SMCP S.A. (SMCP) Earnings Call Transcript & Summary

Hello, and welcome to the SMCP '21 Full Year Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]. And I will now hand you over to your host, Mathilde Magnan, Head of Investor Relations, to begin today's conference. Thank you.

Thank you. Good evening, everyone. This is Mathilde Magnan, Head of Investor Relations, speaking. Thanks for being with us today for the presentation of SMCP Full Year Results. I'm here with Ms. Isabelle Guichot, our CEO; and Patricia Despointes, CFO. As usual, we will go through the presentation. But unfortunately, we have some technical issues preventing us from uploading the presentation and the press release. I hope that most of you have received it by mail. Sorry for that. Before I hand it over to Isabelle and Patricia, I remind you of our usual disclaimer. And I think we can start now.

Thank you, Mathilde. Good evening, everyone. Thank you all for joining us today. Before I give a quick overview of the '21 results, I would like to say a few words about the conflict in Ukraine and its consequences. SMCP is closely monitoring the situation in Ukraine and remain very concerned about the safety of the employees, of our distributor, Hamilton, who work with the group. In this respect, the SMCP Group is pursuing its long-term commitment to Médecins Sans Frontières, MSF, with whom it's been -- with whom we've been in discussion to understand their specific needs since the beginning of the crisis. The group has decided to contribute a significant amount to MSF Emergency Fund, to be used for the supply of medicine in Ukraine in their health centers. In addition, SMCP supports the many initiatives carried out continuously by our teams and is very grateful for this great surge of solidarity on their part, donation, collection of necessities and donation of warm clothing for the refugees. Just to remind you that SMCP already donated the profit of the sales of masks to Médecins Sans Frontières in '21 for the benefit of 2 projects in Lebanon and Mali for EUR 100,000. As far as Russia is concerned, sales are subject to a distribution agreement with a local operator, and we have decided to suspend the delivery. The decision to close store is not under the group's control. We'll continue to monitor the situation closely and offer a rapid resolution to this tragic conflict. So now let's move on and talk to -- about the '21 results with key highlights and business initiatives. Then Patricia will detail out the financial performance, and I will briefly conclude with an outlook. So I hope you all have been able to receive the presentation by now, and let's move on to Page 4. As you've seen from the press release, we've been very happy to announce an improving trend leading to a dynamic and highly profitable year. Operational performance exceeded expectations. Sales performance is progressively catching up with 2019 combined with cost, inventory and cash optimization measures. We achieved this year EUR 1.38 billion sales. This is very important for us to cross that threshold that's important and symbolic threshold of EUR 1 billion. It's up 19% versus 20% on an organic basis, driven by a strong like-for-like growth of 17%. These results included solid digital penetration of 23% of our sales. As planned in '21, SMCP finalized its brick-and-mortar network optimization plan with 42 net closures of directly operated stores, of which 47 in France, mainly small point of sales in small cities, including the discontinuation of the Suite 341 format, with 28 closures over the year. In EMEA, SMCP recorded 13 net closures of DOS., including but also openings in Germany and Portugal, for instance, and some closures to seize relocation opportunities or consolidation of stores such as s Sandro women and Sandro men converted into a unisex store. On the other hand, obviously, the group continued its expansion in APAC, with 21 DOS opening, including 15 in China. In terms of profitability, the adjusted EBIT stood at EUR 95 million, reaching a margin of 9%, out of which 12% in the second semester, as you can see on the slide. You see the results of the growth in sales and increase in the gross margin ratio, which is 71.2% (sic) [ 75.2% ] in H2, combined with the continued disciplined cost management throughout the year. Our net income, back to positive, stood at EUR 23.6 million, a sharp increase year-on-year. Thanks to strict cash discipline. The group has generated a record cash flow, and we are extremely proud about it, increasing by more than EUR 60 million, rising from EUR 8 million in '20, to EUR 69.8 million in '21. Lastly, we showed strong deleverage, with the net financial debt decreasing by EUR 65 million to stand at EUR 317.7 million. This decline, combined with the improvement in the EBITDA, leads to a significant decrease of the leverage ratio from 7.1x EBITDA in December '20 to 2.5x in December '21. Moving on to Page 5. I think this slide is self-explanatory. You can see that our top line exceeded the EUR 1 billion mark again in the year, still impacted by the pandemic with versus '19, our total sales were down only 9.3% on an organic base, representing a solid performance in the context of COVID with very limited tourism and a promotional sales deliberately reduced in an optimized network. In '21, the group recorded a high digital sales penetration at 23%, stabilizing over the period with the reopening of the physical network after important lockdown impact in certain regions in H1. Also to be noted, the group pursued its full-price strategy, mechanically limiting digital sales growth. Nevertheless, the weight of digital sales remained well above the level of '19. I remind you that '19 was only 15%. Moving on to Page 6. Let me highlight some key elements of this improving trend versus '19. As you can see on the slide, this performance reflects sequential catch up throughout the year, resulting in a Q4 organic performance almost at par with '19. 2021 was not a typical year and should be utilized as such in light of the following considerations. First, consideration, it's another year impacted by the pandemic, including store closures, particularly in H1, more than in '20, for instance, in France, restriction impacting traffic, low tourism and so on. Second consideration, we can clearly observe a progressive catch up versus '19 since the beginning of the year. Third, this performance was mostly driven by local demand as tourism is not back yet. And therefore, rely on our solid brand desirability and our local client loyalty. Fourth consideration in line with our One Journey strategic ambition, we made strong progress on our full-price strategy, notably by deliberately reducing the promotional sales share and managing to reduce the discount rate, both in brick-and-mortar and digital, with a drop of 5.6% versus 20. Last, as planned. This year, we finalized our network optimization plan with 42 net closures, as I mentioned in introduction, of directly operated stores, especially in Europe and France. Page 7 now, you will find the performance by region, mainly driven by APAC and Americas. In France, compared to '20, sales were up 10% on an organic basis, driven exclusively by like-for-like growth, down minus 16% on an organic basis versus '19. French performance supported by local demand remained solid, particularly given the severe restriction in H1, where I mentioned again that the number -- the days of closure were higher than in '20, the network optimization plan we carried out and the progress of the group's full-price strategy. In EMEA, group sales were up by 20% on an organic basis versus '20, driven by strong like-for-like growth. This strong performance highlights the gradual catching up of the pre-pandemic level despite the store closures, the drop in discount rate and a loss of tourism-related sales. In APAC now, the group recorded an organic growth of 14.5%, also up 5.5% versus '19. Sales grew strongly in Mainland China, up 15% versus '19 despite further local COVID resurgences and major weather events in key cities, both impacting mobility and traffic, especially in Q4. These COVID resurgences in China have affected almost 2/3 of the 33 cities, where we are present and have directly impacted consumer behavior and footfall in the malls where -- and commercial retail centers where our stores are located. The desirability of our brands is still strong in Asia and especially in China, where our brands remain ranked among the top 3 in the accessible luxury segment. As you've already seen in our latest publication, we continue this year to partner with the famous Chinese ambassadors for Maje and Sandro. Our brand's dedication to digital transformation and agility in the local market have resulted in their advanced brand desirability among today's young generation and consolidated relevance to Chinese consumers, seeking elevated and uncompromising accessible luxury. In the Americas, sales rose by 57% versus '19 -- it's versus '20, sorry, a very solid rebound, a very good performance driven by exceptional like-for-like sales growth of 56%, despite pandemic-related restrictions, particularly in Canada, a drop in the discount rate and a fairly stable network base. Moreover, sales in the Americas returned to pre-pandemic levels with minus 0.6% organic change versus '19. The United States outperformed versus '19 driven by strong demand. Let's move on now to some examples of all the actions that have been carried out by the brand over the period. Let's start with the brand desirability on Page 8. Starting with the first pillar of this One Journey strategy. Let's look at some of innovative and creative collaboration that our brands have carried out to sustain the customer appetite for our products. Let's start with Sandro. For the 50th anniversary of the series, Sandro spotlighted Mr. Men and Little Miss for a limited-edition capsule collection. Throughout the years, these characters have entertained main generations and have become recognizable throughout the world. I remember of Sandro [indiscernible] creative studio remembered having 1 of these colorful books between their hands and wanted to celebrate them in their own way. Knitted onto polo, onto sweaters, printed on t-shirts and scarfs or patch on hoodies and accessories, these mythical characters have been displayed in the selection of womenswear and menswear pieces. There were a reflection of human emotions, joyfully represented on Sandro’s latest fall/winter collection. Now turning to Maje and the 80s for a flash dance vibe with a modern approach. Last October, Judith Milgrom and Lara Mead, respectively Founders and Creative Directors of Maje and Varley, shared their universes in a limited-edition capsule collection, inspired by the contract and similarities of both brands, bringing together sports and fashion, technical and playful. They imagined a mix of modernity and versatility to allow women to have the confidence to express themselves. They gathered in the Paris Maje studio and worked together to create the sexiest, sportiest and grooviest collection, which can be worn to the gym, but also on an urban look. This capsule edition has been sold on digital, but also in more than 30 stores in Europe, 20 stores in -- 25 stores in APAC, sorry, out of which 18 in China and also in the U.S. The [indiscernible] means also being able to have sustainability in the [indiscernible] aspect in the turn of voice. The brands have a tradition of philanthropic and altruist actions, and they keep on -- they made very important action this year. Médecins Sans Frontières, I mentioned briefly in my introduction, the important contribution of the max -- masks, sorry, sales during the pandemic and the donation of EUR 100,000 to Médecins Sans Frontières. Fursac worked with La Cravate Solidaire and organized charity sales for that foundation. Then Claudie Pierlot has been always very committed with Le Ruban Rose that fights against breast cancer. It's part of the brand culture to have that to have -- to do those donations and to finance those campaigns, and it's something that we will carry out. On Page 10, turning to our fourth strategic pillars, CSR, to highlight our 2021 key achievements. As you know, our CSR strategy is based on 3Ps, product, planet and people. On the product side, ethical sourcing is something that is now part of the daily life of our studios and our production teams. Granting 100% ethical sourcing, more and more eco-responsible product and developing reliable tractability tools, now the obsession of our team. We carried out this year more than 70 social and environmental audits and managed to cover more than 80% of purchases made with strategic suppliers. These audits were performed by independent third-party experts, obviously, and we plan to cover 100% by '25. And traceability, as you've probably seen, in the recent weeks, we announced a partnership with Fairly Made and become one of the first accessory -- accessible luxury group to offer its customers detailed and transparent information and accessibility of its whole supply chain and of its products. By '25, SMCP intends to attach the QR code to all products sold by the group for brands, allowing full flexibility of each product. This QR code will provide a quick, simple, transparent and centralized access to all information relating to all the sourcing and traceability of each products, such as the country of origin, obviously, of its material, the number of kilometers, the CO2 impact, the location of the manufacturers and so on. I’m delighted to have announced the signing of this partnership, which places the group as the forefront of the industry. Now obviously on our collection. We are proud to announce that this year, 46% of our SKUs were eco-responsible with the level of -- which means 50% of the components were eco-responsible. And we -- as a reminder, we decided to reach a minimum of 60% of responsible -- eco-responsible SKU by 2025. Obviously, our brands are also implementing some specific 100% organic capsules or upcycled products. Sandro launched pyjama capsule with upcycled products last winter and [ Maje ] did high summer capsule with the pieces made out of organic [indiscernible]. Regarding our second pillar, planet. To preserve our planet and its natural resources, reduce our environmental footprint, we continue to review our shipping flows and managed to reduce air transport flow from 63% in '19 to 49% in '21, a strong performance in a specific context impacted both by COVID, transportation, time-to-market issue and cost issues, obviously. We'll also develop our green concept stores, with this year 99% of newly opened and renovated stores compliant with sustainable criteria. By '25, it will be 100% with even more demanding criteria. At the center of this slide, for instance, you can see that we obtained the Gold LEED Certification for the Sandro Taikooli store in Beijing. And you have on the right part of the slide, what the justification implies. Let's move on to Page 12. Other very strong initiatives have been carried out by the brands, Sandro and Maje, in the circular economy. I think I mentioned during the previous call the fact that Maje launched the first rental services of the group back in June. This project is central to our strategy since it combined a core responsibility with our service cultured mindset. As an extension of Maje CSR strategy, we offer a new online service, allowing our customers to change their style whenever they want and indulge themselves for every occasion. This service brings back to life some of the most beautiful pieces of our old collection and present collection, obviously. It's a 100% ceremony offer. From EUR 20 per day, our clients can rent dresses, suits and accessory for a few days. Through our new rental platform, we guarantee an eco-friendly service from cleaning to delivery. Sandro. Last October, Sandro launched its secondhand service in France. The brand makes the process as easy as it's possible for people wishing to resell their products or to buy secondhand products. After filling in a form on the Sandro secondhand website, the sellers sends his piece to the Sandro team. After authentification and quality control, a voucher is immediately sent to him. These 2 new services have been launched in Europe -- in France first, and our clients are very enthusiastic, and results are extremely promising. We've already started to work to deploy them abroad and on all our end portfolio. We are very proud of these innovative services, strengthening our brand desirability, targeting new client categories, while spreading the sustainable message, be engaged. Last pillar of our CSR strategy, people. Let me highlight some of our key achievements on that third pillar. Our goal is to unveil the potential of our passionate entrepreneurs to strengthen their well-being and professional development, encouraging internal mobility in promotions and prioritizing diversity and inclusion. So we are proud to announce today that 31% of our open positions have been filled by internal promotions in a specific context, in which more and more new position required new skills. We pursued our learning strategy with more than 79,000 learning hours provided to our employees, including 74% by e-learning. We developed a mandatory training on a very important matter for us, hiring without discriminating. We launched our first hackathon, on how to motivate the retail [ vocation ], mobilizing more than 50 employees, a great moment of innovation and sharing for us. Then all of our brands with their teams have been involved in philanthropic actions. And I mentioned some of them earlier in presentation. Our Asian team, for instance, supported the Box of Hope within association of Love 21, or our American team made a cleanup and flower planting operation in Columbus Park in Lower Manhattan. Our teams faithfully committed in the execution of this plan, which will I'm sure enable SMCP to meet our targets and potentially to go above and beyond. Let's move on, on some of the Q4 key openings because our first and -- we are retailers to start with and it's important to look at new retail initiatives. Fursac opened its historic flagship in Paris and pursued it's European extension with a new opening in London. You can see on the left of that slide, a very nice picture of the Rue de Richelieu historic store open reopened recently, with a renewed architectural concept referencing the brand's Grand Boulevards de Paris Heritage and featured the brand's entire French wardrobe under the creative leadership of Gauthier Borsarello. From tailored clothing to casual pieces, the space is bright with the mosaic flooring as well as furniture and fittings inspired by the 1930s. Another store opened on Marylebone High Street, roughly 100 square meter shop. It's a second London shop for Fursac after the King's Road shop opened last October -- in October '20, I meant. We're very happy and proud price to have opened our second -- this second shop. I'm convinced about the potential of Fursac’s French style in the U.K. market. This opening is part of our wider strategy to expand internationally with more openings to be announced over the coming months. Other openings. As you can see, as I mentioned also in the introduction, we kept on opening stores in APAC. As you can see here, 1 example of 2 stores opened in Shenzhen with MixC, one of our more reliable retail partner, the MixC retail malls. So we opened in Shenzhen MixC a Maje and Sandro store. And other openings in Taiwan, in Hanshin Department Store, in Kaohsiung. APAC remaining the fast growing region of the group, as you know. Page 16, a quick look on our distributor and partnerships. As you know, 10% roughly of our sales are done through partner retail or distribution agreements. This is -- those are very strong partnerships in key strategic countries, but also it's a partnership that we also extend to online partnership. For instance, with our distributor in Vietnam, we launched the [ sandro & maje.vn ], which is the Vietnamese extension -- domain extension. And we also placed Claudie Pierlot on The Iconic, which is a leading online fashion and sports retailer in Australia and New Zealand. This partnership strengthened our brand exposure and highlights the appeal of our brand to worldwide consumers. So now let me -- I will turn it over to Patricia, who will take you through the full year performance in greater detail. Up to you, Patricia.

Thank you, Isabelle. Good evening, everyone. So moving on to Slide 18. Let me highlight some key messages on our sales performance by region. First, in France, versus 2020, sales grew plus 10% organic, exclusively from like-for-like at plus 11.7%. This performance is all the more remarkable given that it includes a minus 5-point decrease in our discount rates over the year and the finalization of our network optimization plan with minus 46 point of sales at the end of '21 versus '20. Versus 2019 now, sales are gradually catching up '19 levels over the first 9 months and finally exceeding them in the fourth quarter. For the full year, at minus 16%, organic trends is still below 2019, but improving, thanks to local demand, particularly given the severe constraints in H1. The network optimization plan, minus 57 points of sales in 2 years and the reduction of discounts, to be noted in Q4 at plus 1.5% versus '19. In EMEA now, group sales are EUR 285 million, stood at plus 20% organic versus '20, from a strong like-for-like growth in our brick-and-mortar network at plus 28%. This performance is even more solid given it takes into account a minus 9 points decrease in the discount rate and a rather stable network base. What we noticed also is the gradual catch-up versus pre-pandemic level with H2 only mid-single digit below 2019 despite the loss of tourism-related sales after in H1 at minus 29% from store closures. Now let's move on to Slide 19. In Asia Pacific, sales were EUR 270 million, were up plus 14.5% organic versus '20 and also up plus 5.5% versus 2019, driven by both brick-and-mortar and digital. For the full year, Mainland China was strong at plus 15.2% organic versus '19. But at the end of the year, we have some credit resurgences. In the 33 cities, where we are today, 20 have been impacted either by lockdowns or restrictions, leading to sharp drop in traffic of up to minus 60% for some cities over a quite long period. Finally, the group's strategy in full prices has also been implemented in APAC, with a stable discount rate over the year, despite this uncertain environment. In the Americas, sales surged by plus 57% organic versus '20, driven nearly exclusively from an outstanding like-for-like of plus 56%, while the store count was quite stable. An exceptional performance despite long-lasting restrictions in Canada. Americas is also the area where the reduction in this country at minus 12 points was the most visible. Sales nearly returned to pre-pandemic levels at only minus 0.6% organic versus '19. This strong trend was supported by the performance in the U.S.A. at 5.5% organic positive versus 2019, with a strong demand for our brand products across all distribution channels. Now on Page 20. Let's focus on our P&L performance. We are very happy to report the improvements of our gross margin ratio back to pre-pandemic levels in H2, reaching 75.2% after an H1 at 71.6%, impacted by a few liquidation initiatives at the beginning of the year. For the full year, gross margin ratio stands at 73.6%, up plus 280 basis points and from several sources. From one side, as part of One Journey strategic plan, the group made solid progress on our full price strategy during this season, resulting in a decrease of discount rate by 5.6 points. But we also managed to improve our margin on this offsite channels, prioritizing our own network of outlets versus off-price digital partners. In [indiscernible], store costs as a percentage of sales decreased from 44% to 40%, reflecting a continuing strong cost management throughout the year, combined with a better absorption linked to the return to growth. As a result, the retail margin, which corresponds to gross margin of store costs, stood at 33.2% and is already back to 2019 levels. Page 21, with the SG&A, they went slightly up by 0.4 points due to the increase in marketing spend, which is part of our One Journey strategic plan. The weight of marketing expenses rose to 3.7% of sales in '21 compared to 2.3% in 2020. And reflects new investments in more disruptive and innovative communication with initiatives, such as live shopping, gaming, creative collaboration with brands, art directors or artists. All those sectors enabled us to reach an adjusted EBIT margin of 9% in '21 and even reaching a strong level of 12% in the second half. Now let's have a look on Page 22 to see how the strong operational performance translates into a return to positive net income. Here, you can have an overview of the main components of the P&L in comparison with 2020. Net income stands at EUR 23.6 million in '21 compared to a loss of EUR 102 million in 2020. The bridge highlights the variance of each item. You can see the strong increase in gross margin by EUR 147 million from both volume effect and ratio effect, enabling to absorb the increase in marketing expenses in line with our strategy and higher OpEx from stronger activity. Nonrecurring expenses decreased by EUR 53 million in '21. As you remember, 2020 had been impacted by significant one-off noncash increase. The impact of those in 2021 is much less important. Financial expenses were nearly stable, to be noted that the average interest rate of debt stood at 2.3% in '21. Lastly, tax charges stood at minus EUR 12 million, increasing versus last year, simply reflecting the returns for positive pretax income. Moving on to Page 23, highlighting that the strong P&L performance, combined with a strict cash discipline led to a material free cash flow generation, the highest since the IPO, increasing by EUR 62 million from EUR 8 million in 2020 to EUR 70 million in 2021. Apart from the increase in EBITDA, this performance also reflects a significant continued improvement in working capital from EUR 154 million in '20 to EUR 134 million in '21. Tight control of inventory is continuing. Their weight in the percentage of sales is lower by 4 points in 1 year, supported by the efficiency of the demand planning processes implemented last year. And also, it's due to strong management of trade receivables. Working cap, as a result, in percentage of sales decreased drastically to reach just above 13% in '21 compared to 16% in 2019, just below 13%, sorry. At the same time, the group maintained a strict control of its investments throughout the year, amounting to EUR 47 million in '21 and representing 4.5% of sales, completely in line with our target communicated to the market in October 2020. In '21, 70% of the adjusted EBITDA have been converted in free cash flow. Finally, on Page 4, (sic) [ 24 ], we are proud to present a more and more solid financial structure with a massive decrease of the leverage ratio. We managed to diminish the net financial debt by EUR 65 million versus December '20. This decline in net debt, combined with improvement in EBITDA, leads to a significant decrease in the leverage ratio from 7.1x at the end of December '20 to 2.5x at the end of December '21. The group also continues to benefit from a solid and healthy liquidity headroom of more than EUR 290 million, and we remain very comfortable with our cash levels and our financial covenants for 2022. I will now hand over to Isabelle for the concluding words.

Thank you, Patricia. Before we conclude, let me share with you some of our financial outlook. For the full year '22, SMCP anticipates the following: a solid double-digit sales growth versus '21 and a mid-single-digit sales growth versus '19. We're on track to achieve our '23 targets communicated during the last Investor Day with a sales growth of more than plus 10% versus '19, and we are happy to be in a position to confirm this ambition, thanks primarily to like-for-like, while our direct network should be fairly stable in '22. Regarding profitability, the group expects an adjusted EBIT margin as a percentage of sales, at least in line with '21, despite the context of significant inflation. As far as financial situation is concerned, we anticipate a leverage ratio of less than 2x at the end of '22, instead of at the end of '23, so which means with 1 year in advance. Thus the group confirms its midterm guidance, subject to no deterioration of the international situation, of course. Thank you all for your attention, and we are now happy to take your questions.

Thank you, Isabelle. Courtney, I think we have 1 question.

[Operator Instructions]. And the first question comes from the line of Kathryn Parker.

So I actually have 3, if that's okay. My first question is on current trading. And I wondered if you could make some comments, just looking at like the first 3 months of the year and how your different regions have performed versus 2021 and 2019, if possible? My second question is on your sales growth guidance. And I wondered if you could give any of the assumptions by different regions for your sales growth number. And then my third and final question is whether there's anything else that you can share on an update of the shareholder situation, say, either disposal of the final [ Ruyi ] stake or a potential sale by [ GLAS ] or the outstanding legal cases, if you have any update?

Thank you, Kathryn. Let me start with the current trading. Overall, we can see a strong double-digit growth versus last year driven by brick-and-mortar. All regional brands are above '21, with a good reception of our spring/summer collection across brands. By region, I would say, APAC, China continues to deliver strong double-digit growth versus '19. Hong Kong, as you know, is highly impacted by tougher restrictions, work from home, many types of stores closed, material impact on traffic. Our stores are not closed, but a lot of the retail industry is closed. Americas still performing very strong first versus '21, and sales are above '19. France is above '21, even though public sales were a little slow. EMEA strong growth versus '21, impacted at the beginning of the year by the closing of Netherlands during the first half of January. Versus '19, we continue to have some better resilience in Germany, Switzerland, Nordics, Spain, Portugal, whereas the people that have usually a bigger tourist impact, like U.K. and Italy, are still a little tough. So a major shift compared to what we saw in '21. And the digital is still a very strong performance versus '19 and digital penetration close to '21 levels. Regarding sales -- I mean, more granularity of sales guidance, it's difficult -- I mean we won't elaborate on that. And regarding the shareholder situation, no major update. What we can say is that, as you know, another committee has been formed within the Board's independent members, and they are reviewing all options at this stage. There is not more than I can say.

As you know, you were talking about the shares, the [ 16% ]. We don't have any additional information than what you have and what is publicly disclosed. So we don't have anything more to add to this topic.

Thank you, Kathryn. Courtney, I think we have another question.

The next question comes in from the line of Geoffroy Michalet, calling from ODDO BHF.

Congratulations for the strong results. Two questions from me. You have reached a relatively low leverage. Isn't it the time maybe to overinvest or maybe more than you guided us for? And second, did you have a look on the transaction on [ BA&SH ]? Could you have been interested?

Let me answer, it's for that we're reaching a quite low level of leverage. We are retailers, we're people that are always looking for opportunities, and we are quite agile as culturally in the group. So obviously, we're looking at opportunities. And it's true that everyone today is looking at what's going on in the American [ Sunbelt ], for instance, where there might be some interesting options. So we also -- we could be agile in that matter, too. So yes, we could use that opportunity to be agile, yes. That's everything I can say at that point. Your other point was on [ BA&SH ]. It's a brand that we know well because we -- it's a close labor in almost of the retail department, stores and malls. So we know them well, but it's not our strategy.

Thank you very much. Courtney, I think we have another question.

The next question comes in from the line of David Da Maia from CIC.

Two questions for me, please. The first is one on profitability and gross margin. So the level of gross margin reached in H2 was close to 2019 level. Do you think this level of high margin will be reachable again going forward? Or should we be a bit more cautious in the context of cost inflation? And secondly, sorry to coming back on shareholding, but I know [ GLAS ] is not a number of your Board. But I guess you have regular direct contact with them. So do you think sale of their stake could occur, I don't know, this year, even if the outcome of the 16% stake of unpledged share is still unclear?

Maybe I will take the one on gross margin, David. Thank you very much for your question. Regarding gross margin, just like you mentioned that 75% in H2, we are very satisfied about this level. And to be honest with you, let's say that it's our objective to keep at this level going forward. Now that being said, we have to take into account the inflation context. So it's an objective, but we cannot commit at that stage that we will be in a position to maintain it. You know that we have some mitigation impacts. We increased the prices, so it should compensate, and it has already started compensating in H2 of '21. Now that being said, we are quite cautious, but we like to this level of 75%. So we will do our best to maintain it. Shareholding. No, we don't have contact with [ GLAS ]. So we don't have any comments to do on that.

Okay. So I forgot a last question on current trading. So is it fair to assume that in the first 2 months of this year, trends were in line, more or less in line with your guidance for the full year, meaning mid-single-digit growth against 2019?

Well, the guidance we provided is for the full year. There will be probably some comment for [indiscernible]. We spoke about that on [ April 26 ]. I know that you have already the stuff on your agenda, David.

Thank you, David. Courtney, I think we have another question.

The next question comes in from the line of Gilles Crespel, calling from Alizés.

I hope you can hear me. I had actually 2 questions, and thanks for taking them. One is regarding the stable network scheduled for 2022. Isn't the openings policy a bit conservative? And what brings you to this only stable network? That would be my first question. And my second one would be on the pricing strategy against inflation. Do you -- well, how do you see -- what will be your pricing strategy in 2022? And do you at least intend to have prices that will cover cost inflation?