same.”

“It’s more and more of an integrated experience. And that’s been our strategy for many years as well, but I’m seeing it as every month goes by, every quarter, they’re intertwined,” he explained. The company has already employed omnichannel services including e-reservation, click-and-collect, store to web and is working on additional technology that would make it possible to also ship from stores for online orders.

“There’s some real business being done on those services,” which prompts the question of whether to allocate them to the physical stores or the online channel, he added, before offering a response. “The answer is both.”

The integration of shopping channels is “going faster and faster and faster,” he noted.

While the sales figures met analysts’ expectations, the company’s shares took a hit, closing down 5.3 percent to 15.56 euros per share, as markets turned lower on fears of faltering Chinese growth.

Analysts have noted that a decline in SMCP’s share price in recent weeks — much of it related to jitters over the impact of the yellow vest protest movement — was likely overblown, noting growth prospects abroad.

Addressing these concerns, Lalonde was sanguine, if pragmatic.

The macroeconomic environment seen at the end of the year will likely continue in the first quarter, he said, citing the ongoing yellow vest movement in France, Brexit in the U.K. and consumer confidence in China.

“We continue to invest, because we believe strongly in our mid-term and long-term plans…we’re a very agile company and can respond quickly to consumer trends and marketing conditions,” he said.

Analysts at Berenberg seemed to agree.

Referring to the company as “riot resistant,” analysts said it operates in an “attractive” accessible luxury market that they estimate as worth around 106 billion euros with growth likely averaging around 6 percent a year through 2020.

“Despite increasing competition, we believe that SMCP’s unique business — blending the flexible back-end operations of fast fashion with a luxury-like front office — should enable it to preserve its dominant position,” Berenberg said in a January research note.

The company confirmed guidance for the year of adjusted EBITDA margin of around 17 percent.