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

Dear all, welcome to the fourth quarter 2024 Sales Presentation of Maisons du Monde. Francois-Melchior De Polignac, CEO; and Denis Lamoureux, CFO, will be your speakers today. I'll hand over to Francois-Melchior De Polignac.

Thank you, and welcome you all on this call. So we'll go through the usual agenda, and let me start without waiting further on the key highlights. So basically, moving from bottom to top, you will see with no real surprise that we are seeing quite a challenging environment. As you know, level of consumption has been very slow recently. Level of saving has been very, very high. You probably all are aware of the fact that the real estate market, notably in France, has been quite poor and usually sustain the activity of the home sector. In particular, the launch of construction -- new construction in France has reached now for about 1.5 years, nearly all-time low level and certainly since decades. And there has been this additional burden of the budgetary uncertainties in the recent months in France, and it's still not done. So we believe and we know and recognize that the environment has remained quite challenging and we will keep a very high level of uncertainties for the months to come. In this context, you have seen now our sales, which were down 9.5% on a comparable basis for the quarter, which takes us back to more or less the level of the year, slightly better than the overall level of the year and certainly a very strong improvement compared to the quarter 3 that had been quite difficult. In this context, and I think those figures to some extent, reflect where we stand and what we are doing, we remain more than ever committed to delivering the road map and milestones of the key Inspire Everyday transformation plan that we launched and shared with you not even a year ago. You will remember that it's an in-depth transformation. Indeed, we are transforming the company from basement to roof in all its ways of thinking and of doing. As you remember, and that's the part on the top left here, it all starts with the customer. We have been and we keep on reconnecting with our customers and listening to what they want us to achieve and how they see us and what they expect from us. That remains our key inspiration to keep our actions in the right direction, which has, of course, resulted in the launch of several initiatives that deeply transform our commercial model. And in the last quarter, there has been significant milestone in this respect. As you know, notably the launch of the loyalty program in France, but also the acceleration of renovation throughout our store network. At the same time, and even more with this uncertain context we have been speaking about, we are also very, very aggressively adjusting our financial model let's say it this way, with the 2 Cs of cost and cash that you will remember alongside the key C of customer. So we are committed to keeping our road map. I will, of course, come back to what it delivers, and we believe that is the right way in this key and difficult elements of the environment that I've been highlighting. Now if we move on to the next page, you will see the -- what has been happening commercially in the last quarter. Basically, the message on the store network is that you have 2 key elements to have in mind. We are keeping on with a pragmatic progressive optimization of the store network. So you see no huge changes in terms of number of openings or closings. We are keeping this a balanced pragmatic approach by which we close stores that have little chance for recovery, and we open new stores that have better chances. This is why you see this quite evolution of the store network in total. And the second key element, of course, is the increasing share of our stores on the partnership, notably the affiliated stores. One key element that you have to have in mind here is that we met with 2 key milestones, i.e., the first 2 openings of stores from our affiliates. So remember that affiliation for us is both a commercial initiative because we very much believe in the local commercial touch even in our business and sector and our affiliate partners do bring this to the table. And of course, in terms of cash and financial model, it allows us to get the support of some partners to finance revamping of stores and indeed, with the 2 first openings, complete new openings of stores. Now another key milestone on the next page that we have achieved in the last quarter was, let's say, the last but not least, types of stores that we have been remodeling. We went and we shared that some months ago with 2 stores located in a very important, very strategic location for us, centres commerciaux, commercial centers. Why are such locations strategic to us? Well, because by definition, they have the challenge of high levels of rents that has a very high reward and a very large exposure to customer flows. Both Nice Cap 3000 and Montpellier Polygone are commercial centers with a huge flow of customers where by definition, we do have a commercial opportunity, but also an opportunity to make the brand resonate even more loudly and powerfully in such cities, which is why we came up with an approach for such locations, which clearly builds upon the findings that we had with the rename of the network, i.e., trying to open up the visibility of the offer for customers and also to increase the agility and facility for the customer to go through their shopping experience. So we are leveraging the learnings of what we have been doing before, which were, of course, also insights from our customers, but adapting them to locations, of course, that present particular characteristics and notably, it is huge customer flow. I'm very happy to share with you that in both cases, we have been able so far to measure unquestionably an increase in traffic, meaning that our capacity to open up the space visible for the customers from the mall and to attract more of them into the stores has been a success, but also the transformation rate has been improving, showing that our efforts to showcase in a more easy going way for the customers, our offer has been also successful. So we are very happy with those 2 new bonds of the revamping campaign on our stores and we will, of course, work up on this basis for the future. Now moving on the next page. We have spoken a lot about customer, reconnecting with our customers. You can see here 3 pillars of that for Q4. And of course, again, that is proving a basis for what we want to achieve and roll out further in the future. We spoke about the catalogs many times with you because as you may remember, it has been a quite clear request from our customers. And also, I have to say, from the store staff to come back with the catalogs that make the incredible richness of the offer Maisons du Monde readily available for our customers, not only online, but also with the physical support. We had resumed with our catalog, but at the beginning, making them available to customers only inside the store. And we made a further step last quarter by making those same catalogs available through distribution together with fashion and home decoration magazines across France, and we had a very big impact on that. I have to tell you that the analysis on the customers for those magazines after this operation has been quite successful, in the sense that customers have been showing an eagerness to reconnect with the brand through this catalog made physically available to them. And again, customers with an interest in fashion and home decoration. Second big pillar is the loyalty program. We spoke about it a lot, but you have to know that both for our customers and also both for our store staff, it has been proving a very useful tool to reconnect and improve the link and relation with our customers. You may remember that in the feedback of our customers, there was a very clear eagerness to have the brand and the company value their attachment -- emotional attachment and links with Maisons du Monde is something which for our French customers has been now met with good success and also improving frequency and size of the basket for many customers. And of course, you also remember this last part on the right side that we shared with you our willingness to rebalance a little bit from nearly 100%, let's say, FCA marketing budgets to a more balanced approach by which we remain, of course, very visible on the web, which remains, by definition, the most visible showcase for our products, but yet again, to reconnect also offline, which is what we have been doing progressively in the last quarter in France as a test. We believe a lot in these 3 reconnection with our clients. It is showing some positive signals. Of course, it will just be a basis also for next year. Having made this quick introduction, I will pass over to Denis, who will give you the financial review of the quarter.

Thank you very much, Francois-Melchior. As you can see on the page, we achieved EUR 295.4 million sales for the Q4, decreasing by 9.5% on a like-for-like basis. As you can also see, this turnover includes all the affiliate sales for sure, but also the franchise sales we are doing with the franchise. This is better than the last quarter. And it is also to note that on a like-for-like basis, excluding renovation because you remember that we have 63 stores that have been renovated and some of them were only reopened at the very early stage of Q4. So we have an effect of minus 7.2% if we are purely out of renovation. You can also see the ongoing transformation of our network because we increased strongly the number of affiliates, as you can see, there is one opening, which is Hognoul in Belgium. There is 2 relocations, which is Barentin and Pau. So what we call the [Foreign Language], meaning the concept for the stores. We have 7 transfers to affiliates, and we have 13 closing in our own network. While in the affiliate, we have 2 openings, Cognac and Redon. And these stores are very important in the development of this affiliate store business model. On the franchise stores, it is a temporary closing and it should be reopened in 2025. Let's jump into more detail. If you look at this slide, you can see for sure that decoration is very high compared to what we have seen during the year, of course, because it is the quarter of Christmas and Christmas holiday is very important for Maisons du Monde. All in all, the furniture is doing a little bit better than decoration. And remember that decoration for that quarter is better than what we have known during the year. So a little bit improvement with Christmas holiday. We can also see by channel that we are declining slightly the same compared to digital and stores, even if on like-for-like for stores, we are a little bit better than that. And we have basically 66.2% on store and 23.9% online. From a geographic point of view, we have some pockets of strength in Italy and Spain, which are markets that are recovering also because they have known the transformation of store a little bit earlier than France. And at the end, while the international was a little bit lower than France for the first 3 quarters, at the end of 2024, France and international are at the same kind of dynamic, declining by 11% around, but at least on the same path. If we look at the financial, of course, it is a sales meeting. But if we look at the main topic we are following and we are sharing with you. So on the CapEx side, so we were supposed to be on 3%, and we know that we will be a little bit below 3%. So we are on track on that topic. On working capital, we have also remember that we are working on that, and we have reduced by almost 1 month working capital. On cost savings, we had a target of EUR 45 million saving on 2024, and we achieved that. At the end of that, it enabled us to generate a positive free cash flow in 2024, which was clearly the big target of that year. One set, I leave the floor to Francois-Melchior for 2025.

Next page, thank you. For 2025, so you will have understood that we are not counting on a dynamic environment. Clearly, if you can go back to the page, thank you. Clearly, what we are counting on is our action plans and the positive signal that we see from part of them. There is one point which is close to my heart, and we did not comment too much so far is the NPS. In fact, we have been registering record levels of NPS and a steady growth of this NPS throughout '25 compared to '24, although here, we're talking about the December figures. It's key to us because to be quite honest, when you are going through an in-depth transformation of the organization, you could expect the NPS to take some time to grow or to recover because sometimes it can also go a little bit down. So it's a very positive signal for us that all the elements we have been implementing, listening to customers and trying to connect with customers have been seen and heard by our customers. So this is, of course, very encouraging for us. In terms of other positive signals, what we see from loyalty program is also very promising as much as its engagement of customers is bringing some increase in frequency and baskets. And of course, we have now tested renovation through all different kinds and typologies of stores that we have, which allow us now to make the best enlighting decisions in terms of the speed and magnitude of the rollout that we will go on with in 2025. If I just give a little color on the bullet points that you have below, basically, you see on the left side rather what has to do with the commercial and brand initiatives. Basically, you understand that we'll continue to leverage and reinforce the brand and its connection with its markets. We are also going to capitalize on our omnichannel strategy. You might have in mind that we changed the organization some months ago to bring together under one single commercial management, I would say, all our selling channels, and we see some potential improvements and synergies between the channels to become even more omnichannel than we used to be. And of course, loyalty program is helping us in this respect as well. We believe that we are improving as well the distinctiveness of our product offer, and I will illustrate it in a second. But it's not only about distinctiveness of the product offer. You have in mind that we have been optimizing a level of offer and assortment that we deemed a little bit too complex, though inspiring by our customers. I'm also happy to share with you that this collection will see the beginning of a new category, which is bathroom items, it's an important milestone for us because it's not only about optimizing the offer by making the existing categories more relevant and performance, but also by increasing our coverage of categories for which customers have expressed a distinctive call and need, which is, in that case, the bathroom items. And of course, we will leverage further on the loyalty program to build the long-term engagement of our customers. I could, of course, detail a lot more on the commercial client side, that's a key part of it. But you also have in mind, at the same time, on the right side, the further work that we are doing on, let's say, the financial and cash efficiency. We have been proving in the last 2 years that we are able to optimize our merchandise treasury, and we'll keep on in this direction. Of course, we are planning a lot of improvement in the supply chain as well. We also have announced recently, as you know, a reduction of our head office which is an acceleration of the optimization of our organizations. We count on that not only to master costs, but also to increase agility and simplicity of all our processes. And of course, it will be a milestone to digest in the coming months. And we spoke about affiliation, of course, you have in mind the target that we set for the partnership share of our network. So we'll accelerate on affiliation and franchise moving forward in 2025. So again, as a kind of conclusion at this level, I would say that we don't count on the environment because it remains averse, most likely in the coming months in Europe and notably in France, but we remain confident in our ability to recover momentum and achieve the growth and drive profitability because of the key action plans that have been launched and on the road map that we stick to. And now just to really conclude on some images rather than just on those comments and figures. You are all, of course, more than welcome to come to visit our showroom in the center of Paris. Please do not hesitate to ask for a guided tour. We'll be very happy to do that if you want to. And otherwise, just have a glimpse of the inspiration and variety of the offer that we are able to present to our customers. You can see here something which I believe is quite distinctive, which is the diversity of styles and inspirations that we are able to bring across different categories from the table accessories to the furniture and decoration and from more classical styles to more urban and modern styles and of course, indoor and outdoor, which is the diversity and variety of size and inspiration for everybody that Maisons du Monde is all about. Thank you for listening to us, and we will just check now if there has been some written questions waiting for our answers.

[Operator Instructions]