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

[Operator Instructions] I will now hand you over to your host, Amelie Dernis, Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. This is Amelie Dernis speaking. Thanks for being with us today for the publication of SMCP Q1 2024 sales. And here with us are Isabelle Guichot, our CEO and Patricia Despointes, our CFO. You can listen to the publication as our usual conference call or you can connect to the webcast to have the presentation display. As usual, we will go through the presentation, and then we'll have the Q&A session. Before I hand it over to Isabelle and Patricia, I invite you to go through our usual disclaimer on Page 2. And I think we can start now.

Thank you, Amelie. Good morning, everyone. Thank you all for joining us today. We'll first have a look at the key figures of this quarterly sales and share an overview of our main business initiatives with a deep dive on our performance by area. And then we will share with you in details our midterm action plan. Moving on to Page 4, you can see that our Q1 sales reached EUR 287 million, which means a decrease by 5% organic mostly from a continued sluggish consumption, which remain in line with what we've witnessed at the end of 2023, especially in France and in China. This was quite expected as we knew that the first half of the year will be challenging with an historic base in H1 '23, much stronger than in H2. Key messages from this quarter are the following and, of course, we'll get back to more detail throughout the presentation. By geography, encouraging results in EMEA and in North America, sluggish in France and very challenging in China. By brand, quite homogeneous trends for Sandro and Maje, above the average of the group with a good resilience, except in China, and good progresses made at [indiscernible], a disciplined full price strategy with an improvement of discount rates by circa 2 points. Digital contribution at 21%, quite stable. As announced at the annual presentation, the resizing of the network in China is starting to take place in '24. In Q1, consequently, we already closed about 10 stores in Mainland China, mainly in secondary cities. Page 5 [indiscernible] through the detailed bridge of sales evolution between Q1 '23 and Q1 '24. As shown, the decreased comps from the like-for-like network and actually, majority of the decrease comes from China. In Q1, the network effect is positive despite the closure of some stores in China, as previously mentioned, in cities such as Harbin or Fuzhou. And we also benefit from the positive impact of '23 openings. [indiscernible] sales with our partners also contributed positively. Foreign exchange was negative by circa 1 point. Moving on to Page 6. You will find here the performance by region and a few highlights on the split of sales by brand and by channel versus historical shares as Sandro and Maje representing, respectively, 49% and 38% of the total sales. By region, France 34% is 1 point lower than last year, while EMEA at 31% is increasing a bit. America at 15%, gained 2 points in the global contribution contrary to Asia Pacific, which stands at 20% of the sales. By channel, 1 point difference compared to last year, and non-retail sales now represent 9% of the total compared to 8% last year. Sustainability on Page 7. As usual, I would like to present you the initiative and progresses made during this quarter. As regards to the access -- the first pillar, which is Planet, we would like to underline the initiatives of 2 of our brands in terms of circular economy. Maje launched recently a new repair service and Claudie Pierlot joined Sandro and Maje in the secondhand business, which was launched just a few weeks ago. On the People pillar, we launched a second class of our retail lab. You know our retail school. As you know, this school gather a group of students who received a professional training from SMCP brand, combined with courses at the famous ESM school in Paris and the retail techniques from EMA SUP, very proud of this initiative, which already enabled us to recruit people from last year's class in our stores. Moving on to Page 8, just to highlight a few of the different initiatives that all the brands have undertaken for -- to trigger and boost brand desirability. Sandro and Maje have launched different capsule and marketing initiatives. So you can see the Lunar New Year capsule developed by Sandro, very nice with the dragon on the windows and the Ramadan capsule, developed by Maje with also a dedicated 360 activation starting from product, social networks, window activation. Of course, influence remains also an important media for the group -- for the brand activation with influencers, big names that you can see that are highlighted -- that highlighted the brand this quarter. Emily Ratajkowski, everyone knows with more than 30 million followers on Instagram has been attending the press there at Sandro, and Camila Morrone, which is also a very famous influencer, has picture with Miss M bag for Maje. Claudie Pierlot did a collaboration with a very famous influencer, Lena Mahfouf, also known as Lena Situations, is probably the most powerful influencer in France with more than 4.5 million influencers (sic) [ followers ], and it was dedicated to the launch of that Straw Bucket bag. And you can see that the Straw Bucket launch was also the case for global activation, [indiscernible] activation with the stickers on the windows, and it's been extremely successful. Fursac now, different marketing initiatives for Fursac, also some very interesting and very powerful press cover with Cillian Murphy displayed on the cover of Deadline Magazine in the Fursac suit. Also a very interesting launch during the main fashion week of the collection, the full winter '24 collection for Fursac, with a dedicated concert with Miles Kane and also, we had the wonderful opportunity at Fursac to address Pete Doherty during its gig in Paris with its famous group, The Libertines, and that was the occasion of the very nice picture that we like very much. Key openings now on Q1. As we mentioned earlier, America, the momentum in America for the brand is good, and it's also a place where we have some untapped potential in terms of opening. So in that geographical rebalancing strategy that we are undertaking an opening in America with -- is a key pillar. So you see some newly opened store in Scottsdale America, part of that sun belt, which is booming. And in Lenox Square in Georgia, Atlanta, and we think it was a very good example of the dynamism of the group in America. Our partners, we call partners, the people that are operating with the same level of execution, our brands in countries where we cannot operate or do want to operate directly. So new openings in the Middle East and Bahrain, for instance, in Marassi Galleria or in Thailand in Bangkok, Central maintenance. And also in the Emirates, I forgot to mention, very -- 2 new boutiques in Al Maryah Galleria, Abu Dhabi that we just visited a few weeks ago and extremely happy with the performance. I will hand it over to Patricia for a deep dive by regions.

Thank you, Isabelle. Good morning, everyone. So as usual, we'll go through the sales by region, starting with France and Europe on Slide 16. France, Paris with a sales line at EUR 98 million, minus 7% versus 2023 on very high comps. You may remember that France has delivered plus 13% in Q1 2023. The softness of this quarter was particularly visible at the beginning of the year during official sales. However, the trend improved a bit when we switched to the new spring/summer collection, which was well received across our brands. By channel, brick-and-mortar is quite resilient, especially at Sandro and Maje, which are only a touch below last year in like-for-like. Digital sales suffered more and compared to very high comps, notably at Claudie Pierlot. To be noted that we have rolled out our new web platform at Sandro and Maje, and the new sites are now live since March for Sandro and since early April for Maje. EMEA now with a sales of EUR 89 million, flat versus last year, but with very contracted situations with a good dynamism of markets in the South of Europe, such as Spain and Portugal, while the North was more complex namely in the U.K., for example. As regards our retail partners business, Middle East and Turkey continued to perform very well. Nothing special to mention regarding the network, the decrease that appears is very temporary and just reflects some relocations that are currently happening at our partners with reopening a few stores, which is underway and which will be completed soon. In America, on Page 17, sales of EUR 42 million for the quarter stands at plus 9% organic, demonstrating the resilience of this market and the positive or encouraging trends in each country. U.S. [ evolves ] in line with the average of the area. Canada had an encouraging trend and sequentially improved month after month, and Mexico registered a strong double-digit growth. I won't elaborate more on the network, as you already saw the openings of the quarter earlier in the presentation. In Asia, sales stood at EUR 57 million this quarter, which represents minus 16% organic versus Q1 '23. This decrease comes from Greater China, where the traffic in the malls continues to be very low. On the other hand, we enjoyed a much better trend in other Asian markets, both in the network we operate in direct, for example, in Singapore or in Malaysia, but also in the network operated by our retail partners such as Thailand or Vietnam. The network was reduced by 10 POS, which comes basically all from China.

Thank you, Patricia. Now I'd like to get back [indiscernible] during the presentation of annual figures to our strategic action plan. You may remember that we had underlined 4 key pillars on the left side, activity and top line, and on the right side, bottom line and cash. And I would like to [ decide ] in each pillar in the following slides. The first pillar is to reignite growth and gain market share. Our first initiative on this is to continue to work on brand desirability and enhance brand relevance and positioning by reaffirming the place and role of each brand in the portfolio. As a reminder, Sandro is all about the Feminine/Masculine Subtle elegance, Maje embodies the Hyper Femininity and the Emotional side. Claudie Pierlot incarnates the Parisian Timeless silhouette. And finally, Fursac, the true representation of French tailoring and wardrobe. Each one as its own DNA, and also its own specificity. It's what makes them relevant in our portfolio. Sandro and Maje are to establish worldwide brands, Sandro is fashion forward and Maje aims to convey an image of cool couture. Claudie Pierlot and Fursac are 2 emerging brands, including the Digital and CSR lab for the group, being the most advanced brand on these topics, and Fursac with its presentation during Men's Fashion Week and its unique offer is a kind of runway lab for the group. So clearly, our objective is to continue to cherish and foster, what makes each one so special and unique in the portfolio, nurture and highlight the identity of each brand, cultivate its raison d’être in the portfolio and the strategy of the group, and thus enabling to develop their complementarity while avoiding overlap. Moving on to Slide 21. So what we're going to do to foster those 4 great brands. Let's have a look at this first pillar at product strategy, starting with our key category, which is ready to wear. A key element of the strategy is to optimize collection architecture and merchandising grade. We'll continue to sharpen collection architecture, thanks to distinctive messaging, but also thanks to an optimized mix between carryover, updated product, fashion products and novelty, which will help us to reduce [indiscernible]. It will also animate even more our collections, thanks to capsule collaboration, or creative injections to foster desirability. Additionally, we will enhance merchandising strategy, both product and visual merchandising, which means having fewer references per collection, but underlining more our [indiscernible] products and carryover and working also on the readability of collection in stores that triggers the purchase. We pay attention to local specificity, of course, to make sure that the assortment is relevant for the country of the store. Finally, we continue to boost our main segment by capitalizing on the gender fluidity trend and reinforcing brand value and relevance, especially outside France and Europe, where the room to grow is the widest. Of course, we have other categories, and so we will be working on catching untapped potential in accessories and in eyewear, for instance. [indiscernible] M Bag Line rollout can be used as a case model, is back with launch circa 6 years ago, and it's still a great success. Last year, we launched the Miss M bag, and it was sold out in a few days in many colors. It's the first proven example of the bag family at SMCP with a distinctive vocabulary and cost. More M Bags could enrich the family going forward. And I know that the team is working on new addition to that family and could serve as a model for the brand. Eyewear could also benefit from a stronger push with a license partner, and that's also something that all the teams are dedicated on. We also consider new opportunities, whether at the group level, for instance, both beauty and perfume with a group license scheme or more brand-specific with new categories of collaboration according to [indiscernible] each brand, for example, lifestyle, home, travel & experience. The target is to increase not ready-to-wear penetration by 5 points in 5 years' time from around 10% to 15%. All the above-mentioned initiatives, moving on Page 23, have a common objective, boost our profitable growth. And we can measure it by the evolution of sales by square meters, which becomes a key metric for us. Our mid-term target is to improve our store productivity by circa 20%, coming from existing core products, development of underpenetrated product categories, new product offer and efficiency in retail operations. And you see the bridge, which is self-explanatory. Moving on to Page 24. Left slide of this first pillar is about digital. This channel has an amazing source of growth over the past year. It's also a bit mixed with new challenges and constraints sometimes, for instance, return rates, cost of performance marketing. So the strategy is all about transforming the current challenges into opportunities in order to enable us to reduce sales within profitability and leverage omnichannel capabilities. To achieve this, top line wise, we will continue to see the opportunities like marketplace, cross-border [indiscernible] market, omnichannel product development and circularity, which is mostly dealt within a digital mode for the time being. We will also adapt to local specificities in China [indiscernible] you can see on the right side of that slide, the Maje livestreaming at Zoom. Our recent [indiscernible] coming of digital sales is a powerful enabler, more immersive, consist as truly mobile first. It has just been launched at Sandro and Maje, and will be sooner rolled out Claudie Pierlot. We also work on action aiming at reducing returns, currently testing several options and return performance marketing to a smarter ROI-driven approach. Second pillar is to develop -- is to leverage global exposure. At SMCP, we are probably one of the groups in the accessible luxury segment with the widest geographic penetration being present in more than 45 countries. This is a huge advantage as it has always helped see the opportunities across markets. But while this worldwide presence is a disputable asset, mitigating risk between regions seeing untapped opportunities, but not depending too much on some areas is now the winning formula. We currently work on rebalancing geographical footprint of our network, as a reminder, our own retail network is made of approximately 1,360 POS out of 1,719 POS. From West to East, in North America, as it already started in '23 and in Q1 '24, the network we continue to grow in key areas in the U.S. to see the opportunity in this region with a good momentum for the brand and a good resilience of the market. We showed some picture opening in Scottsdale, for instance, earlier in the presentation. In France and in Europe, the network will be optimized with some closures at Claudie Pierlot, circa 25 stores until '26. And in Northern Europe, few stores that we may challenge or operate differently, for example, with a local partner. We will, on the other hand, continue to work on the quality of the network with flagship opening in key cities with exciting opening coming soon in London and in Rome, for instance. In India, we've already talked about circa 30 net closures, will probably be closer to 40 stores closed this year in all brands, including CP, which will temporarily exit out of China. An additional wave of closure, stockholder may come if needed in '25, probably we're a bit overexposed in China prior COVID, so we must adapt these conditions. Commission contract in Maje in already 3 years, so very short, make it easy to adjust and optimize the network. So we take the necessary agility, the necessary measures to face a continued decrease in footfall in the malls. Agility is the keyword at SMCP. In other APAC countries such as Singapore, Malaysia and Australia, curated opening are still on our road map. Moving on to Page 26. So this is for retail. Now let's see non-retail development. You know that at SMCP, we talk about retail partners, which are local distributor who operate stores with an elevated standard of execution in some geographic way to complex for us to run direct. This model is a way to explore new market with potential. It's a scalable model with a proven track record in many countries and a positive effect on EBIT margin. Our goal is to open circa 40 to 50 stores with partners each year and grow the activity in the mix of the sales of the group. Compared to what you've seen in previous presentation, we accelerate this development. We already talked about India recently with the Reliance partnership. But we also explore South America, Eastern Europe, Central Asia, Southeast Asia, and travel retail opportunities. This business model also offer optionalities for the future to integrate it in direct mode. This is not something we have integrated in our financial assumptions for the moment, but it could come at the later stage. Page 27, third pillar of the action plan is about efficiency. Within this pillar, the first and probably one of the biggest source of efficiency that we expect is about gross margin and cost of goods. In the year 2010, the group developed mostly on the geographical expansion mode, which cut most of the attention of the management, be it in commercial, architecture, logistics, digital teams. Now we are convinced that we have a powerful pocket of efficiency lying in the leverage of the supply chain, and it's time to address this topic. We will develop a more transversal approach on the buying of products and components, leveraging negotiation with a group approach with a rationalized portfolio of privileged suppliers, with which we will work more on partnership basis, providing them with visibility on reservation of capacity. We are currently starting this initiative with the support of external experts to assist us on this high [indiscernible]. It will take a little bit of time to reach the full benefit of this reengineering, and we will start to harvest those results starting mid-25. A few words now on Page 28 on sustainability. You know how much it's important for us. It's a point of focus in all our initiatives and with [indiscernible] that on top of all the good reasons that we have to support sustainability actions, it can -- it will also be a source of efficiency. All that we said regarding supply of material and goods supply also sustainable fabrics, and this is only the beginning. Neutralizing the reservation of sustainable raw materials, organic or certified are coming from regenerative agriculture of circular processes will be -- being an innovative actor in this respect, may come from working together with partners developing recycled fibers, for instance. The group will try to act as a true sustainability innovation lab. Moving on to Page 29. Efficiency will also, obviously, and it's obvious will come from technology, and we keep an eye on development such as AI, which is very promising in -- IA sorry, which is very promising in fashion. IA could also be an enabler for many aspects of the industry. I will not mention all of that we can underline -- I will not mention all of them, but we can underline few examples of the role that it could play in shooting to generate product images and visual, inventory management and in stock allocation and more example in the future. Last aspect of the action plan on smaller brands' operating model on Page 30. We are completely committed to enhancing the profitability of our smaller brands. At Claudie Pierlot, just existing operating model, as already explained in the area section, we'll suspend operation in Asia to concentrate on Europe where we will also adjust the network parts by circa 25 stores in the coming years, mostly from '24 to '26. Claudie Pierlot is also the brand with the highest digital share, and we will capitalize on that key asset. At Fursac, we'll continue to foster the good momentum and image of the brand, and to nurture and strengthen the product offer with the casual silhouette [indiscernible] offer, which is a brand signature. In terms of development, we will focus on department store where the model relies on light investment, variable cost structure while benefiting from higher traffic flows. For both brands, we will open a few account in wholesale mode as well as the wholesale partners in countries like Korea, which is opened with Fursac, Middle East or Mexico that is already opened with Claudie Pierlot. Patricia, I will hand it over for the next slide.

We now switch to the financial translation of all these actions. First, on the savings plan. In this respect, we have designed the saving plan, the aim of which is to reach by 2026 an additional EUR 25 million positive impact on our EBIT. We will play on all the pockets of costs, cost of goods, gross margin and OpEx, both in stores and in SG&A. In cost of goods, the savings directly results from the initiatives described by Isabelle on the efficiency of buying with more transversality and group leverage. As far as OpEx are concerned, we try to address all kinds of expenses, rent, team organization to foster efficiency and productivity of the workforce. This may involve some account adjustments, especially in China due to the resizing of the network, which also leads to an adjustment of headcount in the local HQ. In SG&A, we are currently performing an entire review of indirect purchases. In IT, logistics, supply chain, maintenance, et cetera. And finally, on D&A from a business development, which will be a bit more supported by our partners, and also from optimization of our cost of concept. This results in EUR 25 million positive impact on EBIT. It will take some time to get gradually to this target that we aim to reach by 2026. With the 2 parts, cost of goods and OpEx, each representing roughly half of the target. And you can see on the Slide 32, that each line [indiscernible] will be positively impacted at different moments. As far as cost of goods is concerned, due to the creation process, leveraged by definition, a delay between the design of the collection and its impact on the P&L. So it is expected to have a positive impact starting in 2025 with full effect in 2026. As far as OpEx is concerned, we have already started our action plan, especially in China. Some others may take a bit longer in terms of negotiation or renegotiation, for example, regarding rents. On the next slide, combining with the initiatives that Isabelle described in terms of the top line and network by geography, this will help us achieve a path of relative growth from the 6.5% EBIT margin in 2023, we continue to ambition a target of circa 12% EBIT margin in the midterm, i.e., in 5 years, with an important step, which is getting back to double-digit EBIT margin, which is planned in 2026. On the cash side, let's have a look at CapEx and working cap. The control of CapEx will be enabled by several aspects. First, the rebalancing of the development towards partners; second, with an increased efficiency of our CapEx with the fine-tuning of our concept. Thanks to an increased differentiation depending on the various store types, more synergetical buying processes and choices of materials, which should also help our concept to be busier to install, move and recycle. On the inventory side, we are increasing the constraints on the open to buy, i.e., the quantities both per season. We will differentiate more of the assortment in our stores relying on the clustering of boutiques and continue to invest in demand planning. This will support the free cash flow generation, which is the absolute priority. In the short term, and given the soft trend at the beginning of 2024, we will support '24 free cash flow by a lower amount of CapEx than in 2023. We also continue to decrease our level of inventories, and we do not plan to have exceptional cash out in 2024. In the midterm, the initiatives we take regarding CapEx and inventories will support the sustainable cash generation as we will focus on investments with an ROI-driven approach in the most agile way as for today. On this basis, we target a free cash flow generation of EUR 50 million in 2026.

Thank you, Patricia. Let's come back for a conclusion on this strategic action plan. This action plan is already underway. We're confident that we can regain solid momentum in terms of profitability over the medium term. First, we have to resume profitable growth. And I think that's the key message of that presentation is profitable growth, and achieve mid-single-digit sales growth once we have completed our stock network review, which means from '26 onwards. As I've said throughout the presentation of our plan, we have identified several additional sources of growth, whether it's new categories, geography or licenses. The next pillar is about the network. Taking into account the closures in Asia and also at Claudie Pierlot, we'll adjust our network by around 100 units over the next 2 years. We are convinced that this is the right decision in terms of profitability and geographical balance. At the same time, we'll open up our business model to more non-retail opportunities, it's sos that we're maybe a very, very pure business -- retail business model in a selective and very qualitative way, of course. Third, EBIT, we're targeting an additional EUR 20 million of EBIT by '26, and a double-digit EBIT margin by '26 with a midterm target of 12%. This will be achieved thanks to the work we've started and will continue in the coming months and years on processes and costs. As I described earlier, we want to be more efficient in the way we work in our spending. Finally, this will be combined with a selective approach to investment in order to secure cash generation, which is a top priority for us with a target of EUR 50 million of cash generation in '26. We're fully aware of the new challenges in our industry and our environment. Well, this is not easy to manage on a day-to-day basis. We also see that a good opportunity to further improve our business model with the agility that we've always shown, innovation and adaptability. This plan is supported by our portfolio of strong brands and fully committed teams is all about enriching our business model, opening up to new products, new channels and new ways of working to ensure profitable and cash-generative growth. Thank you.

Thank you, Isabelle. I think we can start the Q&A session now. Operator, do we have any questions?

[Operator Instructions] We will now take our first question from Marie-Line Fort from Bernstein.

My first question is about your Q1 momentum. You mentioned during the presentation that you experienced better sales at the end of the Q1, particularly in France or in Europe. Could you comment if this better momentum has continued over Q1, and also probably some comment on China? The second question, it's about the 100 stores closures. Could we have an idea of what kind of impact we can expect on your revenues as we understand that from now to 2026 -- to 2025, you can have some impact on your revenues, which will help us to better monitor yourself. And last question is about your mixed profitability between U.S. and China. We understand that you are switching a bit from China to U.S. if profitability in U.S. today and in the near future is much more promising than in China. If we can have a comment because we know that trends are pretty expensive in this area. So just to understand the metrics.

Okay. I will answer to question 1 and 3, maybe, and I will leave it to Patricia on question 2. I think what your question was Marie-Line was more do we see any inflection in the trend between the end of Q1 and beginning of Q2, if I am correct?

Yes. And to see if there is some momentum in March, as I understand, is remaining in Q2.

I would say that traditionally, April is not a very big month in terms of seasonality in our sales. Trend remains globally quite comparable to Q1 in a very volatile environment with some specificities between the region. France and EMEA, it's a better trend versus last year than in Q1. So it's quite a good news in brick-and-mortar, digital remains soft. Asia remains in the same trend than Q1. And America, softer trend in April, but we are confident in Q2, it depends also very much on the calendar -- promotional calendar in the U.S. The performance was solid in March in the U.S. And it's been a softer start in April, but it's mainly a shift of commercial calendar. And we've seen also some solid performance in the new doors that we opened and all the Florida, Vegas, Sun Belt are off to a very strong start of the season. So that's what I can say. But April, then about the U.S., it's true that now we have a totally different profitability profile in the U.S. than we used to have in the past where prior to COVID, we had very heavy leases, very long-term leases that were impacting a lot of the profitability of the brand, which is no longer the case. So now the profitability in America is really normative and then that -- and don't forget also that our business model in America is mainly in malls or in department stores, and we no longer have those big investments in flagship or heavy leases are impacting the P&L.

On your second question, so 100 closures, let's say, it's about 7% of the total retail network. However, those stores tend to be in terms of sales per store, lower than the average. So the total impact is below this figure. It will be progressive, so let's say, a few points in 2024 and the rest in 2025.

We received also some questions on the webcast. So the first one -- we will translate it because it's in French. It's the usual question linked to the recomposition of the share capital of SMCP. Why is this issue not solved 2 years and a half after the default, what is the blocking point according to you? Is there any chance that it's sold by the end of 2024 for us and for other investors, it's clear that this litigation (unsolved) has a negative impact on the share price of SMCP and -- so do you have -- are you conscious of that, and thank you for clarifying this topic.

I think we're more than conscious about it. It's something that we've been living also for 2.5 years. So we are fully concerned than something that we know very well. We fully agree on your comments on the fact that it's having an impact on the share price definitely. One interesting news maybe that I could share this morning is as regards to the ongoing proceedings regarding -- before the English courts, we've just been informed yesterday night that Dynamic Treasurer, and Ms. Qiu, one of the former member of Shandong Ruyi and the daughter of Chairman Qiu, have each failed to pay a sum of EUR 9 million that were requested -- required by the court to defend the claim. So [indiscernible] consequently applied for a summary judgment against them, taking an order for the return of the highly awaited 16% stake in the company currently aid by Dynamic. We understand that the application should be heard by the court relatively rapidly in July '24. Hope that answers your question.

And we also have another question on the restructuring costs associated to the time.

Okay. I can take this question. The restructuring costs that we expect are, I would say, minor as we are talking about closures of stores mostly in China, where the normal length of the concession contracts in the most is quite short. It's typically 2 to 3 years, meaning that closing the stores is relatively easy because a significant portion of the network is permanently under reshuffle. So we close the stores when the contract ends. So the restructuring cost is very limited. And I think we have demonstrated also that we can manage such a network adjustment at low cost with [indiscernible] that we did in France a few years ago where we closed 40 to 50 stores, and we always did that at the end of contract, so that you never saw a significant restructuring cost, and we anticipate it will be not significant.

Do you have another question, don't hesitate to ask it. I think we have another one on the webcast. Can you please elaborate a bit about America, and how you explain the effect? Is it perimeter? Or is it like-for-like growth?

I think I would say in America, it's both, it's perimeter and like-for-like. So we enjoy a good momentum and a good resilience in America. That's really interesting. And also, as I mentioned during the presentation, it's the country where we think we have an untapped opportunity. New geographies, Sun Belt, [indiscernible] centers, because of the [indiscernible] policy, you have, for instance, in California, places like Sacramento or other places is that we've never contemplated before that could be a target for openings and when we have some more initiatives and lenders are coming to us. And it's also the format that we find now in America to open -- kind of sell around format of cells around 100 to 150 square meters with a decent CapEx per square meter and allows us really to roll out a profitable growth in America. And also, Digital is strong in America. Digital is something that is also an omnichannel capabilities America are really important to drive the momentum.