China Drags Sales Down at Sandro Parent Company SMCP as It Realigns to New Territories
Rhonda Richford
7 min read
This story was updated Oct. 29 at 1:30 p.m. EST
PARIS — As the China slowdown hits brands from luxury to the high street, SMCP continues to shut stores there, after third-quarter sales ticked down just under 1 percent on an organic basis due to weak sales in China.
Sales for the company were down 0.9 percent in the third quarter to 292.6 million euros, with the Asia-Pacific region leading the drag. Due to the ongoing weakness in China, sales for the APAC region were down 18.6 percent year-over-year to 47.7 million euros as the company streamlines retail channels in the country as part of its recovery plan.
In the third quarter, SMCP closed 10 stores in China and will close an additional 30 stores in the fourth quarter and first quarter of 2025 with plans to close 70 stores before the Chinese New Year holiday at the end of January.
“We’re executing that plan very thoroughly, very militarily, and it’s on track,” SMCP chief executive officer Isabelle Guichot told WWD. Notably, the company exited three second-tier cities and reduced store count in Beijing and Shanghai. It has also renegotiated leases at some locations.
The news sent the company’s stock soaring 8.56 at the close of trading. SMCP operates contemporary labels Sandro, Maje, Claudie Pierlot and menswear label Fursac.
The cuts are aimed at helping the company refocus its value proposition there. “China is over-malled and with a slowdown of [foot] traffic and a mood that is really affected by the economic crisis, we need to have a more focused network and to be elevating our service level to the client,” Guichot said.
She framed it as an “adjustment phase” from the previous hypergrowth period and reiterated the company has broad confidence in a rebound and the country’s long-term potential. To strengthen its position there, SMCP will now focus on upscaling its retail network, seeking continued efficiencies and providing improved customer service that complements its “accessible luxury” price point.
The closures will reduce SMCP’s global store footprint by 15 to 20 percent this year. It now operates 1,666 points of sale worldwide.
The three new territories “will be nice additions to the global momentum, but they will not make up instantly for the loss in China,” added Guichot. Those countries will see slightly higher prices than Europe due to local duties as the company expands through partner deals.
She cited “very good growth” in the Middle East, particularly the UAE, Kuwait and Saudi Arabia, where it works with a retail partner, as helping fill that China gap.
The Americas were a brighter spot. Sales were up 6.6 percent on an organic basis to 45 million euros in the third quarter on the strength of SMCP’s Sandro and Maje brands, despite five net closings during the time period in the region.
Sales in the U.S. were strong, indicated Guichot, however, Canada “has been really tough” post-pandemic as foot traffic numbers failed to rebound. In the third quarter, the company opened Sandro and Maje outposts in Montreal’s new Royalmount center alongside Louis Vuitton and Gucci.
Outside of a concession at Bloomingdale’s, the company has no existing wholesale business in the U.S. “Ida brings a vast experience of the market, of department store relationships…the brand needs to be performing in the department store environment,” Guichot said.
With her luxury brand background, Simonsen will also seek to elevate the brand positioning.
“Desirability, boosting full-price sales — it all ties in to one goal, which is to really be an accessible luxury brand with the word luxury in it,” she said. “There is room left by the higher prices of the luxury players and the mass market, and to be really playing and getting market share in that segment.”
To that end, SMCP will be seeking to improve its materials while maintaining the stable prices. It is also seeking to strengthen its accessories business, marking three new handbag launches at the spring 2025 presentations in September.
“What we are really working on is to make sure that the product conveys its pricing, and everything we do in terms of elevation of the product, attention to details, traceability, level of service — all the details are really making the product true to its price.” The full-price strategy will continue to be applied in all regions.
While the company is full steam ahead with its “two major engines” of the trendier Sandro and Maje, it is repositioning Claudie Pierlot with 15 net closings in Europe during the third quarter, seven of those in its home country of France. Moving forward, it will focus growing its wholesale business and online operations.
Longtime SMCP executive Stéphane Ledru has slipped into the C-suite as CEO of the brand over the summer. He has held various roles within the company over the last 15 years, with posts at Sandro and Maje, and spent a significant chunk of time focused on the Asia-Pacific region.
Both Claudie Pierlot and its menswear brand Fursac, which it acquired in 2019, were overexposed in the French market, indicated Guichot.
Fursac is “enjoying a little growth,” she said, as it is still basking in the halo of its brand revamp and the appointment of Gauthier Borsarello as creative director in 2021.
SMCP does not break out sales for the two brands, and sales were down 13.1 percent for the pair in the third quarter. Less well-known and with more local clientele, the two brands were hurt particularly hard by the Olympics, which were “really, really tough for them to navigate” as local client traffic dropped significantly during the three-week period.
In France, group sales were flat in the third quarter, up less than half a percent to 97.8 million euros, as the company took that Olympics hit.
The fourth quarter should be looking up with an increase in footfall since the beginning of September, showing “much, much better results,” Guichot said. SMCP highlighted sales at star brands Sandro and Maje as being particularly strong going into the fall season.
The outlook was more positive for Europe outside of France, with sales up 5.4 percent on an organic basis in the third quarter to 102 million euros. The boost in sales in the region was credited to the company’s “strict full-price strategy,” another of the key pillars of its turnaround plan.
The company continues to streamline operations at its Paris headquarters in light of budget constraints, but will continue to invest in IT development, infrastructure and optimizing operations to strengthen omnichannel growth.
The sales figures follow the English court decision to invalidate the 2021 sale of 15.9 percent of the company for 1 euro to Dynamic Treasure Group, which is owned by Chenran Qiu, daughter of Yafu Qiu, who is chairman of SMCP’s former owner, Shandong Ruyi, Guichot is anticipating the return of the shares.
Guichot is anticipating repatriation of the shares before the end of the year, though it’s clear the company is not party to the litigation and cannot give a precise date.
“We have a fantastic board, very, very supportive, and we managing through this situation pretty well with all the support,” she said. Trustee GLAS has announced its intention to sell the shares, which could trigger a takeover bid.
“But it’s true that finding a reference shareholder will be as important for the future and of the company [and] of the group,” added Guichot.
