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Hello, and welcome to the Presentation '21 Q3 Sales Call. My name is Kevin, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I would now like to hand over to our host, Mathilde Magnan, Head of Investor Relations, to begin today's conference. Thank you.
Thank you, Kevin. Good morning, everyone. This is Mathilde Magnan, Head of Investor Relations speaking. Thanks for being with us today for SMCP Q3 sales. I'm here with Isabelle Guichot, our CEO; and Patricia Despointes, our CFO. As usual, we will go through the presentation, and then we'll have the Q&A session. Before I hand it over to Isabelle and Patricia, I invite you to go through our usual disclaimer on Page 2. And I think we can start now.
Thank you, Mathilde. Good morning, everyone. Thank you all for just morning this call. I begin with a quick overview of Q3 '21, then I hand it over to Patricia, our CFO. She will detail our sales performance by region and then I will make every conclusion. Let's move to the Page #4 of the presentation. As you've seen in the press release, we are very happy to announce that our Q3 sales are almost at par with '19, in the third quarter, we achieved EUR 271.7 million sales, down minus 1% reported versus '19, minus 3% on an organic basis and up 8.4% versus 2020. Let me share with you some of the key messages on this quarter performance. First, on a global basis, we see a progressive catch-up versus '19 since the beginning of the year, with Q3 low-digit -- low single-digit positive organic basis and nearly back on track after the reported figure. In Mainland China, the performance remained strongly positive versus '19, reaching 15.8% despite some pandemic residences impacting mobility and store traffic. Americas has turned positive on '19 for the first time since the beginning of the pandemic, with the U.S. still outperforming and accelerating, reaching include '15 versus '19, thanks to a very high demand. France and EMEA are progressively catching up '19 levels, both supported by a strong local consumption, as you know, tourism is not yet back, unfortunately, in France and Europe. Versus '20, the overall performance of plus 8% is driven by like-for-like growth. Our teams are still fully committed to execute our One Journey strategy plan, which is our key ambitions. In this context, the group continued to make steady progress on its strategy to improve full price sales, notably by deliberately reducing the promotional sales share, especially in digital. As such managed to decrease the discount rate in all regions, both in brick-and-mortar and digital, with a minus 5.5 points in Q3 versus last year. This is a result of improved inventory management, enabling us to reduce the quantity and duration of liquidation operations. Regarding network. As planned, we continue our brick-and-mortar network optimization plan with minus 3 DOS in 9 months. In France, we closed 45 DOS, mainly very small stores located in small cities and not at the right concept, including minus 27 stores of Suite 341, no longer strategic for the company. After a wave of closures in Q3, we are nearly on target. On the other hand, we continue our expansion in APAC with 19 new DOS over the semester, of which plus 14% in China. On digital, the group achieved a penetration of 24% of sales in 9 months, normalizing in percentage of sales due to the complete reopening of physical stores and impacted by our full price strategy making the sales growth. To conclude, all regions contributed to discontinued sequential growth over the quarter. These are very encouraging results, considering the COVID restrictions in APAC, low tourism and less commercial sales. Let's start with Sandro on the next slide. [indiscernible] a definite partnership with a leading local e-commerce patent to invest a launch party for its fall winter collection in Shanghai with Tmall. The fewer steps far beyond the digital arena, this picture is Shanghai ambassador @Sunnee, a singer with more than 22 million follower on Weibo. This margin in Mainland market has come from dedication and innovation, leveraging omnichannel marketing with live streaming and a store locked feature to emphasize the new Hope campaign, which is fall winter campaign and to engage in new young shoppers. You see the pictures on the left side of the chart. A very successful event with [ 300 ] physical attended in Shanghai and more 0.5 million viewers online, generating traffic on Tmall supply by 35, new followers, tens of thousands more and ranking Sandro as a top 1 in women accessible lister industry for the period. Now turning to Maje. Riding on the success from latest collaboration, Maje continued to collaborate with the celebrity Jian Tian to kick off the launch of its new full winter collection, young Chinese actress followed by more than 4 million followers on Weibo has confirmed our commitment to the brand by expecting to be once again an investor of Maje Greater China. Local shooting with images and videos that have been produced to be displayed across all digital platforms, including Tmall flagship in China. It's the pictures of that. Those are special shooting you can see in the middle of the slide. A very efficient collaboration, boosting traffic on our Maje Tmall flagship website by almost 2x more unique visits. [indiscernible] to strengthen brand awareness and to promote its new campaign, including has decided to collaborate with 5 KOLs through social media platforms. Overall, our brand dedication to digital transformation and their agility in the local market have demonstrated our advanced brand desirability among today young generations and consolidated relevance to Chinese customers seeking elevated and uncompromising accessible luxury. Moving to Page 6. Let's talk about digital now, which is at the core of our ambition. In Q3, we continue to expand our digital presence with 2 new virtual stores. First, we are delighted to announce a new key partnership after [ February ] '19, Maje now available on Farfetch since mid-September. Farfetch is now 1 of the undisputed global reference in the luxury fashion world, and we are happy to reinforce our partnership with this high-end e-commerce platform. This is on a drop ship model basically a marketplace, and it enables us to use their front end and to pick from our shared inventory located in Paris, a very efficient model for us. Let's go to APAC now and [indiscernible] Hong Kong, where we opened [indiscernible] first shop, this is another milestone for Asia Digital Business Development and also a key step for [indiscernible] to engage with customers via digital. Moving on to Page 7, all snapshot at our retail expansion. As you can see our APAC network, the continued expansion with some meaningful examples of store openings within the quarter, China Taikoo Hui, Shanghai Taikoo Li and an outlet in Shanghai Village, and other opening in Taiwan. Over the 9 months of -- the first 9 months of '21, we opened in FX plus 19 stores, out of which 14 in China. APAC remains the fastest-growing region of the group. Moving on to Page 8. Let's have a look on our partnerships. As you know, in some countries that we call nondirectly operated were distributed by partners about -- it's about 10% of our sales. Thanks to strong partnerships in key strategic countries, we are conquering new territories. What happened in that -- in those territories in Q3, let's cover some openings. Mexico, for instance, where open a new store in literary outdoor mal with Taraashna considered 1 of the most exclusive shopping gestation in Mexico. And we launched the central digital stores. This is a new digital expansion, thanks to these partnerships. South Korea, where we reinforced our presence with the opening of 11 stores for Sandro and Maje, which 2 outlets. And we offered also 2 new digital stores in the United Arab Emirates with Bloomingdale's. These partnerships strengthen our brand exposure all around the world and highlight the appeal of our brand to Worldwide consumers. Moving to Page 9. As you know, at the center of our One Journey strategy plan, we decided to boost our marketing investment to enhance brand desirability from -- and this boost is from 2% to 4% of our sales. Among the key initiatives, we implemented this year, our collaboration with GOL is significant and emphasizes a strong brand desirability. Here, we wanted also to highlight that organically, our brands attract more and more new keys of celebrities. And I urge you to see the very nice picture about Amanda Gorman wearing a nice dress during Jimmy Fallon show [indiscernible]. Their authentic opportune careers and leadership personalities allow the brands to in d elegance to broader audiences all over the world, thanks to the halo effect. So now I will turn it over to Patricia, our CFO, will take you through the Q3 performance by geography in greater detail.
Thank you, Isabelle. Good morning, everyone. So moving on to Slide 11 to get an overview of our Q3. The group performance highlights a progressive catch-up versus '19, a trend concerned since the beginning of the year, as you can see on the graph on the left with a major improvement in Q3, both in absolute value and in terms of evolution versus prepandemic level. Indeed, our sales are almost back to 2019, reaching EUR 271.7 million, down 3% on an organic basis. These are solid results considering COVID resurgences in APAC, low tourism and less commercial space across all brands, regions and channels. .Now on the right, in 9 months, our sales have reached [ EUR 795 million ], minus 13% versus '19 and plus 17% versus 20%. By return on a 9-month basis, France and APAC remained the most important areas with, respectively, 32% and 28% of sales. To be noted that Europe as a whole uses 5 points of penetration versus pre-COVID levels due to market evolution and the very special situation this year with the impact of Logan in Europe in H1. Now Slide 12, let me highlight some key messages on Q3 performance by region. In France, sales are gradually catching up 2019 levels, down 10% versus '19 organic, solid performance, supported by good demand. If we compare with 2020, sales are nearly stable, minus 1%, which is very satisfied considering our ongoing full price strategy. Indeed, we managed to reduce our incident discount rate by 7 points in Q3, and we registered a positive like-for-like growth. Finally, we continue to deliver a good network optimization plan with minus 45 DOS in 9 months, of which 27 Suite 341, and we are completely in line with our 2021 annual strategy. In EMEA, we delivered a strong performance, catching up progressively versus '19, reaching minus 9% organic despite the lack of tourism. Versus '20, sales were up by 16% organic, driven by brick-and-mortar like-for-like growth, solid performance, considering also the decrease of the incident discount rate by almost 10 points of the quarter versus last year. To conclude on these 2 regions and considering iterate level and our full price strategy, we consider that we delivered a solid performance. Now moving on to Slide 13, in APAC, we delivered a very solid growth of plus 7% versus '19 organic, driven by Mainland China, reaching plus 16% versus '19, a strong performance despite new profit resurgences and some major weather events in key cities, both impacting mobility and traffic. If you compare with 2020, APAC sales were down minus 5.7% organic, a trend explained by the high comparison basis as Q3 '20, as you may remember, benefited from a strong consumption rate post stores reopening. Rest of Asia remained solid despite COVID cases and a very low tourism, but driven by dynamic regions such as South Korea continuing to be very strong. Finally, over the first 9 months, we continued our network expansion with plus 19 in the U.S., of which 14 in Mainland China. Americas turning positive versus 2019 for the first quarter since the beginning of the pandemic. The U.S. are still outperforming and even accelerating return plus 15% versus '19 on an organic basis. Continued growth over the quarter across all channels from strength to strength, driven by a very strong retail [indiscernible] growth. Sales were up plus 62.9% organic versus '20. A strong performance considering the incident discount rate decreased by more than 10 points. I will now hand over to Isabelle for a brief summary.
Thank you, Patricia. Just to summarize, Q3 sales are almost on par with '19. Americas has turned positive versus '19 for the first since the beginning of the pandemic, and U.S. are still outperforming driven by very high demand. France and EMEA are closing the gap versus '19, supported by local consumption, solid growth in APAC, driven by strong Mainland Chinese despite local resurgences and somewhat major weather events impacting mobility and traffic. We pursue the execution of our One Journey strategic road map, focusing on our key pillars. Including this quarter, a statement solid progress in full price strategy, leading to a drop in the incident discount rate by 5.5 points and our network optimization plan delivery. Looking forward, a looking a positive dynamic across all markets in the first week of October. We're confident in our capacity to an EUR 1 billion in full year '21 sales, and we confirm the midterm guidance presented during our Investor Day in October.
[Operator Instructions]And the first question comes from the line of David Da Maia from CIC.
Actually, I have 3, 1 on current trading, 1 on gross margin and 1 on shareholding. So the first 1 on current trading you said you have observed a positive dynamic across all your markets in October, but could you be more specific about trends by region, for example? Are you still closing the gap with 2019 levels in Europe? And are you still recording double-digit growth in -- versus 2019 as well in the U.S. and China? Second question on gross margin. You have significantly improved quality of your sales this quarter. Should we expect further progress on your full price strategy in Q4? And in this context, is it fair to assume that your gross margin in H2 could be clearly higher than in H1 despite the, I would say, the ongoing inflation on your COGS. And finally, on shareholding, can you give us an update on the situation? Do you have a better view on the identity or the profile of the bondholders represented by the trustee? I don't know have you had direct contact with them since the enforcement of the pledge.
Thank you, David. I will take the first question and maybe the last one, and I'll then over to Patricia for the second one. Current trading well, what we -- what I just said is that we see an acceleration in October versus '19 in all regions. They're all above 19% in October so far. If I go a little bit more gradual by region, APAC and [indiscernible] China continued to deliver strong double-digit growth versus '19. Americas, good results driven by the U.S. brick-and-mortar and the digital. France and EMEA is performing very well, early signs of tourism coming back. It's just early signs but we take as a positive -- as a positive sign and digital still performing both very well versus 2019.
Okay. So you both 2019 level in Europe as well?
In all regions, I say.
In all regions, okay.
Regarding your second question, about gross margin, yes, I confirm to you that we anticipate to improve gross margin. And by the way, all our P&L metrics in H2 compared to H1, and gross margin is 1 of them. Mainly thanks to our full price strategy, as you have heard from the call, the decrease in discount rate is quite significant. So it will enable us to improve our gross margin ratio. Yes, we see some inflation in the cost of goods line that's true, and that's for everyone. Now we need to get this by this full price policy and also by our geographical supply policy, as you know, we have a maturity of supply coming from the European business. So we can missed a little bit this, so we confirm that we will improve our gross margin ratio throughout H2.
And as far as your third question is concerned, regarding our shareholder structure, there is what we can see at this moment, not much more than what you've probably read in the press and different notices that have been public. So we've been informed that European subs failed to redeem its [indiscernible] shares at the maturity date in September, back in September 1. And then we're following this default [indiscernible], I think as a trusted. In relation to the exchangeable bond indicated on October 5 that is considering a temporary taking position of part of the underlying SMCP's shares up to 29% of the share capital. This is what it's public today, and there is not much we can say on top of that. Regarding the Board holders named and identity, you also read what has been publicly said and written in all the different -- in the paper, there is not much we can say about it, except what you've probably read. But the important message I would to reiterate today is that, the situation does not affect our financing and operations. Value creation for all of the group stakeholders which are shareholders, employees and other partners is at the heart of the company's strategy. SMCP and his team remains fully committed to the implementation of our strategic ambition One Journey plan for 2025.
Thank you, David, for your question. Kevin, do we have another question?
Next question comes from the line of Geoff Michalet from ODDO BHF.
I just have 1 has to do with the discount rate. I just wanted to know what kind of headroom do you still have when it comes to pricing? And actually, how does the current level compare versus 2019?
You mean the current level of discounts versus 2019?
Yes, exactly. I mean, the -- let's say, the pricing strategy, how is it compared to 2019?
Okay. So both discount rates and pricing strategy. In terms of discount rates, we have already reduced quite significantly. I think we still have a few points more than we can that we can gain. In terms of comparison versus the discount rate had increased in 2020. We have caught up a big part of it in 2021 and maybe a little bit more to come. And if your question is about pricing strategy, obviously, we're working on it and we'll take -- we are taking, as we speak, all the necessary steps to protect our gross margin. We're working on price increases, obviously, and we continue to absorb part of this through cost management as we already did in the past loans, and that's all we can say and also better demand planning policy, which is absolutely key in that project.
Thank you. Kevin, do we have another question?
We now have a question from the line of Kathryn Parker from Jefferies.
So I have 3 questions. My first question, I'm afraid is on the discount rate again and its impact on the gross margin. And from a slightly different angle, so would you say the improvements in the in-season and off-season discount rate means that the gross margin in H2 could perhaps be back at 2019 level? So that is my first question. And then my second question is just an update on the inventory situation, given global shipping difficulties. So would you say you have enough product availability in each of your global markets kind of coming into the busy Christmas season? And then my final question is on Activewear. So we've seen the Maje [indiscernible] capsule collection launched last week. And I wondered how you feel this opportunity developing and whether perhaps other brands within the group would also consider launching activewear?
Regarding your first question, you know that today is a sales call, so we will have the opportunity to discuss gross margin later in the year. But yes, I would say that we anticipate H2 gross margin to be the area of H2 2019. So probably not very different from H2 '19 ratio.
Regarding your second question, Kathryn, yes, we see some there are some delays in the transportation and sourcing that for the time being, it's something that we've really been growing over the past months. So as we've been really working in anticipation of those issues. Nothing has significant impact on our business so far, and we've covered for the months to come. It's also that the timing of our buying wave just to reduce the risk of a large quantity being blood and really jeopardizing business for the year-end. .And also, as I mentioned earlier, our demand planning policy that we've implemented over the last 12 months allows us really to reforecast for many ourselves and to reduce our supply chain. Don't forget also that 60% of our trusting is made in the Euromed region, which reduces the freight delays. And also, we have a very dry production and supply chain with the ability to turn around and manage it necessarily and also that we've been covering a lot with raw material buffers to be able to -- to relaunch reproduction, if needed. And as far as your last question on Activewear and thank you for noticing the major launch of the collaboration with [indiscernible]. It's an area that we always investigating a little bit in terms of extension of our core lines, some digits last year with a capital of jogging and athleisure is more visible collaboration made with the match today. course, it becomes a little bit special in team an obvious organic addition to ready-to-wear. So it's something that we will be venturing sporadically whenever we can and whenever we feel it's relevant.
Thank you, Kathryn. Kevin, we will take the last question.
So our last question comes from the line of Floris [indiscernible] from Apiture.
Just 2 quick questions from my side. The first is we've seen a bit of a crop down in China on the luxury segment. So it'd be interesting to get your views on how this might act in SMCP. And then the second question has also got to do with, I guess, the shareholder structure now. Could you confirm if there's been any discussions between, I guess, the management team and the bondholder group?
Sorry, can you repeat your question.
We didn't hear very well.
Sorry. We've been reading that there's a bit of a cut down on luxury goods.
The second one.
Sorry, the second 1 was on the shareholder structure. Just trying to understand if there's been any type of contact between the bondholder group that might collect on the shares and the management team.
Regarding your first question, it's early to tell definitely. And especially, it's difficult to know if it will have an impact on general climate of consumption. But as far as we are concerned at SMCP and considering our positioning, which is accessible luxury, we do not expect any direct material impact on the consumption. And also we have a much larger client base and the luxury players. So for us, it's not really a threat that we factored in. Regarding your second question, it's -- I mean it's -- we won't comment on that because it's beyond our -- it's not it's definitely not in our radar, I would say. Thank you very much. I think we are done with the questions. I will wish you a nice day.
Thank you. Thank you very much Bye.
Thank you very much, everybody, for joining today's conference call. You may now disconnect your line.