October 29, 2019 / 7:10 AM / 14 days ago

French fashion company SMCP defies retail pain, shares soar

(Reuters) - SMCP (SMCP.PA), the French fashion company whose brands include Sandro and Claudie Pierlot, on Tuesday defied a gloomy retail outlook by maintaining its forecasts for the year, sending its shares soaring.

The logo of ready-to-wear Sandro brand is seen on a fashion shop storefront in Paris, France, March 29, 2017. REUTERS/Charles Platiau/Files

The group operates in the so-called “affordable luxury” segment with dresses sold at around the 400 euro (£346) mark, putting it on a par with the likes of Britain’s Ted Baker (TED.L).

This corner of the retail market has become increasingly divided, however, with some struggling due to fundamental shifts like consumers switching to online shopping or events like the street protests in Hong Kong that have forced store closures.

SMCP shares were up 12.2% by 10.48GMT, after posting a 9% rise in sales at constant currencies for the third quarter, a touch above forecasts. It reiterated a 2019 goal for an increase in underlying sales and a stable profit margin.

That contrasted with Ted Baker’s second profit warning in four months in early October, in part due to its large exposure to a troubled British market, while Germany’s Hugo Boss (BOSSn.DE) has also cut its 2019 earnings outlook.

“The reaffirmed guidance is really positive as other affordable luxury peers have been cutting theirs, on headwinds in Hong Kong and the United States,” said Kathryn Parker, an analyst at Jefferies.

SMCP, which is majority-owned by Chinese retail group Shandong Ruyi 002193.SZ, said third-quarter sales rose 10.8% on a reported basis to 274.5 million euros (£237.2 million).

The company’s full-year outlook includes sales growth of between 9% and 11% at constant exchange rates, and a stable adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) margin compared with 2018.

The forecast does not take into account its recent acquisition of the De Fursac brand.

SMCP recorded an improvement in its French home market in the third quarter, which has long been sluggish.

And across Asia, revenues remained strong, with sales growth slowing only marginally from a quarter earlier to 21.5% at constant currencies, despite turmoil in Hong Kong that has forced retailers to temporarily shut their doors.

Echoing comments from more high-end peers like Hermes (HRMS.PA) or Kering’s (PRTP.PA) Gucci, SMCP said demand in mainland China was especially robust.

Reporting by Sudip Kar-Gupta, editing by Amy Caren Daniel and Deepa Babington

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