Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The transformation of the retail network is accelerating, with 17 stores adopting the new concept in Q2 2024.
- Gross savings of EUR20 million have been achieved compared to June 2023.
- Inventory optimization has improved by nearly 16%.
- Free cash flow remains stable compared to H1 2023, aligning with the forecast for a positive free cash flow for the full year 2024.
- Brand awareness in France has increased by three points according to the latest Barometer from the BVA Institute.
Negative Points
- Sales and EBIT were negatively affected by macroeconomic uncertainties in June.
- Sales declined by EUR52 million, a 9.6% drop compared to the first semester of 2023.
- Furniture sales declined by 6.7% year-on-year.
- The company experienced a gross margin loss of EUR25.8 million.
- The EBIT result showed a loss of EUR5.8 million.
Q & A Highlights
Q: You have just suffered during the second quarter for difficult context, would like to know if you see some better momentum in Q4, I know it's very difficult to anticipate, but given the cumulative comp base the (inaudible)m comparison base, is it wise to see such a quite an improvement on at the end of the year. And the second question is about the new concept. Is it possible to quantify the improvement on the like-for-like sales before and after. And also just to share with us, do you expect the benefits of the refurbishing over six months or something you will need to recover more traffic to get all the benefits from the new concepts, just to have an idea of the momentum the phasing? Thank you.
A: (Francois-melchior De Poligna, CEO) So to start with the turnover trends and the context, it's true that there has been a specific momentum a verse momentum in France in June because of the political context and we have seen that in our figures and we are able to see that because the momentum in France and sales was quite distanced by the one in the rest of European markets just in June as an exception months compared to the rest of the year. So indeed, there has been something specific affecting our main domestic markets in June. And let's say that hopefully this political context is not going to harm in the future any longer the consumption momentum in France, I would not read too much further than that because you know, we did not guide on sales basically. So we do not see any huge signs for market improvement in H2 apart again, from the fact that I do hope there would be no such other impact as the one we experienced in France in June. About your second question on the new concept. So when we go for the full fledged new concepts, we do see we have been seeing consistently something which is a strong double digit improvements compared to the like-for-like of the remaining stores that have the same comparable basis. That gives you a hint of where it hits heads. And then in terms of seeing the benefit, in fact, what we see is that the positive impact on sales of the stores that we are revamping is coming very fast, it's nearly immediate. However, of course, the revamping of the 70 stores we plan with them for this year is going to be progressive and so there will be a large momentum of those 70 stores representing 25% of the retail sales only in Q4 because the last of the 70 stores will be revamped very early November before we freeze by the end of the period. And of course, we will make sure that we have some local communications to increase the awareness of customers around those stores, which to be honest, we have not been doing so that much so far.
Q: In H1 2024, you benefit from a lower freight cost. But since that freight cost, let's say, on the market increase, quite sharply, what kind of effect it could have on your P&L for the H2 2024 and what about 2025 as well, if you get some visibility regarding the length of your contract [ISO]? Thank you.
A: (Denis Lamoureux, CFO) Thank you very much for the question for sure, this topic is a big focus for us, and hopefully we have currently contract that secures fully on the cost of this topic. So I do not anticipate any issue for H2 and to be clear, we view the currently we might have a risk some time of a forwarder that does not respect the contracts so far, there is no issue with that. All over we continue to load your container or the price, we have a new contract to that since that should secure us for 2024. For 2025, for sure, it's a big concern. You have to take into account for sure that the data is two topic. First one is that we are we are mainly based in [Maisons]. So what you can see on the delivery index today is the Shanghai [hotel] and we all know that this line is quite expensive compared to the line to go to Maisons. So there's, for sure a big decline compared to this index and secondly, you have also to take in mind that we are lending and we are loading a lot of container in view of the delivery time it comes from Asia. So we booked a container in H2. It will be the product to be sold in H1 2025. So what I would say, whatever will be the cost and we are going to start the tender in the coming weeks, but it will only hit, if there is a hit, it will only hit H2 of 2025.
Q: Could we have a rough idea of the gross margin rate that can, let's say, as in the second half of the year because the H1 performance was, really great. Could you, let's say you maintain this kind of improvements in H2? Thank you.
A: (Denis Lamoureux, CFO) So far, we do not anticipate to have a big change in the renewal gross margin rate compared to what we have today. Of course, it will depend on the promotion of the end of the year. But we do not anticipate to have a big move on that topic.
Q: Can you come back to the deployment schedule for the new concept of stores in '25 in France, and internationally, how many stores in H1 '25 and so forth?
A: (Francois-melchior De Poligna, CEO) That's a very good question. So as I mentioned, 70 stores by the end of this year and actually by the beginning of November, rightly latest by mid-November at the moment, to be completely honest with you, we are seeing how we could accelerate as much as possible starting from January '25, because seeing this positive momentum on the renewed stores, it's all it's obviously for us of great interest to go as fast as we can, both in France and internationally. So I'm afraid I'm not yet in a position to confirm to the figures. I can only tell you that we are working in a direction of drastically increasing the number of rhythm stores in '25 compared to what we had initially in our roadmap. And I'm sorry, I will not be able to give you more detail than that for this call.
Q: What are the key priorities for the second half of the year?
A: (Francois-melchior De Poligna, CEO) Our objective is to continue the transformation of our model, roll out our new store concept, streamline operations, and accelerate cost savings with a EUR25 million target for H2. We aim for a positive free cash flow contribution to our three-year target of more than EUR100 million. Additionally, we will increase initiatives to enhance brand value and awareness in European markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
