Maisons du Monde S.A. (ZMM.F) Earnings Call Transcript & Summary

Dear, all. Welcome to the Third Quarter Sales 2024 of Maisons du Monde. Francois-Melchior De Polignac, CEO; and Denis Lamoureux, CFO, will be your speakers today. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Francois-Melchior De Polignac. Sir, please go ahead.

Thank you. Good evening, everyone. I hope you are all doing well. So the agenda of today's conference is displayed on the screen. After the session on highlights and business review of the past 3 months, I will hand over to Denis for the financial review. I will conclude with the priorities for Q4, and then we'll open the Q&A session. So during this quarter, we continued to steadily execute our Inspire Everyday transformation plan, achieving meaningful progress across all dimensions, which I will detail shortly. However, we must acknowledge the reality: the third quarter was challenging. Sales declined by 15.3% overall and 14.3% on a like-for-like basis, driven by a volatile macroeconomic environment, ongoing supply chain disruptions and the renovation of our store network with several occasions closed for refurbishment during the period. While July and August were tough months, we observed a marked improvement in September with like-for-like sales trending at minus 9.4%. The challenging macro backdrop has undeniably impacted consumer confidence and discretionary spending, a trend reflected across the sector, as highlighted by Banque de France data for the quarter. Our transformation plan is on track, and while the full impact is yet to fully materialize, we are confident that the positive results will become increasingly evident in the quarters ahead. One of the key areas where we've already seen tangible results is in price and assortment adjustments. We successfully completed a price reduction campaign on nearly 3,000 product references, which led to a notable 26% increase in volumes for the 350 references adjusted in September. Additionally, we streamlined our assortment by 20% for the autumn/winter '24 collection compared to that of '22. Our store network transformation is also progressing steadily. We have already completed renovations on 20 stores with an additional 41 stores currently under renovation and expected to be ready by early November, just in time for the peak season. The performance of our new concept stores is particularly encouraging. Those with the most comparable history are consistently outperforming peers by double digits and have been showing positive sales growth since reopening compared to last year. Moreover, we've made headway in expanding our affiliation model with our first affiliate partner store opening in September. As of the end of September, our total store network includes 336 locations, of which 8 are affiliates and 3 are franchisees, underscoring our continued efforts to optimize our store network. In terms of organization, we've made strategic adjustments to place a stronger emphasis on the customer experience. We streamlined the Executive Committee and consolidated all the sales channels under the leadership of Christophe Lapotre who was appointed Chief Omnichannel Officer after joining the company 1 year ago as Chief Retail Officer. This move is driving seamless execution across all touch points. By unifying retail and digital operations under a single executive leadership, we are enhancing our omnichannel integration and optimizing the business model to deliver a more cohesive experience. In addition, we announced the introduction of a new high-impact collaboration organization. It's what we call a winning trial between store and regional directors, merchandising and downstream supply chain at regional level for stores. This initiative is aimed at better aligning head office and stores around common objectives for maximizing sales and margin performance while minimizing residual inventory. All 3 teams engaged and accountable for each store, all in line with our Think Global, Act Local approach. Last but not least, we continue to maintain financial discipline. We are firmly on track to achieve our EUR 45 million cost saving target by the end of '24 with solid progress in inventory and CapEx reduction as well, ensuring that we are managing our resources efficiently as we drive the transformation forward. All these initiatives aim to enforce customer centricity as a core priority. Now on store network. As of 30 September '24, our store network comprises 336 locations, including 8 affiliate stores and 3 franchisees, together, representing 3% of our total network. As a reminder, by '26, we aim to grow this network to approximately 400 stores with 30% operating under the affiliation or franchise model. As mentioned earlier in this presentation, we have successfully completed renovation on 20 stores and an additional 41 stores are currently in progress with completion scheduled for early November ahead of the peak season. So by the end of this year, nearly 20% of our network will have been revamped, reflecting our commitment to modernizing our store base. In line with our strategy, we've continued to -- the rollout of our affiliation model [ with the words ] saying, "The first store created by an affiliate partner," during September in Redon, France. This marks an important milestone as it strengthens our collaboration with affiliate partners, helping us to expand into white spots and enhance our geographic coverage with a CapEx-light model. This concludes our business review for the third quarter. I will now hand over to Denis, who will walk you through the financial review.

Thank you very much, Francois-Melchior, and good morning, everyone. As Francois-Melchior mentioned, we have been focused on advancing on transformation efforts. Now let's turn to how these efforts have impacted our sales performance. In Q3 2024, total sales reached EUR 213.5 million, reflecting a 15.3% decrease compared to the same period last year and down 14.3% on a like-for-like basis, not adjusted for store under renovation. As you know, we have a lot of stores under refurbishment during Q3 to be ready for peak season. Despite macro headwinds and transformation of the store network, we saw an improved trend in September where sales were down 9.4% on a like-for-like basis. The quarter decline included a net negative impact of [ EUR 14.2 million ] from comparable stores and EUR 4.1 million negative impact from stores opened or closed between Q3 2023 and Q3 2024. It is important to note that when excluding stores under renovation, September retail sales were down by 7.3% on a like-for-like basis, highlighting a more resilient underlying strength. As shown in the table, our store network has evolved as planned with the transformation plan. More affiliate, less owned stores. By September 2024, this has shifted to 336 stores with 8 affiliates and 3 franchisees. Since the beginning of the year, we opened 1 new store in Belgium [indiscernible], completed the 2 relocations in France, mainly [indiscernible] and transferred 3 stores to affiliation model. Additionally, we closed 13 stores across various markets, 3 in France, 5 in Germany, 4 in Italy and 1 in Spain, totally in line with what we have planned. Now let's dive into the details of our sales performance by channel, category and geography. As Francois-Melchior highlighted at the beginning of the presentation, our figure reflects a volatile macroeconomic environment still affected by supply chain disruption, which continued to weigh on consumer confidence and discretionary spending, along which with the accelerated transformation of our store network. How it has impacted sales breakdown? If we look by category, Decorations sales were notably impacted by delays in product implementation and last year's stronger end-of-season sales performance. In contrast, the furniture category demonstrated greater resilience with a more limited decline of 6.4% over the quarter. I remember you that Banque de France has published minus 6.6% on furniture on the quarter. By channel, inventory reduction constrained end-of-season sales in our retail stores compared to last year compounded by delays in receiving autumn/winter collection. Online sales also experienced the decline due to reduced traffic. However, we saw continued growth in our marketplace, namely in Italy in Spain, sorry. By geography, we observed similar trends in both France and international markets, both of which were affected by our ongoing store network optimization. Additionally, France faced some disruption in traffic due to the Olympic Games in the Paris region. You have to know that basically the Paris region is not far from being 1/3 of the French business. This concludes the main point of our Q3 sales performance for 2024. I will now hand over to Francois-Melchior to present our key initiatives for Q4, both from a commercial point of view and from a financial discipline point of view. Thank you.

Thank you, Denis. So now let's explore how further reconnecting with our customers is indeed at the core of our commercial actions for Q4. We are pleased to announce that our autumn/winter '24 catalog is now available not only stores, but also for the first time as a supplement in popular fashion and home decoration magazines across France with a combined speculation of 440,000 in paper, sorry. This initiative aims to engage with customers where they are most receptive. In addition to this, we will launch for the first time in years an advertising campaign designed to enhance our brand visibility and reinforce customer engagement in this key Q4. We are also proud to introduce our first loyalty program in France, Ma Maison du Monde, crafted thoughtfully with our customers in mind. This program creates a world of unique privileges tailored to their preferences, innovative and responsive to the needs of over 4.5 million customers throughout France. Especially in this challenging economic climate, Ma Maison du Monde goes beyond transactional benefits. It focuses on relationships, emotions and services, allowing each customer to experience a sense of belonging as if they were truly at home. This loyalty program Ma Maison du Monde is based on 3 loyalty status: Likers with last year spent between EUR 0 and EUR 199 in spending; Lovers, EUR 20 to EUR 999; and Addicts from EUR 1,000 onwards in spending. This group reflects a deeper connection to our brands and enjoys exclusive benefits, including discounts, premium services and access to exclusive events. One of the main transactional benefits is a privileged shopping day where customers can enjoy discount between 10% to 20% depending on their status. This privilege is not restricted to a fix date, but is adaptable, allowing customers to choose a day they wish to use their discount, a concept that enhances the personalization of the experience. But beyond simple financial benefit, Ma Maison du Monde focuses on unique services and experiences. Lovers and Addict customers will have access to private sales, exclusive events and early previews of certain collections. Ma Maison du Monde loyalty program has been codeveloped with our customers, from the naming of the 3 status to the content and privileges it offers, ensuring they truly feel at home while creating their personal living spaces. The launch of Ma Maison du Monde is an opportunity for us to honor our customer promise, drawing on insights from our team and the aspirations expressed by our customers while also delighting them in new and unexpected ways. For instance, we organized an exceptional weekend experience exclusive to our 10 best clients in France. Each of these valued customers I called, personally invited to spend the next weekend in La Rochelle at the Maisons du Monde Hotel & Suites. There they enjoyed a curated agenda filled with memorable activities designed to strengthen our relationship and show our appreciation for their loyalty. Indeed, our aim is to make this experience truly unforgettable, highlighting the personalized approach that sets us apart. We believe that by investing in these special moments and others that I will not detail here, we can deepen our connections and enhance the overall experience of our customers that they have with Maisons du Monde. Last but not least, all Lovers and Addicts will receive complementary access to our new innovative platform, Maisons du Monde + created specifically for this launch. This platform has been called by some, indeed, the Netflix of decoration. It serves as a new channel for audio-visual programming accessible through a URL that reflects the essence, the mindset, lifestyle embodied by Maisons du Monde through a diverse [ style ] and services. Maisons du Monde + is fun, inspiring and engaging platform designed to take the Lovers and Addicts on a unique journey, offering even more inspiration, support, services and personalization. We will soon develop a link within this platform and our e-commerce site. On top of this initiative, you will see something new in our stores in France in the coming weeks, namely, a number of additional product offers carefully selected from a small number of categories and partner brands that we enrich for the first time our offer for end-of-year [ presence ]. As part of our ongoing transformation plan, Inspire Everyday, we are committed, as you know, to modernizing and optimizing our store network. This involves, as you may remember, tailoring annual concepts to the diverse typologies of our store, i.e., city centers, retail parks named ZAC in French and regional shopping centers or [ CCA ] in French. We have specifically designed a new concept to meet the evolving expectations of customers in shopping centers, and I'm pleased to announce that our first 2 pilot stores will open at Montpellier Polygone and Nice Cap 3000 early and mid-November. These stores will offer a fully immersive shopping experience focusing on 3 key principles: attract, facilitate and inspire. Attract, we are implementing open storefronts to seamlessly bridge the gap between the gallery and the store, enhancing visibility and encouraging foot traffic. Facilitate, to improve the customer experience, we are introducing self-checkout stations for quicker transactions, especially for smaller purchases. Additionally, we've designed specialized furniture to showcase items like mirrors, frames and lighting more efficiently. Inspire, the store layout will feature curated journeys for different product categories with dedicated theme spaces as well as an inspirational wish list area where the customers can dream up their ideal interiors. Serve and retain. Finally, we are integrating a service area for click and collect and personalized advice to further enhance the customer experience and build long-term loyalty. Such concept will prove key to us not only, of course, because it does adapt our store format that we already worked on at the beginning of the year, as you remember, 2 special locations, but also you have to have in mind that those [ CCA ], commercial centers, are clearly showcased because they have a huge traffic of customers or potential customers going through those alleys. Now as we continue to navigate a challenging macroeconomic environment, financial discipline remains a key priority. I will not go into too much detail, but you can imagine that we are thoroughly challenging each line of spend and CapEx, and indeed, changing the culture of the company to deliver our objectives. That you can bear in mind, for instance, that our efforts that we already spoke about, such on the assortment and the organization, have allowed us to reduce square meters, both in supply chain and head offices in Paris and [ North ] that now directly fuel savings for the remaining months of the year. All these initiatives allow us to be firmly on track with our EUR 45 million cost saving plans for this year, which is, of course, critical to achieving our overall target of EUR 85 million in savings over '24-'26. Alongside this, we will maintain tight control of our CapEx investments and work to further optimize our working capital. In Q4, our focus will also be on driving sales during the critical peak season while ensuring our transformation initiatives are fully executed to deliver also long-term return to growth. This concludes our presentation. Denis and I appreciate your attention, and of course, are here ready to answer any questions you may have, and we are ready to move to the Q&A session.

[Operator Instructions] And it comes from the line of Clement Genelot from Bryan Garnier & Co.

I have 3 questions from my side. So the first one is on the sales in Q3. Are you able to split the Q3 performance between prices and volumes? My second question is on the working cap, given you had a post-sales trend in Q3, I would assume throughout H2 globally. Is it still able to have a smaller working cap inflow this year? And my third question is on the freight. Can you give us an update on the freight, please because I would assume that the spot prices are still high, but some ships are still avoiding Red Sea.

Awesome. Yes, Clement, thank you. We could hear you loud and clear for the 2 last questions on the working cap and the freight. But I'm afraid I could not hear you well on the split in the Q3 sales performance question, the first one.

On the split between prices and volumes.

Okay. So I will take the question 2 on the working cap, and I will let Denis give you an update on the price and volume topics for Q3 and also share with you a freight update. So on the working cap, we do not see any challenge in achieving our working cap ambition for this year because of the fact that the first point we have to bear in mind, we did explain that we had some delays in the implementation of the new collection, and this did impact the sales throughout Q3, notably in August and still a little bit in September. But the good news for us that the performance of this new flow is in line with our expectations. Plus, of course, we are carefully adjusting our Q4 plan to make sure that we maintain the flow rate of the new collection, of course, of the older collections in the sales. So we do not expect to have any challenge compared to our working cap ambitions for Q4.

Okay. Regarding the other question on the split on the price and the volume is basically, as you have seen, we have a mix effect linked to more Furniture as well as declining Decorations. So we have more declining quantities than the sales due to that mix effect, mainly. On the third point, on the freight side, we are covered by our contracts. And so far, we can accept from the time of, as you mentioned, the delays of deliveries. From a financial point of view, there we have a very, very low impact due to the hedging we have on this kind of contract and it will last until the end of the year and we are under tender for next year.

[Operator Instructions] And the next question comes from the line of Florent Thy-Tine from TPICAP Midcap.

Just 2 questions on my side. The first one, can we have the impact of the renovated stores on revenues in Q4, the negative impact? And the second question is on the gross margin. Can we have some color on the performance on Q3.

So your question of the impact of revamped stores or stores under revamping program is really for Q4, right? I heard you well.