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

Dear all, welcome to the First Quarter 2025 Results of Maisons du Monde. Francois-Melchior De Polignac, CEO; and Denis Lamoureux, CFO, will be your speakers today. I'll now hand over to Francois-Melchior De Polignac. Sir, please go ahead.

Good morning to all, and thank you for being with us today. So one of the key highlights for this term. This term reflects a contrasting picture for us. On the one hand, we've made solid progress in our transformation efforts, advancing even as we navigate in a persistently challenging market environment. On the other hand, sales reached EUR 221.4 million, down 9.9% on a like-for-like basis, such results highlighting both encouraging trends and areas where we can and shall improve. Regarding our strategic plan, Inspire Everyday, we have made steady progress. Among our recent initiatives, I'd like to emphasize a few key highlights: a wider offering with introduction of a new bathroom range; and extensions in pet accessories and culinary products, among others; enhanced brand visibility, driving greater customer awareness and engagement; improved performance of our renewed store concepts; and a cost-saving plan that remains fully on track and supports our long-term objectives. These efforts are starting to pay off and deliver encouraging results. Stores show their best like-for-like performance in the last 24 months at minus 5.7%. Spain and Italy, our largest international markets, are close to breakeven on a like-for-like basis and positive in March. Yet, we are not fully satisfied, of course. Activity in France, which is our biggest market, is down by 11.8% in a consumer context that remains very challenging. Online activity decreased by 17.6%, mainly due to drop in pet traffic following reallocation of market investments, SEA, towards brand strengthening actions. Our SEO is progressing, but not fast and strong enough to compensate for said level of reduced SEA. We are obviously progressively fixing the balance of SEA and SEO by markets to better manage our website traffic. As you saw, we are now targeting our cumulative free cash flow objective of over EUR 100 million over a 4-year period instead of 3, so for the 2024, 2027 period instead of 2024, 2026. This adjustment reflects 2 key parameters. First, of course, difficult market conditions that reflect in our current trading, notably in our core market trends where, as you know, political instability persists in a context of challenging public deficits, not allowing for positive consumption dynamics in our view. Second, we remain committed to seize opportunities to accelerate. Typically, our commercial center stores as well as our most recent ZAC or commercial average zone store that we opened 2 months ago, leveraging CCR learnings, are proving so successful that we want to keep open the opportunity to accelerate. In this context, I want to underline that we remain focused on transforming our business to build a stronger foundation for the future. So store network. 2024 was a year of significant transformation for our retail network, and we are now drawing some lessons. The affiliation model has proven to be a resilient and effective alternative for operating smaller stores, successfully implemented in France today and is planned to expand abroad, as illustrated by the recent opening of our first store in Manila. This opening abroad represents a key step for us. Investing in our retail network has shown clear value, even though it requires both time and financial resources. Our 65 revamped concept stores have not only enhanced the customer experience, but also demonstrated a more resilient dynamic compared to other stores. Among this, as mentioned, shopping center locations have seen the most significant positive impact. As we continue to refine our approach, we adapt and improve with each step. In this respect, as I mentioned, the recent revamp of our store in La Baule in France delivered an impressive performance, confirming that we are gradually finding the right formula. To better meet the needs of our -- all customers, including B2B clientele, we have expanded the in-store B2B offering, upgraded our services and added 15 new B2B corners, bringing the total to 40 across our network, which has created additional traction for these customers. Now around activity. A key pillar of Inspire Everyday is to nurture our brand and use it to deepen the connection with our customers. As many of you know, we launched our first loyalty program, Ma Maison du Monde, on October '24. The program has already rewarded thousand of customers, and the initial results are highly encouraging with a noticeable increase in customer frequency. Our goal is to cherish our customers, especially our most loyal ones. That's why we organize exclusive in-store events for "Addicts" and "Lover" members. Another key initiative has been the return of our printed catalogs since 2023, which has become an essential tool for furthering our products. It has reached this spring an all-time high of over 1 million copies printed. In addition to being available in stores, the catalog was distributed as an insert in leading fashion magazine, giving it significantly broader reach and impact. We've also strengthened our communication efforts through out-of-home and radio campaigns, all of which have contributed to a notable increase in brand awareness, which, as you can read, has been validated by the YouGov study. Finally, to connect this point to the next point, we are pleased to share that customer satisfaction, as measured by the Net Promoter Score, NPS, increased by 2 points over the past quarter. Now our goal, as you know, is to better support and inspire our customers. That's why we've enhanced our range with new additions, such as bathroom essentials and outdoor lightning, with -- while also expanding our selection of pet and culinary accessories to better meet their needs. Some of you may remember that was an explicit request by our customers when we surveyed them in-depth 3 years ago. We are also proud to inspire our clients. 3 of our creations were featured in the renowned French magazine, Marle Claire. Innovation is key, and the Tangerine capsule collection was an iconic MDM products is a perfect example of how our teams drive creativity and innovation. Better serving our customers mean streamlining all aspects of our operations from implementation time lines to product availability, in-store stock management and delivery efficiency, ensuring a seamless experience at every step. And we pass on to Denis for the financial results.

Thank you, Francois-Melchior. Hello, everybody. So we will go here a little bit deeply in details of the sales of the Q1 2025. A lot of -- has been already said by Francois-Melchior, but let's see more in detail. So what we can see here, of course, is the decline of the sales of 10.9% over the Q1, and it's strongly linked to France and online because we can see some positive effect. First of all, the like-for-like is only minus 9.9%. But also the retail like-for-like is only minus -- I mean, only, of course, in view of the current situation, only minus 0.7%, which is one of the best performance since some quarters. So a good evolution, and this evolution has been a little bit contracted over Europe because if you look at like-for-like international, so in retail store, like-for-like international, then there is almost no decline, and we have some positive months on -- in Spain and Italy, which are our 2 biggest markets outside France. Besides, remember that we had 1 day less in February, which accounts for 3% of February performance. And on top of that, the -- in terms of dynamic, March was the best month of this quarter. On top of that, on the online sales, we have a sharp decline of the sales, as mentioned by Francois-Melchior. The main reason is the effect on the paid traffic because we want to find the right balance between paid traffic and free traffic. We -- the decline on paid traffic has been sharper than anticipated. And of course, it is not the target for the full year. And we, as mentioned by Francois-Melchior, and he will also elaborate a little bit more after, this is not the trend that we want to see on the online for the other quarter, and we are working to compensate with additional paid traffic to have a soft landing on this topic. Regarding the affiliation, there is no mention here on the affiliation. But as mentioned, we are on the same number of affiliation at the end of the quarter. But the path is not changed, and we will continue to open. As mentioned by Francois-Melchior, we have opened international affiliation in Manila, in Spain, and we will continue both in Spain and Italy, but also in France, and namely opening of new stores. So no change on that target. If we go on the next page, we can see the evaluation of the mix, which is the standard also a slide that you have. You can see the evolution by category, decoration and furniture, taking into account the fact that there is a mix effect, of course, there on furniture because the furniture is more driven by web rather than by store. So the evolution of the channel mix has an effect on the channel category, as you can imagine. On top of that, we did not elaborate too much on that, but you have seen on the store network, the B2B corner, that also show strong results. And if we go on geography, I always spoke about Spain and Italy. But also, we have to mention Switzerland, where we adjust locally some pricing strategy, and it shows a strong performance in terms of like-for-like and an increase in traffic with an increase in the basket size. So we are finding the recipe for the rebound. And again, on the new concept, which is not presented here as we speak, but better performance normally in March. Once said, I leave the floor to Francois-Melchior.

Thank you, Denis. So looking ahead, in 2025, our focus is twofold, basically, of course, addressing immediate challenges to reinvigorate our top line, while continuing the in-depth transformation of our business model for the future. We are putting strong emphasis on strengthening our brand through new designer collaborations, impactful marketing and an enriched product offering. At the same time, revitalizing online sales is a priority. We are launching initiatives to improve the website and the omnichannel experience, fostering better synergies between online and in-store sales and fine-tuning, as we mentioned, with at least our SEA strategy based, of course, on the learning from earlier this year. Our store network transformation is also progressing well. We are continuing renovation, rolling out new concepts in key shopping mall locations and expanding our affiliation model abroad. Finally, we are driving greater efficiencies across the organization with an additional EUR 10 million in cost savings, bringing our 3-year target to EUR 110 million, with streamlining operations, optimizing our supply chain and simplifying our structure to ensure we execute with even more precision. On that brief complete update of the quarter, we will open the way, of course, for the Q&A, which I don't see any question at the moment, but we are, of course, waiting and allow you to type a few questions, if necessary.

So there seems to be no question. Of course, we remain, Denis and myself, open to direct calls. And -- well, I'm just speaking slowly to leave a large chance for the system to update itself, but I don't see any questions coming up. So thank you -- one question. Just a second. All right. So question is what non-macroeconomic factors motivated the extension of the cumulative free cash flow target time line? Will this affect the pace of store renovations? And the second question is, is the decline in online sales temporary? Or should we expect it to remain at this level throughout the year? Was it planned to have such a backdrop in online sales? So thank you for the question, Flavien. On the first part, really, what we see is macroeconomics is not satisfying, optimistic certainly in France. And as I mentioned, our French people around the table, we know that the government now is looking for EUR 40 billion of savings, without having any majority -- strong majority in parliament and a potential forecast of new elections coming in a few months. So all of this for our core market of France is clearly putting some pressure on the consumption patterns to come. So that's the macroeconomic. And it does reflect in our current trading, which was not -- which is not where it should be, which is why we are expanding this horizon to get our over EUR 100 million free cash flow generation. Will this affect the pace of store renovation? I would say, no, basically. As mentioned, what will affect the pace of store renovation will rather be the base at which we are 100% confident that we have the perfect balance of the different elements we are putting in our new stores. And as we mentioned, we keep on the contrary the option to accelerate. At the moment, it will appear to be -- could be the best one for us in terms of timing. And yes, of course, we could adapt by country, by market depending on the potential of the speed of the store renovation program. And on your second question, so decisively, we do not see that as a long-term trend for the online sales. We did have the impact, as mentioned by the Denis and myself of the reduced level of SEA. It is for us a key objective to be less dependent on SEA, which is basically giving out money for onetime stop and traffic on our website and to increase the share of traffic that is coming from the power of our own brand and its capacity to be visible by customers. So SEO is progressing well. This is satisfaction for us. But yes, we did not anticipate so much impact on the SEA reduction. This is why we are rebalancing the mix progressively to get this objective of less dependence on SEA, but also, of course, to better manage the sales online. And during my long answer, sorry for that, we saw no upcoming additional questions. So in that case, we see Flavien for this one question. And again, Denis and I, we're very open to any other questions you might have after this meeting. Well, another question we had is on the renovation and the extra sales mentioned on the renovation. What we have put, and it's something that we are not sharing the full value, of course, of that because it's quite confidential in view of the challenging market. But of course, what we have mentioned in the press release that on March, the renovated stores were 7% above the comparable stores, I mean, in the store that should be in the same position in order to isolate the renovation impact, and that's something that is underway. And to just remind you that we are supposed to have 100 stores renovated at the end of 2025. So refreshment shows no question. So thank you very much for attendance. And yet again, we remain open to any questions that you will have to have after this call. Thank you.

Yes. Thank you. Have a good day. Bye-bye.