SMCP S A : – Journée d’Investisseurs 2020 (Transcript)

SMCP Investor Day

Tuesday 27th October 2020

Transcript produced by Global Lingo

London - 020 7870 7100

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SMCP Investor Day

Tuesday 27th October 2020

Introduction and Agenda for Investor Day

Celia d'Everlange: Good morning, everyone. Thank you for being with us this morning. We are pleased today to organise our first investor day exactly three years after the IPO. It is also a first in this singular period. Today's agenda will be structured on three axes. The first one, a quick snapshot on Q3 followed by the presentation of the group strategy by Daniel Lalonde. Then a deep dive into each brand, Sandro, Maje, Claudie Pierlot, De Fursac. And to conclude, a couple of comments on the financial profile of the group and the outlook for the next five years.

During this morning we will organise two Q&A sessions about 15 minutes each; the first one just after the group strategy and the two global brands Sandro and Maje and the other one after the outlook for the next five years. One break about ten minutes at ten past eleven. Another element before to conclude; we would like to apologise for the absence of Jean-Baptiste Dacquin. Unfortunately, Jean-Baptiste has been in contact with a positive COVID case, so for sanitary reasons, we have decided not to be all together for the full session and to have Jean- Baptiste just for the presentation and not for the Q&A.

I hope that this morning's results will help you to better understand the group, the strategy, who we are, where we are going, our ambition, what will change and what will not change. Thank you very much for your attention, and now I will leave the floor to Daniel. Daniel?

Daniel Lalonde - A Snapshot on the Highlights of Q3

Daniel Lalonde: Very good morning, everyone. I hope you're all well. What I'd like to do before we start is give a little snapshot in the highlights of Q3 and then go into our - what I call our Chapter four. Our strategy of the group for the next five years.

There are the speakers.

And Q3 sales, the first thing is if you look at the - the last three quarters we've had a sequential improvement since Q2. You can see Q1; we had a decline in sales of 20% - 20.4%, followed by Q2 of -47 when most - a big part of our stores was closed. And Q3, which we're announcing today, a decline of minus 10.6. So, an exit rate at minus 10.6 and 9.5 negative at constant currency.

So, let's talk more about Q3. So, as I mentioned earlier, it's a sequential improvement driven by many things, one of which was China and digital. Organic sales growth, again, minus 10.6. We achieved sales of €248.4 million last quarter. Reported sales growth was minus 9.5 and our directly-operated stores plus six in Q3, which brings our total count to 1330 for all of our four brands.

Again, Q3 sales performance was above our expectations. It was a sequential improvement throughout the quarter. Mainland China sales contributed to really accelerate with a very strong exit rate and strong double-digit growth. We had selective net openings. Again, I mentioned plus 6 in Q3, mostly driven by APAC and we continued to optimise our network in France at minus 4 DOS.

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SMCP Investor Day

Tuesday 27th October 2020

And last but not least, a strong performance in e-commerce. At group level, our growth was 27.6%, excluding the De Fursac. And that was driven by all regions. In particular, APAC.

Deep-Dive into Performance by Region

Now, if we deep-dive into the performance by region. So, again, Q3 sales were very dynamic by region. We had a broad-based sequential improvement across all regions. I begin with France at minus 8.3. So again, a sequential improvement with the strong - the stronger resilience of our sales and our business outside of Paris and a good traction with domestic customers. Again, we had a strong double-digit growth in sales in digital, and we continue to optimise the network.

EMEA

In EMEA, again, gradual improvement in all countries throughout the quarter. And we see continued contrasted trends with more resilience in Germany, Northern Europe and Russia and challenging market conditions in Spain, Italy, and the UK. And that's been very consistent throughout this year. We also had in EMEA a strong double-digit digital sales growth.

Americas

In the Americas, again, a gradual improvement throughout the quarter. Conditions remain very challenging in New York, Florida and California, our key markets. Traffic remains weak. We did increase conversion, but traffic is quite weak. And again, in this region, we achieved double-digit digital sales growth.

APAC

And last but not least, plus 13.8 in APAC. A strong performance mainly driven by China, which grew at 30% in the quarter, including a double-digit like for like growth rate both in brick and mortar and digital. So very qualitative growth.

Across the region, we see some to trends, strong performance in markets like South Korea and Taiwan and tougher market conditions still in markets like Hong Kong, Macao and Singapore. So that's all I wanted to say about Q3. I think you've read the press release and we can take questions later if you wish.

Group Strategy Over the Next Five Years - Daniel Lalonde, CEO

Introduction

So, what I'd like to do now is open a new Chapter and talk about the strategy of the group for the next five years, and each brand will lay out their specific plans.

So, what does SMCP look like in the next four years - the next five years? It's what I call Chapter four. We are here to talk about this Chapter. It's a different Chapter in response to accelerated trends. And the profile of growth of the group will be different in the next five years than it was in the previous five years.

Very quickly, Chapter one was the creation of the brand Sandro and Maje by Evelyne and Judith in the 1980s and 1990s with the wholesale model. Chapter two was a big switch in business model, from wholesale to becoming a pure player with a focus in France. Chapter three, which

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SMCP Investor Day

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we've just left last year, was about international expansion and bringing up omnichannel services, and now Chapter four is all about global, sustainable and digital brands.

So let's talk a little bit about the markets before we lay out our strategy. So there are some very meaningful macroeconomic trends. We've selected two. There's an increasing number of middle-class consumers everywhere, and in particular in China. There's also a rising demand from the Chinese millennials and what we call the Gen Z.

From the consumer trends, there's a big shift to online shopping with a digital mindset, but I think you know all of this, an upgrade of mass consumers or customers. And what I mean by that is we've seen an upgrade from fast fashion or mass fashion into accessible luxury, and we think this will continue for some time. There's a new balance between experiences versus goods. And a heightened environment and social consciousness, which, again, I'm sure you're all aware of.

If you look at the last seven years, we've had - we've strongly outperformed the accessible luxury market. According to Bain and other consultants, this market has grown 4.5% over the last seven years. SMCP has grown at 18.1%, so we have gained some very, very meaningful market share over the past seven years in this market. It's a big market, accessible luxury, purportedly €130 billion. And as you know, our sales last year were €1.1 billion.

But what has COVID done? It has simply accelerated very meaningful consumer trends in a very volatile and a fast-changing world. The trends that we think have been accelerated the most that are the most relevant are these three - an accelerated shift to online shopping with a digital mindset. Again, maybe I should explain digital. Digital is obviously the mix or the blend between the physical approach and digital and blending them all together to create one experience from the customer's perspective. And you'll see this word used a lot throughout our presentation today.

There's also a new balance between experiences versus goods with a very strong demand for entertainment and emotions. And I'm sure you'll see that from all our brands today, particularly the entertainment and emotion part. And last a very heightened environmental and social consciousness, which is in the mindset of all customers, not just the millennials and Gen Zs, but all customers.

In this changing world, SMCP - remember, we're very well equipped to take advantage of all these changes. Why? Because we have a strong exposure to the Chinese cluster, which represents about 30% of our sales. We have a solid presence and digital - presence in digital with more than 15% of our sales. But it's been supported by a very strong investment platform that we've created. And we've begun to invest three or four years ago to develop all these new services for the future.

We also have a solid commitment and action towards sustainable fashion against the brands. The brands will lay that out. We've begun several years ago on this roadmap, and our group and our brands attract the Gen Zs and millennials today, which represent over 50% of our customer base.

We also have a strong track record of growth in the past, not just strong growth, but qualitative growth. We've also moved our digital platform, our digital penetration, from 2% to 15% of sales since 2012. And as you can see, we've internationalised the group and our brands very

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