Welcome to the SMCP 2025 half-year results conference call. My name is Alan, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration, your lines will be on listen-onl y. However, you have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero, and you'll be connected to an operator. I will now hand you over to your host, Amélie Dernis, Head of IR , to begin today's conference. Thank you.
Thank you. Good evening, everyone. Thanks for being with us today for the publication of SMCP's half-year results. I'm here with our CEO, Isabelle Guichot, and our CFO, Patricia Huyghues Despointes. You can listen to the publication via the usual conference call, or you can connect to the webcast to have the presentation displayed. 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 two. I think we can start now.
Thank you, Amélie. Good evening, everyone. Thank you all for joining us today to talk about H1 2025 results. Last time we talked about results for last year's annual figures, we told you how 2024 has been a challenging year, but we also told you mostly about strong actions that we've taken to navigate this tough environment. First from H1 2025, I think the demonstration that those actions were the right choices, translating in a significant recovery. While there is still a way to go to reach our targets, the recent months make me think that the path we took is the right one, and I will show you why. I know that, I think that H1 performance is quite healthy, especially if we compare to the market, and healthy because all KPIs are green. Top line is solid.
3% growth for H1 is quite network rationalization, especially in China and marginally in other geographies. Profitability is recovering in a very healthy way. It's true that 2024 was a low point for sure, and we had the objective to recover as quick as possible. In H1 2025, adjusted EBIT margin in percentage of sales more than doubled, and net profit turns back to positive. Finally, cash indicators are also excellent, with a record free cash flow generation for our first semester, which is traditionally not the best one in the seasonality of our cash. Let's move on to page five, where I will focus on key figures about sales performance. You can see that our half-year revenue came at EUR 601 million, an increase of 3% at constant effects versus last year, and 2.8% like-for-like. Here are the main takeouts of the H1 sales.
Sales were supported by growth in all regions except China, still impacted as anticipated by the full year effect of the network optimization we initiated in 2024. Second quarter's sound performance was led by a very robust growth in America. Q2 positive trend is in line with Q1, even slightly better, despite a higher base of comparison than it was in Q1. We definitely stick to our full price strategy, with once again a three-point decrease of average discount rate in season, despite good cost. This was especially the case for Maje in Europe throughout the semester and in China, especially in the second quarter. Our digital share remains at a satisfactory level above 20%. We also have to take into account that the network decreased by 20 POS in the first semester. This is coming from Q1. In Q2, the network was pretty stable.
To be noted that during the semester, we continue to progress in our development to partners with the opening of six new countries: India and three countries in the Balkans, Croatia, Montenegro, and Serbia, Jordan, and the Philippines in Q2. Page six, let's go a little bit more granular about revenue evolution. Here's the bridge between H1 2024 and H1 2025. It's mostly green, with only one significant red box, which is pretty much anticipated and logical, which is the network optimization that I mentioned before. The increase of sales is driven mostly by comparable stores and wholesale development. The like-for-like network is increasing by 2.8% and brings EUR 14 million additional sales, coming mostly from Europe and America. Other network evolution growth comes from a few openings in 2024, especially in the U.S.
Reflecting our strategy of agile development with retail partners, wholesale revenue are increasing by EUR 12 million, coming at the same time from like-for-like stores, new addition in countries already open, and new countries. Network optimization in China and for Claudie Pierlot accounts for a decrease of EUR 11 million of sales compared to last year. Finally, foreign exchange effect is negative by a small amount of EUR 2 million, representing 0.3 point, but with a very different profile between Q1 and Q2, nearly neutral for the total of the semester. Moving on to page seven now, you will find the performance by region. Patricia will get back into more detail later in the presentation, but a few highlights. By region, Europe gains one point versus last year, and now represents the same share as France. America gains two points and reaches 16%, the highest share ever for SMCP.
By brand, no big variances compared to 2024 split. By channel, Q2 confirms Q1 trend and all sell increases by two points versus last year, in line with our strategy. On page eight, you will find some key figures on P&L and cash. Additional details and widgets will be also given by Patricia later on. I will just highlight the following messages. Gross margin ratio remains at a high level, above 74%, in line with last year. The impact of wholesale activity on gross margin is compensated by the strong retail margin, supported by the strict full price strategy. As it said, it improves strongly from sales increase and cost optimization action plans. These results in the net income back to positive territory at EUR 11 million.
A strong free cash flow generation of EUR 30 million, the highest level ever in H1, leading to continued deleveraging with a net debt reduction of EUR 32 million in the semester and EUR 87 million over the last 12 months. This was for the big picture in terms of figures. Before Patricia, let's move on to page nine. Before Patricia goes more in detail of the figures, as usual, I will present you our main initiative and achievement of the semester. I will start with Claudie Pierlot, with an achievement we're really proud of, which is the B Corp certification for the brand. As I mentioned in April, we are very proud that the Claudie Pierlot team is for achieving this certification with a score of outstanding score of 96.7 points, well above the required 80. For Claudie Pierlot, we are now to join a community of conscious and committed companies.
The score is based on five key pillars: environment, employees, communities, governance, and customers. The certification is not an end by itself, but a long-term commitment to continuous improvement. Key initiative now in terms of brand desirability over the last quarter. Spring-Summer's 2025 Sandro pays tribute to the Franco-American artist Louise Bourgeois, a key figure of the 20th-century art scene. Évelyne Chetrite draws inspiration from Bourgeois' iconic spirals and spider webs to create an exclusive capsule of fluid, natural material pieces. To bring this capsule to life, Sandro launched pop-ups everywhere in the world, from Dubai Mall, Shanghai, Galeries Lafayette, creating dynamic spaces that celebrate both art and craftsmanship. We have some illustration of key vitrine windows that were implemented over the world. For the summer at Maje, on page 11, Maje is more committed than ever to craftsmanship, partnered with the iconic Côte d'Azur and Saint-Tropez shoemaker K.Jacques.
Together, they have designed two exclusive pairs of sandals made in Saint-Tropez to accompany women with a distinctive French elegance. The collaboration came to life both through content shot on the Côte d'Azur and in K.Jacques Saint-Tropez workshop, as well as through a pop-up at Le Bon Marché and customer events on the Riviera. Page 12, some illustration of very limited keyword strategy, which is visible on the slide. Sandro made numerous elegant appearances during events, among which the Cannes Festival or Roland- Garros, with influential opinion leaders and celebrities boosting brand visibility. You have, for instance, Eva Longoria there, Shia LaBeouf, or Virginie Led oyen. Then Maje shown on the red carpet with looks worn by Diane Kruger in a black tulle dress from the Fall Winter Collection and Iris Law in a custom-made outfit at the Carlton during the festival.
Meanwhile, Bella Hadid was spotted in London wearing Maje's double buckle slingback heels for the launch of her new fragrance, Orebella. Fursac is regularly featured by key opinion leaders who appreciate its mix of timeless tailoring and modern style. You have here Julien de Saint Jean or Renan Pacheco. These organic mentions help strengthen the brand visibility and appeal among a wider fashion-aware audience. On page 13, moving to the commercial strategy, in line with our target of reinforcing our network with partners, we opened some stores in very interesting stores in new countries. In the Philippines for our two brands, Sandro and Maje, in Greenbelt Makati and also Jordan that I mentioned earlier, Sandro and Maje. Maje opened this quarter and Sandro will follow in the coming months in the Taj Mall in Amman. With these two new countries, we are strongly reaffirming our expansion strategy with retail partners.
Page 14 now, we reinforce our presence in Thailand, in Phuket, and in Egypt. For example, at Alm aza City Center in Cairo. I will now leave it to Patricia to give more details on H1 figures . Thank you.
Thank you, Isabelle. Good evening, everyone. Let's start with sales on slide 16. France revenue stands at EUR 207 million for the first semester, progressing 2.3% versus last year. Like-for-like network growth both in brick-and-mortar and in digital, reflecting a good dynamism across all channels. The trend of a decrease of discount rates has continued, especially for Maje and Claudie Pierlot. Q2 sales amount to EUR 105 million, stable compared to Q2 2024, which was a relatively high basis of comparison, with a +6.5% versus prior year. The network decreased by 16 net units during H1, of which seven in Q2, notably due to the network optimization at Claudie Pierlot.
In the EMEA, H1 sales at EUR 204 million progressed 6% organic, driven by like-for-like growth in retail, which is positive in nearly all markets and very homogeneous in Q1 and Q2, and by wholesale performance, which is dynamic, but with some timing effects between Q1 and Q2 on deliveries to partners. The network grew by 19 net openings during the semester, of which 14 in Q2, coming mainly from the openings of new countries through partners, as Isabelle just explained. On page 17 now, in America, sales at EUR 94 million in H1 grew by 12% organic versus last year and by 22% in the second quarter, driven both by price increases in the U.S. and also and mainly by higher volumes. All three markets of the region grow in retail, with a positive like-for-like in both the U.S.
and Canada and in our partner activity, with a particularly robust growth in Mexico. All this despite a network down by 25 net closures over the semester, including five in Q2, mostly from the closure of Hudson Bay corners in Canada, which should be replaced by a new partnership soon. A very strong Q2 in the America indeed. Now, let's be clear. We are, of course, very happy about this performance, but it's wise to anticipate that it will be difficult to replicate in Q3 with a relatively high comp. Finally, in Asia, sales stood at EUR 97 million in H1, minus 8% organic. Just like in Q1, the decline in sales is linked to the full- year effect in 2025 of the network optimization that we performed in 2024, especially in China. You may remember that we had closed 65 stores.
However, like-for-like sales are stabilizing in brick-and-mortar in the first half of the year, despite a very strict approach on discounts, especially in the second quarter. In the rest of the region, several markets have shown good resilience: Singapore, Vietnam, Malaysia, Thailand. New markets such as India, Indonesia, and the Philippines have an encouraging start. No significant evolution of the network this year. On page 18, let's have a look at the bridge of adjusted EBIT between H1 2024 and H1 2025. If you look at the full P&L in the appendix, you will see that all major P&L lines contribute to the positive evolution of EBIT, including gross margins, store costs, SG&A, and D&A.
If we analyze where it comes from, you can see from the graph that we benefit from the following factors: positive volume effect, bringing additional gross margin in retail in the U.S., for example, and also thanks to our developments through partners. In the middle, the impact of cost optimization plans, which start to bear fruit from network rationalization, product production process optimization, and also renegotiations of indirect purchases. Finally, some one-off impacts from 2024 in connection with the store network optimization do not happen anymore in 2025. What's particularly important to highlight in this slide is that the entire incremental revenue plus EUR 16 million between H1 2024 and H1 2025, and even more, translates into EBIT, which increases by more than EUR 23 million.
As far as adjusted EBIT margin in percentage of sales is concerned, at 7.1% of revenue, the increase enables us to more than affect the fall of profitability that had taken place in H1 2024, and it also underpins our target of getting back to a shorter 10% adjusted EBIT margin in H2 2026. On page 19, you can see the evolution of the net results versus 2024. Apart from adjusted EBIT explained in the previous slides, the main change is on non-recurring expenses with much lower effects from impairments this year. Maybe less significant, but encouraging, we have also a positive trend in financial expenses, mostly explained by the reduction of our debts. Income tax obviously gets back to an expense from a positive pre-tax income, and in the end, we are back to positive net results of EUR 11 million.
On page 20, you will see our usual KPIs about balance sheet and cash. We are very happy with the free cash flow generation in H1 at EUR 33 million, more than EUR 40 million above last year, supported by better operational performance, efficient cost management, and continued control of CapEx and inventories. Inventories continue to decrease by 14% compared to the same period last year. Logically, on page 21, it's the mirror of the previous page, and free cash flow generation enables us to decrease net debt by comparable amounts versus end of 2024, from EUR 237 million to EUR 206 million. This deleveraging is also quite spectacular compared to the same period last year, with net debt down by EUR 87 million versus H1 2024 and debt-to-EBITDA ratio down from slightly above 3- 1.9 in 12 months.
During the semester, we have also regained maturity in our financing, thanks to an extension of our main facility, which is the term loan plus the revolving credit facility. Our contract enables us to ask lenders a one-year extension, each bank being free to accept. A vast majority accepted, and a significant portion of this facility is now extended to 2027.
Thank you, Patricia. Now, a few words of conclusion. As you've seen, we've delivered a strong sales performance in H1. This growth, particularly on a like-for-like basis, has played a key role in improving our cost absorption, strengthening our operating leverage, and supporting the resilience of our business model. I'm also glad to say that our strategic action plan is starting to bear fruits. Thanks to disciplined execution and clear priorities, we've seen a tangible improvement in our EBIT margin, putting us firmly on track to achieve our H2 2026 guidance. In terms of cash generation, the performance has been equally solid. Free cash flow generation was strong, enabling us to take further steps in optimizing our financial structure. As a result, we've seen a notable reduction in net debt and a clear improvement in our leverage ratio, which reinforces our financial flexibility moving ahead.
Looking forward, we remain fully focused on executing our action plan, both on top-line growth and cost management. I also take the opportunity to thank the whole team at SMCP, all our managers, our ComExes, our management committees, and all the teams in all stores in the world for their incredible dedication and fighting spirit for the brand they work for. In H2, we'll also gradually fight against stronger comps. While the external environment remains uncertain and challenging, our objective is clear: to confirm in the second half the positive momentum demonstrated by our brand in the first half of the year. Now, before I pre-empt a question that I know will obviously come on the plate, a few words about our legal proceedings.
As you remember, the Singapore High Court decided on July 4th to order Dynamic DTG to return to European TopSoho ETS, the 15.5% stake of SMCP, which had been transferred in 2021. DTG had to comply with this order within one week following notification performed on July 8th. We understand that DTG did not comply with this order in the required timeframe, and that Glass has therefore initiated forced transfer procedures. We'll obviously keep the market informed about the next updates. Thank you.
Thank you, Isabelle. Operator, we can take the question now.
Thank you. If you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. You will be advised when to ask your questions. We will take our first question from Marie-Line Fort, Bernstein. Your line is open. Please go ahead.
Bonjour, Marie-Line.
Bonjour. Congratulations on this very good set of results.
Thank you.
Of course, I've got some questions about U.S., America. I'm just wondering if there is extra profit in H1 due to the fact that you passed some price increase without having immediately the impact of tariffs. Just trying to measure what could be a balance on the second half. Also, do you think that the price increase you passed during the first, the second quarter would be enough to mitigate the increase in tariffs from the second half? That's my first set of questions about U.S. The second part of the question is about trading, current trading. I remember that last year, Q3 was under pressure, particularly in France due to the Olympic Games. Just wondering if you see some sign of improving. Also, in China, we are hearing that there is some recovery there. Are you perceiving some signs of improvement also? Thank you.
First, on the U.S., I would say that part of the very good performance in H1 in Q2 is linked to the increase of prices, but it's not explaining the whole, it's mostly volumes. On top of it, the price increase was another positive factor, but it's mainly volumes. On your question about the way we model in our modelization of the price increases, we took the assumption of 20% as we thought could be the tariff applied to European merchandise. Somehow, we are pretty much within the range of our modelization. We don't forecast any other additional step of increases to be done if the situation remains what it is today. On the current trading, for the time being, it's a little bit too early to say. It's true that we will have comps, especially in France, the comps are of the Olympic Games.
I would say that for the time being, there is no big difference for the time being versus H1 on the whole. We are monitoring the situation, and we are pretty much where we wanted to be. Even in China.
Oh, and then last question on China. China, what we're seeing, you know, there is a combined effect. Maybe I need to elaborate a bit more on that. You know that we changed our management in China at the beginning of the quarter, on April 1. That new manager now comes after the optimization and the contraction of the network. It's more into a rebound phase. It's been working a lot on the like-for-like, with a very strong point of view that we absolutely are backing up on reducing the level of discount to really trigger the brand desirability and keeping the brand very aspirational in China. It's the key move. It means that we've cut a lot of promotional activities, sacrificing somehow some top line, but we see that is paying off. We see weeks after weeks, like-for-like in brick-and-mortar coming back to a positive level. We're happy.
Digital is still a work in progress. I think digital, as you know, is extremely driven by promotion in China. The whole model is about those big events, the 618 and so on, 11/11, 12/12, and others. I think it's something that is challenged by everyone today because it's mobilizing, it's freezing a lot of inventory amount, and it's not very productive, very high cancellation rate. Now the strategy is really moving. Most of the brands are moving to something that is more elevated, more curated, more personalized by the brand. The strategy in digital is changing. I would say that it will be further down the road during the H2 that we think we come back to better levels in digital. Overall, it's a work in progress, but we are absolutely confident to be heading in the right direction in China.
We're extremely happy to have been among the pioneers to start reducing the network as early as last spring in 2024.
Thank you. Thank you very much, Isabelle.
We have received a question on the written channel. I will read it. It's about EMEA and the fact that this region keeps performing quite well. Can you please elaborate on your strategy and the reason why this area?
I think the work that has been done by Sandro and Maje on really elevating their brands, working on the curation of their expression, on the alignment of a 360 of all the signals on the collection is paying off. It's also true that we're seeing a kind of a, I mean, we cannot be pleased about it, but it's a fact, a little of weakness of our competition landscape. I would say that we're gaining market share in Europe these days. We see good traction in Spain, in Portugal, in Benelux, in Germany, in the U.K, in the countries where we operate with partners, the Middle East, Turkey is flying, Eastern Europe, good growth. I would say that except maybe for, you know, we have to find one or two countries that are still a bit of a headache.
I would say that the Nordics are a bit of a headache and Switzerland. I would say that for the rest, we're really happy with the European performance.
We have another question we have received on the chats, which is about wholesale. You accelerated your openings with the retail partners. What is the next step, and what is the potential for this activity? Is this your new growth driver?
To start with, it remains, you know, we are, by essence, a retail pure player. I mean, there is no discussion about it. Wholesale activity remains marginal, and the way we operate wholesale, it's a very curated wholesale activity. It's almost a partner retail, if we call it. It's slightly above 10% of our sales, so it's not a revolution in our business model. We definitely think that it's an untapped potential for us in a lot of geographies where we cannot operate ourselves and partners would do a better job than would do themselves a better job with our help, definitely. This allows us to operate in markets that are difficult to access or too complicated to operate directly. It's a good way to continue to foster the pioneer approach, which has always been a pillar in the philosophy of development of this group with unlimited investment.
We're really happy about the success of the partners we've chosen. We usually choose the most active and the most prominent partners in the countries we operate. We still have a good pipe of opening on H2 until next year. That's an interesting business model for us that we keep on nurturing.
Thank you, Isabelle. Thank you, everyone. We wish you a good evening.
Bye-bye.
Thank you for joining today's call. You may now disconnect.