PARIS, France — “Agility is the key for next year,” declares Daniel Lalonde, president and chief executive of SMCP, the French group that owns affordable luxury brands Sandro, Maje and Claudie Pierlot. “It’s about agility in keeping the consumer excited; agility providing the relevant product offer fast; and agility interacting with a very connected customer who is also very channel-agnostic.”
Lalonde cites an increasingly smart and savvy consumer as the main driver for this. “The overall sophistication of the customer has increased rapidly last year and it’ll be a theme for the next years as well. They’re very smart and they’re very comfortable moving between different segments, categories, channels, brands and geographies.”
“It’s a more modern way of consumption that we’re seeing than in the past... Consumers make trade-offs to consider what is the best value.”
In a flat market, the company posted a 19.2 percent rise in sales for the first half of 2016, driven by strong demand for all of its brands across its regions. Last year marked a milestone for SMCP, as it was the first time that total international sales outweighed sales generated in the French home market. “We have a very, very clear ambition and a very clear strategy that everyone in the company knows and it’s quite simple. We want to be the global leader in accessible luxury,” he says.
“[We also have] a very clear direction on where we’re going, how we’re going to fund the growth and we have a very granular plan even on, for example, new store openings. I can tell you in the next three years exactly where we are opening what store, in what city and in what mall. [But] I’d say our secret sauce is our business model [which] is unique in two ways: we’re retail pure players and we blend the codes of luxury and fast fashion.”
“We’re allergic to the traditional way of doing wholesale,” he explains, “Ninety-four percent of our business is done through direct retail [and] there are big, big advantages of being a retail pure player today. You control your distribution, you control your commercial policy, you can replenish the stores quickly. We know what sells right away... It’s also great for omnichannel because I can tie all my stores together.”
In March, one of China’s largest textile producers, Shandong Ruyi, bought a majority stake in SMCP from private equity (PE) firm Kohlberg Kravis Roberts & Company (KKR), which had acquired a majority stake in the company three years earlier.
“For us, it has been a very good period with KKR bringing in their knowledge. They know what they know; they know what they don’t know; and I think it’s been a very good partnership. They’ve certainly added value, [especially] with the management and our international expansion, so it’s been very positive.”
It’s not been short-term thinking and decision-making. PE firms can be very performance-driven, priority-driven and they’re great sparring partners for CEOs.
“This myth of PE companies coming in and driving — well, they do drive performance, there’s no doubt about that, but with a mindset of long-term value creation and taking the right decisions and the right investments for the brands for the long-term. So it’s not been short-term thinking and decision-making. [In my experience], PE firms can be very performance-driven, priority-driven and they’re great sparring partners for CEOs.”
However, Lalonde concedes that not all private equity firms are interested in the long-term health and desirability of the fashion brands they acquire. “It depends,” he says. “Not all PE companies are the same. Some have more success and more experience in turnarounds and others more in taking a company up to the next level.”
Lalonde believes that despite the increased volatility facing the fashion industry next year, private equity houses will continue to acquire fashion brands in 2017. “Listen, on the PE side of M&A... there will be a continuation of activity,” he says. “They have the resources and I think they’ve developed solid experiences now.”
The State of Fashion 2017 is The Business of Fashion and McKinsey & Company's in-depth report on the global fashion industry in 2017, focusing on the themes, issues and opportunities impacting the sector and its performance.