SMCP Lowers Guidance for 2023, Citing China Slowdown

PARIS — French accessible luxury player SMCP has lowered its guidance for the year, taking a battering from economic headwinds from all fronts.

The company cited lower sales in all regions and especially China, where the Sandro, Maje, Claudie Pierlot and Fursac parent company has been heavily counting on the country’s post-pandemic recovery to boost its bottom line.

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“Market conditions have deteriorated overall,” SMCP said in a statement released after market close.

“Chinese consumption…has not followed the expected trajectory, as indicated by key indicators in China,” the company said, citing the national manufacturing index, which fell three points in August.

Sales in the second quarter were up 53 percent in China, as reported in the company’s latest financial results in July.

SMCP also cited “a slowdown of growth in Europe in a persistently inflationary environment such as in France, where the market as a whole has recorded sluggish consumption since the beginning of August, or in other countries such as Switzerland and Italy.”

Looking toward the second half, the company is now predicting moderate sales growth year-over-year despite favorable comparisons to 2022, when China was still in the grips of rolling pandemic shutdowns.

The third quarter will be “stable or slightly decreasing,” the company said. It was more positive about the fourth-quarter prospects, which it framed “in line with the trend seen in the first half, benefiting in particular from a favorable base effect in China.”

The strength of China in the second quarter boosted the company’s overall sales up 8.7 percent at constant currency in the period to 305.3 million euros.

For the full year, the company now targets midsingle-digit sales growth at constant currency and an adjusted earnings before interest and taxes margin of between 7 percent and 9 percent, down from the 9.2 percent it had targeted previously.

The company is holding steady on its full-price strategy, and will continue to invest in omnichannel development and said it will produce “visible effects” from that expansion by the end of the year.

SMCP is also looking at slowing hiring at its headquarters, and will instead focus on upping productivity.

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