This article first appeared on GuruFocus .
Release Date: July 28, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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SMCP SA ( STU:SFC ) delivered positive top-line growth with organic sales up 0.6% and like-for-like sales up 1.6% in H1 2026, despite a challenging consumer environment.
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Gross margin reached an outstanding 76%, improving by 1.7 points year-over-year, driven by a disciplined discount reduction strategy across all regions.
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Adjusted EBIT margin improved significantly to 8.9%, up 1.8 points from H1 2025, putting the company on track to achieve its H2 2026 target of around 10%.
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Net income increased by over 50% year-over-year, driven by strong EBIT progression and improved financial leverage.
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Net debt decreased by EUR61 million year-over-year, resulting in a record low leverage ratio of 1.1 times, reflecting strong financial discipline and cash generation.
Negative Points
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Sales in France declined by 10.8% organic, impacted by soft consumer demand, a negative perimeter effect from store closures, and reduced liquidation activities.
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The network evolution resulted in a sales decrease of about EUR11 million, primarily due to the closure of BHB and SGM stores in France and SACs closures.
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Foreign exchange headwinds negatively impacted sales by approximately EUR7 million during the first half.
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Free cash flow generation in H1 was only EUR3.5 million, with the company expecting the majority of its EUR50 million full-year target to be achieved in the second half.
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The company recorded non-recurring expenses including impairment of stores and goodwill for Claudie Pierlot, which, while non-cash, indicate ongoing challenges in certain brand segments.
Q & A Highlights
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Q: Can you provide more detail on the sales trends by region and the drivers behind the improving momentum in the second quarter? A: (Isabelle Guichaud, CEO) The first half results came in at EUR597 million, up 0.6% organic and 1.6% like-for-like. After a slightly negative first quarter, sales accelerated in Q2, up 2% organic and 4% like-for-like. On a two-year stack, our like-for-like network was up 6% in Q2. Growth was supported by America (up 11% organic), EMEA (up 7%), and APAC (up 2% organic, with like-for-like at 3%). France remained impacted by a tougher environment, down 11% due to network contraction and other impacts, with like-for-like at minus 5%.
Q: What drove the significant improvement in profitability, and how does this align with your strategic targets? A: (Patricia Hubbespont, CFO) Adjusted EBIT reached EUR53 million in the first half, up 25% versus last year, representing 8.9% of sales, an improvement of 1.8 points. Over the past two years, our first-half EBIT has increased by EUR34 million compared to H1 2024, with a margin improvement of 5.7 points. This steady improvement demonstrates the effectiveness of our strategy and puts us firmly on track to achieve our ambition of around 10% adjusted EBIT margin in the second half of 2026.
Q: How is the company managing its discount strategy, and what impact is it having on margins? A: (Isabelle Guichaud, CEO) We remain fully committed to our strategy of discount management, with a reduction across all regions by around two points versus last year. This is absolutely key in the protection of our margins. The management gross margin ratio reached an outstanding level of 76%, improving by 1.7 points versus last year, thanks to work from all teams on initial margin, retail margin, wholesale margin, and full price strategy.
Q: Can you elaborate on the cash flow generation and deleveraging progress? A: (Patricia Hubbespont, CFO) Our net debt keeps decreasing and was divided by two in two years. The leverage ratio is at its lowest level ever at 1.1 times, compared to 1.9 times one year ago. This is driven by EBITDA growing 6% year-on-year and net debt decreasing 30% year-on-year, roughly a EUR60 million improvement in 12 months. We generated EUR3.5 million in free cash flow in the first half and expect to deliver EUR50 million for the full year 2026, mostly in the second half.
Q: What is the status of the sales process of SMCP shares? A: (Isabelle Guichaud, CEO) Several discussions are ongoing with interested parties. Today, I cannot comment further. We will update the market of any material development in due course.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
