SMCP Full Year 2017 Results

Wednesday, 21st March 2018

SMCP Full Year 2017 Results Wednesday, 21st March 2018

Welcome Célia d’Everlange Head of Investor Relations, SMCP

Good morning everyone. For those being in Paris and being connected, thank you for listening to us this morning for the Full Year Results of SMCP. It is obviously an important full-year meeting because it is the first full-year meeting since the IPO. I would like to invite you to go through the disclaimer and remind you that all definitions are on the back of the presentation. I will now welcome Daniel Lalonde, CEO of SMCP, and Philippe Gautier, CFO of the Group.

2017 Highlights Daniel Lalonde CEO, SMCP

This was Célia. You did not present yourself. Célia d’Everlange joined us as Head of Investor Relations a month ago. We are very happy to have her here with us and very, very excited. She had the same type of role at Danone before and then worked at Rothschild for ten years prior to that. We are very, very excited Célia to have you here, trust me.

Outstanding 2017 Results – Exceeded Guidance I will go through the results. I will take my time but most of you will probably have seen the results that we are announcing for Full Year 2017. We are very proud of the results, the accomplishments, and you will see we beat the consensus in our first year of announcement. This is a little bit my opening slide. You can see what our guidance was throughout the year last year. Sales €900m, we were very precise, around €900m. We achieved €912m but you have seen that in January.

What is new this morning is EBITDA margin. We guided to 16.5% and achieved 16.8%, 30bps ahead of our guidance. CAPEX we were right in the guidance, just €1m below the €50m, and we moved the needle significantly on leverage throughout the year. At the end of December 2016 our leverage was in fact 3.1x and throughout the year we finished at 1.9x. Philippe will explain natural part of it was due to the IPO but there is a very natural deleveraging that we have in our company due to our free cash flow. That is a good start.

Another Year of Strong Growth The second one is chiffre d’affaires. You have probably seen this one before. Essentially we are at x4.96 since 2010 in terms of sales growth. Last year, on a reported basis, we grew ay 16% and importantly at a constant currency basis at 17.5%. Again, another very solid year of growth. We are theoretically $1bn but we are in euro so we will maybe achieve that in 2018. The growth, as we have talked with many of you many times, is not just high growth. It has been sustainable growth and it is quality growth. We can talk about that in Q&A if you would like but our growth has been on growing our core business the hard way. Not through a whole bunch of licenses, not through a lot of outlet business. It has been very, very focused on growing the core business.

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It is maybe hard to see but on the bottom, what I would like too is only stress the percentage of international business. That has grown from 28% in 2012 to almost 60% last year. That is very exciting for us because often we get the question, ‘France is a big market. We are a little nervous perhaps on France.’ We love France. We have been doing very well in France but we recognise it is important to build our business in other regions. And we have done very, very successfully so over the years. I think that trend will certainly continue as we continue to grow.

Creating Value through Profitable Growth EBITDA, you have seen the numbers. It is €153.7m, so let us say €154m. 16.8% margin. The guidance that we gave was around 16.5% so we are again 30bps ahead of our guidance. Philippe will take you a little bit more through that in detail.

Leveraging All Our Growth Drivers Our strategy has not changed and I will try to go quickly over it. It is the same pillars and the same growth levers that we have presented before in our strategy. We have three buckets again. The first one is pursuing and investing in what we call organic value drivers. This is to build and continue to grow like-for-like which is very, very important to us. That is building on the core. It is great collections, always desirable collections worldwide, great customer experience. Our CRM communication is very important. We now have 5 million active customers for the three brands throughout the world. Then we have emphasised three areas to grow, to help like-for-like. There is digital, very important which I will talk about; Men’s, we think is still a huge opportunity; and Accessories.

Number two is to continue to gain market share in France which remains 41% of our business, so still a large market. It is a market that has not really grown for the last seven years. It has been in slight decline, anywhere between 1% and 1.5%. Last year was flattish. We had a decent year last year but that was flat. Here we want to continue to gain market share and we have done so in the past years.

Then developing our brick-and-mortar and digital network as well in selected markets, the same six markets that we have spoken about over the last six months. I will show you the potential. The size of the prize, we will try to get a little more granular on that. However, they are Greater China, four markets in Europe and North America. Then lastly we have a couple of partnership markets again that we do not operate in directly but we have partners that operate single branded stores, just like we do, in selected markets. These are the strategic ones: South Korea, Australia and the Middle East. We have a push model. We help them replenish. It is a very natural extension of our retail model for us.

Build on the Core I will give you a couple of highlights very quickly of last year. The first KPI indicator, our like- for-like grew last year to 7.8%. Our like-for-like business was stronger in 2017 than in 2016. Our like-for-like grew. We did a few things. We talk about great ready-to-wear collections. This is an example. This is a Maje dress of the Capsule Soir. We do a lot of capsule collections throughout our brands. We have done a Middle East collection, a capsule. We did Chinese New Year last year for Sandro. This is Maje Capsule Soir which came out at the end of the year.

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We also innovate through the customer experience. Here is another example of Maje. We did a pop-up store in Regent Street. We are putting a flagship store soon for Maje on Regent Street, a beautiful store. However, we had the space before so we did an interesting pop-up there, different colours, a different concept with very, very digital concept as well. Very few products to sell on the ground floor. People ordered basically the products. It was very exciting and I think it was great for the brand.

We continue to build brand awareness by telling our story across the world. For this we need Judith, Evelyne, Ilan and Vanessa Pierrat who is the Artistic Director of Claudie. Having them travel to tell them their story, how they started the company and very strong entrepreneurial spirit by very strong women with a strong conviction. This we continue to do. This is some examples of the press.

Lastly we continue to invest a lot in the social networks. Instagram is very important to us. Instagram is probably the most important platform. WeChat is becoming very central to our strategy and personally I believe that WeChat will have a big application not only in China but is already having a big impact in Europe and worldwide. We are very, very active on social media as well.

Strong Digital Acceleration Driven by Successful Initiatives Digital, that was the second part of the investment on building like-for-like. Again, two parts of our strategy. First of all, we are channel agnostic so we let the customers choose how they want to interact with our brands. We continue to roll out omni-channel services. The highlight for us for 2017 was building the Store-to-Web service. Click & Collect we had before, E-Reservation before and other services too. We successfully piloted Store to Web in France with Maje last year and now we are in the rollout of Store to Web in other countries and for Sandro and Claudie. Essentially what that is, is having iPads in the store and an application to be able to sell to customers when they come in the store. And they might like a product but we do not have their size. We will be able to order it for them and deliver it to their home or back in the store. But, it is never losing a sale because we do not have the product in the store. This one also I love because it is probably the service that would have the largest impact on like-for-like. It will have an impact on like-for-like. That is very exciting.

Our digital business grew by 46% last year. It is 12.1% of total sales. Four years ago we were at 2.4% so we have grown a lot. It continues to be the fastest-growing channel and also the most profit-accretive channel we have. The second part of our strategy on digital is to drive our e-commerce business. As most of you know, two thirds of our business on e-commerce is driven through our sites. We love to master all the aspects of our business. That is why we are a retail pure player so we control a lot of things. It is also very profitable. Two thirds is our sites and a third is mainly department stores and a few pure players, like Net-a-Porter and Mr Porter.

What was new last year is a couple of highlights. We implemented our own sites in China. We launched Tmall in 2016. The growth has been incredible with Tmall. We have become one of their strategic partners in accessible luxury and we developed our own sites last year. The traffic we used to build to our sites is mainly again a WeChat strategy. Saks was new last year, saks.com, and we implemented a Rest-of-Europe site as well to enable our reach to

4 SMCP Full Year 2017 Results Wednesday, 21st March 2018 more European countries. I mentioned our customer database grew by 30%, now 5 million customers worldwide.

Strong Success of Sandro Men We continue to have a lot of success in Men. Our collections have been very, very well- received. Our positioning is what we call urban chic. We are not Hugo Boss, we are not classical, a little bit formal suits. We have suits – actually we are wearing them today – but we have more this urban chic, Parisian chic positioning. Brad Pitt was in one of our ads but he is one of the fans of the brand.

We also continue to roll out the Men’s footprint. It has been largely rolled out in France and in Europe. It is an exciting year for us in 2018 because we have made a conscious effort to roll out the Men’s footprint in China. We have not really done that in the past so this is something relatively new for us. We have done a lot of consumer research. We have worked with McKinsey and some other people internally to come up with a real breakthrough strategy for Sandro Men.

Part of it is the store rollout. And we are rolling out dual-gender stores going forward, mainly, other than when we are in a department store where you have different levels of the floors men/women; we will respect that. However, otherwise our freestanding store strategy is more about dual-gender stores, a footprint of roughly 150sq.m. We have secured some great locations last year. We plan to roll that out, mainly in extending from Europe to Greater China.

Lastly, we continue to build the brand awareness of our Men’s business. Ilan, as the Creative Director and feature, travels across the world and has been extremely well-received in the press. Men’s has grown 17% last year, as you can see.

Strong Momentum on Accessories Last part of our like-for-like levers, here we continue to focus on bags or leather goods and shoes. We have had some great successes last year, grew the business at 18%. The M bag from Maje was the key hit a year and a half ago. We continue to build on it, to make it a very, very strong franchise for the future. Claudie had a particularly successful bag called the Anouck that was launched last year with some fantastic results. The part of the business is growing but Ready-to-Wear is growing really fast too. The penetration is slightly higher but both businesses are very, very successful.

Then what is new for us is the launch of our first product licence ever in the company, is Eyewear. The part is called Mondottica. It is a Hong Kong/English company, mid-sized company and we are a big part of their business. We are a meaningful part of their business. We have launched quite successfully actually at the end of last year, at the Silmo Show, Maje and Sandro Eyewear collection. And we are rolling it out through France now and through Europe in wholesale distribution, primarily opticians, and in some very selective stores for Sandro and Maje. It is very exciting for us. Claudie will coming a year later. We wanted to start this rollout with Sandro and Maje.

Develop Footprint, Capturing Huge Growth Opportunities That is the last lever, if you will, to develop like-for-like. There are many others but those are the ones we are putting more highlight on. Now, if you look towards the second part, which

5 SMCP Full Year 2017 Results Wednesday, 21st March 2018 is building the network, a couple of things I would say for last year. The first is the net openings, 109 new stores last year overall. And it meant that our total store network, we finished the year at 1,332 stores, to be very precise. That obviously has changed since the beginning of the year. By big buckets, by region, most of those stores were in Asia, 50 on a net basis. Europe is still a very important region for us and I will show you why in about a minute, 48 stores. France, our network declined and that is our strategy. Our strategy for the network in France, which I will describe just a little bit later, is to optimise the store network. We have 475 stores in France. The great problem we have is that they are all very profitable so it is fantastic. We will continue to optimise to improve the locations, the size. We might close two small stores to build a bigger one. The Americas, our store count grew at 15 last year. This makes up the 109.

Probably the most important point I wanted to make today is the white space, what is ahead of us. We have got like-for-like growing nicely and we have so much white space out there. White space in existing markets, not in new ones. What is the size of the prize? The way we look at it is France now 475 stores. Let us take the regions very, very quickly.

Greater China, how big can we be in Greater China? Good question. Straight answer is we think we can at least have the same number of stores in Greater China that we have in France – at least. So 500 stores mid-to-long term; it depends how you define the terms. Very, very achievable. Today we have 130 stores. 30 of them are in Hong Kong, Macau and Taiwan. It means 100 in mainland China. In mainland China we are present today in 18 cities. We are obviously in tier one, tier two cities and we do as well in both.

I was recently in China a month and a half ago, and a most exciting city that I did not know very well called Chongqing I do not know if you know it. There is 29 million people living there. A little off the radar screen but a big city. I was in Chengdu, Chongqing, Guangzhou, and Shenzhen, of course. It is incredible what is happening in these regions. Again, we are in 18 cities.

Sandro finished the year last year in Greater China, so I am adding Hong Kong, Macau, Taiwan, with 64 stores, for example. Still we have less stores for Sandro than a lot of luxury brands in that region. Gucci has more stores than we do. Burberry has more stores than we do. Their stores are bigger, of course, so our footprint is much smaller. There is so much potential because our addressable market is larger than these brands. We are very excited about the growth prospects in Greater China.

It is not only a brick-and-mortar story, it is also a digital play as well. Again, we have three shops now online with Tmall. We have got our own sites. We have got other pure players approaching us to work with them as well. We will do it in due course. But, it is an explosive market for us. Almost 6% of our business is digital in that part of the world. We think it will gravitate to the global average fairly quickly. A very important market. Can we go faster? Today we plan roughly 50 stores a year, between 45 and 50. We want to make the right choices as well so we are very selective in our approach.

North America, 149 stores. Here, our approach is slightly different. We definitely have capability to increase the brick-and-mortar footprint. We have done so last year very successfully. Our Head of Market is the ex-CEO of Ted Baker, a very successful person and selects some really great stores, which led to a great growth, as Philippe will describe, at 20%

6 SMCP Full Year 2017 Results Wednesday, 21st March 2018 last year in North America on a constant currency basis. Here, the approach is to selectively grow the number of stores but we are putting a lot of investment and importance on digital. This is the market where e-commerce has one of the highest penetrations of business for us in the world. We have invested a lot in e-commerce and omni-channel in North America.

The other markets in Europe, the four large countries, again in some respects we are at the beginning of our story in these markets. If I take a market like Italy, 33 stores, again the question we have talked about 33 versus you see 475. And the answer for us no. Why? Because we will use e-commerce to go and acquire customers in smaller cities. The e-commerce footprint and the digital strategy will impact our brick-and-mortar strategy. But, here again we have said, I think to some of you in the room today that we see at least about a third this physical store counts as we see in France.

That is a little bit the size of the prize and that is only in existing markets that we know well, that we know we have proof of concept. We are not thinking yet about South East Asia, Latin America. There are many other countries where we have a potential but we want to stay very focused in tapping the potential in these markets that we know very well.

Key Openings in 2017 in Prestigious Locations Lastly, some examples of some stores last year. Regent Street was a big, important store for Sandro. We were waiting two years to get this store. Canada, my home country, a very successful store at Yorkdale’s, the biggest mall in Canada, in Toronto. Champs Elysées Maje is trending to be one of our top-performing stores in the world. Shenzhen, I was there recently, Shenzhen MixC. MixC is a large developer. We have many stores with this developer. Again, a nice store, Guangzhou. I was there as well. Some new stores in a new mall. This is Wharf. It is the company behind. Then Milan for Claudie Pierlot. Claudie Pierlot launched in Italy last year. Italy is a fairly new market for us, again only 33 stores. So, an example of some of the stores that we built last year.

So I will turn it over to Philippe to take us through the financial highlights.

Financial Highlights Philippe Gautier CFO and Operations Director, SMCP

Excellent 2017 Results; Exceeded Guidance Good morning everyone. I am very delighted to present our excellent 2017 numbers. You have seen already, in January, our sales number. Just as a reminder, we talked about 16% growth, 17.5% constant forex growth, and then balanced growth with a high contribution of like-for-likes, 7.8%. And [Inaudible] growth, we opened these 109 stores in 2017.

In terms of profitability, we have an adjusted EBITDA of 16.8%. This is called adjusted EBITDA because this is the EBITDA before the management LTIP. And that is the only difference. Pretty minor in 2017, about €1.9m difference. We are going to follow, going forward, this adjusted EBITDA to be comparable with the past.

Lastly, you have the free cash flow which is €60.7m. This is excluding IPO-related cash-outs. As a reminder, we are talking about financial statements with a 12 months period on a SMCP

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SA consolidated financial statements. We are comparing to a pro forma for 2016 because in 2016 you had the acquisition by Shandong Ruyi so that is why we have a pro forma.

Very Strong Growth, Well-Balanced Across Brands and Regions I will just remind you quickly about our sales number. Growth has been very strong and, more importantly, very well-balanced. It is balanced by brands with all the brands growing double-digit. You have some differences. Obviously, Sandro growing a little bit faster. They also benefit from opening of meaningful stores in 2017 and we have been waiting for years to open these stores, like in Regent Street. They also open in Munich and also in Barcelona at [Inaudible].

If you talk by region, importantly we are growing in all regions. This includes France, which was growing 3%. This is our only mature market, meaning that we are gaining market share in France. Internationally, we have been growing 27% and that is 30% currency constant or very, very strong growth internationally, led by APAC. APAC is at 40%. It’s actually 51% currency constant so Daniel talked a lot about APAC. Now, EMEA, as well, extremely exciting. We have grown 27% currency constant. In North America has been really impressive growth, up 20% currency constant, in a market which was one of the toughest ever for retail in the US. Really an impressive performance.

Adj. EBITDA up 18.6%, Margin Reaching 16.8% Now, if we talk about our EBITDA we have exceeded our guidance, as Daniel mentioned. We have a strong growth of EBITDA, up 18.6% and this means reaching a margin of 16.8%. As you see on the left side, the growth comes from the sales momentum. That is the largest driver. We are a growth company, but, as well from EBITDA margin expansion, and that is 0.3%. The gain in our margin comes primarily from what we call our retail margin. This is largely driven by two main factors which are e-commerce and Asia. That is the two areas that we grow the most in the company and that is the areas which are the most profitable in terms of retail margin.

Looking a bit more in detail at our margin structure, so a little bit of a reminder how it works. We have first this very high gross margin. I think it is an industry-leading gross margin. It has been always stable between 76% and 77%. For 2017 we are at 76.9%. Now, we have contained store cost and that is due to the beauty of our model. We have a high productivity, 40% better than our peers. That leads to a retail margin of 37.1%. Now we have SG&A which are around 20%, 20.3% this year. This is the level of SG&A that enables us to prepare the future steps of growth and we are very careful to invest to the right investment in the infrastructure and the right talents.

Strong Net Income Excluding One-Off Costs Now, if I move to the net income we have a strong net income excluding the one-offs. Now, there were significant one-offs in 2017, which leads up to €38.6m – I will explain a bit about that – leading to a reported net result of €6.3m. To have a point of reference, we have calculated this net income, excluding one-offs, of €44.9m. In comparison with last year, a similar number would be €39.6m.

If I detail a little bit the one-off that I am talking about, this €38.6m, you have three different buckets which are below. One in other income and expenses, €41.9m. This includes costs related to the management package in the form of free preferred shares. The valuation of

8 SMCP Full Year 2017 Results Wednesday, 21st March 2018 this package at IPO, including payment of social charges, is €31.6m. Then we have IPO- related costs, mostly fees, around €10.3m.

In terms of financial charges, we had costs related to the early redemption of the bonds. We had a high-yield bond that we put in place in May 2016 of €471m. We have decided to repay €271m of that to benefit from our new financial structure which is much less expensive. We need to pay some redemption costs, €20.8m.

Lastly, you have shareholder loans. This is a shareholder loan which was put in place at re- acquisition. This is about €19.5m in terms of non-cash interest. This is extinguished at IPO so it no longer exists.

Lastly, in terms of favourable impact, we put the favourable impact as well, obviously, so you have the tax deduction of the one-off charges that I talked about. That is about €23m. Then we also put another item, which is unrelated to the IPO. This is a €20.9m non-cash tax gain due to the new Loi de finance at the end of last year. We have a gain on our different tax liability because the long-term rate, as you know, is going to go down. It is going to go down to about 26% in 2022.

That explains this net income reported at €6.3m and excluding one-offs €44.9m. All these items were already anticipated in the note d’opération. And you had also anticipated that in your research, so none of that is a surprise.

Solid FCF Generation What about cash? We have a sound free cash flow generation. It starts with the EBITDA, obviously, €153.7m. We have a change in working capital of €44m. It is a little bit on the high side. There is a little bit of timing impact so a bit on inventories and a bit higher comparables, which is really timing.

Second item we have sustained CAPEX, €49m. As Daniel mentioned, a lot of exciting stores that we opened in 2017, including we paid the CAPEX for the two stores in Regent Street in London, both for Sandro and Maje. We also had the renovation, like relocation and new beautiful store on Champs Elysées for Maje. €49m of CAPEX in line with our guidance but higher than last year, which was at €39m. That results in free cash flow of €60.7m, excluding the IPO-related cost. You have a cash-out from the IPO of €15m so that is a portion of the one-off that I talked about.

Significant Deleveraging What is the result of all that in terms of deleveraging? We have a very significant deleveraging this year. Importantly, we are below the 2.0x level, at 1.9x. Two components here. First is the organic deleverage and that is 0.6x, very much in line with what we have discussed before. We explained before that we were able to deleverage, give or take, about 0.6x a year, obviously including the nice momentum of our EBITDA. Second item relates to the IPO, so primary issuance net of fees. That is another 0.6x. That is a big difference compared to the time, if you remember, not so long ago when we were acquired by Ruyi. The closing happened just in October 2016. It is not like ten years ago. We were at 4.0x EBITDA, so a big, big change.

As you know, we have gone through a partial refinancing of our debt at IPO. We have looked at different options. We had this high-yield bond, €471m; nice condition at the time, done in

9 SMCP Full Year 2017 Results Wednesday, 21st March 2018 mid-2016. We were very happy with a cost of fund slightly below 6%. If you look at it now it looks a bit expensive. We reimbursed €271m of it and we have a new RCF facility up to €250m. We are drawing on this facility right now. The next step is that the non-call[?] period of the bond is in May 2019 and we will look at refinancing this bond.

What that means is that we are going to see a drastic reduction in our cost of debt. If we talk purely about cash interest we have been a bit below €30m in 2017. We should be around half of that in 2018. And it will further reduce in 2019 as we transition from a cost of debt of around 6% to around 2.5%.

So this concludes my presentation and I let Daniel to talk about the guidance.

Outlook Daniel Lalonde CEO, SMCP

2018: Growth Story Continues with New Exciting Projects I will take you quickly through our guidance so we can move to Q&A. Big picture 2018, we certainly expect to be a continuation of 2017, of 2016 with a lot of very exciting things happening. I will not list them all. It is a special year as well for Maje. It is the 20th anniversary of Maje. This is a new campaign that looks very nice. We have a Chinese ambassador as part of it too. It is very exciting, a lot of events are planned throughout the world with Judith. It is also the 10th year anniversary of Sandro Men so we will be doing some special events there.

We continue to drive our e-commerce business, mainly through our own websites, as I mentioned earlier. Really importantly, continue to invest in all these omni-channel services, which are vital to retail and vital to our company.

We have a great pipeline of stores. I will not take you through all the stores. We have great visibility on the pipeline for 2018. I have pretty good visibility on the pipeline for 2019 and some on 2020 as well. We try to work in three-year rolling plans on where we are building our stores, where locations are coming up.

On my last visit to China, just to give you a little anecdote – it is happening in the US – we sat down with the top eight developers in that part of the world. They all took meetings with us at a very high level in their company and we are looking at three-year roadmaps with them as well. They are positioning our brands as the anchors in accessible luxury in that part of the world. Just like they will have Vuitton, Hermès – I think they announced their results this morning. Chanel, Dior in luxury, and typically we are not on the same floor. That is fine. We are on the next floor but we are right below them, and we are the anchor brands for accessible luxury.

2018 Guidance Our guidance, specifically we said it this morning in the press release, it is 11-13% for 2018 top-line growth at constant currency, so very consistent with what we said last year. EBITDA margin of around 17%, again from 16.8% last year.

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Mid-Term Guidance: 2020 Objectives Confirmed In terms of mid-term guidance we keep the sales growth in constant currency between 11% and 13%. We are very consistent with what we said last year, which is our EBITDA margin will grow 100bps from 2016 for 2020, which means 17.5%. Our leverage, Philippe mentioned, we intend to refinance the high-yield notes at the call period in 2019. Dividends, also we will consider them once our financial structure, capital structure is settled in the mid- term around the same timing as the leverage comment here. Again, this is very consistent. There are no changes from what we have said a little while ago. We try to be as consistent as possible.

In terms of openings, the guideline which we gave to the market last year of anywhere between 80-90 DOS. It could be more. It depends on the opportunities we find, some slip into this year, some might slip into last year, but, at least this pace.

And then CAPEX anywhere from 4.5%, probably closer to 5% of net sales. Again, we just wanted to bring back the elements that we have said last year so that we are consistent because we are relatively new since the IPO.

SMCP I think that is it. Our ambition continues to be we want to become the global leader in accessible luxury; that is really our ambition. And we will get there. We are on our right way to get there and our mission for the company, for the brands, remains to spread Parisian chic across the world.

Q&A Chiara Battistini (JP Morgan): Good morning, hello, thank you for taking my questions. The first question would be on whether you could share some colour on the profitability by brand. That is something that you used to disclose during IPO so I was wondering if you could give some indications on that. Second question would be on any commentary you could share with us on your trading in February and March, notably given that the weather has not been particularly favourable. The last question on dividend and the net debt capital structure; what kind of capital structure do you see as optimal in the medium-term? Do you have any preliminary thoughts on the dividend pay-out you might be interested to pay? Thank you.

Daniel Lalonde: Alright Chiara, three questions, maybe three and a half. Philippe, I am going to give you two, I am going to take one. I will take the current trading question. If you want to answer the profitability by brand, and the dividend and capital structure.

Trading, it is a good question. What we have seen so far, what I can say is that it is true. Most of you live in Paris, I think. No, you do not. Paris or Europe. It has been unusual weather conditions, clearly. I hate to use this an excuse. My teams are not allowed to use weather ever, by the way. However, it has had some impact clearly, just last week a little snow in Paris. France has been a little bit more challenging mainly due to weather conditions. I also understand from my colleagues at department stores in France that the traffic has been a little slower, particularly from Chinese as well. And the quality of traffic is different than it was in the previous years in some of the department stores. France has been a little bit challenging, it’s doing quite well, and Europe a little bit of an extension of that as well, quite

11 SMCP Full Year 2017 Results Wednesday, 21st March 2018 similar. We have seen very strong start continuation in Asia clearly and also in North America.

Those are my qualitative comments on Q1 trading. We are still very confident obviously for the year, and for the quarter. But it is nothing inconsistent with what you might have heard and many other companies report this, that the weather has had some impact on the trading in France and some other markets in Europe. Asia is strong, very strong, and North America we continue to do very well.

Philippe Gautier: We have seen gains on the EBITDA on each of our brands. If you have in mind, we have slightly different EBITDA margins structure. By the way, it is in the appendix of this presentation. We have Maje which has the highest EBITDA margin in the Group. It is at 17.8%; slightly lower than last year because we had the impact of higher rent and the new stores that we talked about. Right now, it is a pop-up in Regent Street so the actual store will be open this year. This is for Maje.

Sandro is at 17.3%. It had great gains in 2017. You have seen very dynamic performance for Sandro. Also, they were a little bit playing catch-up in e-commerce. They had a fantastic performance in e-commerce, Sandro, so it contributed a lot. 17.3% for Sandro. Have in mind that within Sandro you have Women and Men. Men is still a little bit of a start-up, so it is not as high as Women in terms of EBTIDA margin.

Then Claudie Pierlot is at 12.2% in terms of EBITDA margin. Stable EBITDA margin. EBITDA up 16%. Here it is a little bit the same thing. Claudie Pierlot pretty much continues to be a start-up. They made great progress. There is better absorption of the cost as they grow but they also opened some new stores in Europe which are slightly less profitable. In general, 16%, that is a great evolution for Claudie Pierlot.

In terms of the capital structure, just to be very clear, when we say we will look at these once the capital structure is fully in place, we mean once we have refinanced the high-yield bond, which should be the case in May 2019. We feel comfortable with leverage well below 2.0x. And we do not have yet guidance on the dividend. We will look at that in due time.

Chloe Liang (Bank of America Merrill Lynch): Just a follow up on Chiara’s question on the trading trends from February to March. Can you talk about January as well, and do you mind splitting out the weighting between each month, i.e. which one carried more weight within the quarter? Also, I have a question on your competition. You mention that you are gaining market share so I am curious to know who are the losers, especially in France, that you are taking market share from? Also, in terms of the EBITDA margin growth in the next year, how do you see that? Where do you see the margin improvement coming from? Is that from the top line or cost? It will be great if you can go into the details of that. Thanks.

Daniel Lalonde: I will take the first two questions and Philippe, you can take the EBITDA one. When I talked about current trading I really did not separate January, February or March. This is the qualitative comments I can give you at this point in time for the quarter. I do not think they should be a surprise. I have read a lot of other ones, a lot of other companies mention that as well. However, I can say for our business, a couple of things. We have a business that is not that variable, not that seasonal overall. If you take our quarters, our trading per quarters, the penetration of the seasonality by quarter, there are not high cycles. It is relatively consistent quarter by quarter. However, within Q1, clearly January is a

12 SMCP Full Year 2017 Results Wednesday, 21st March 2018 big month for us. It is a big month for us, why? Because of, obviously, the French sales. However, going forward as France penetration comes down, obviously the other regions’ penetration increases. It will mitigate a little bit the sales period in France, which still is important but was really, really important four years ago, a little less.

My comments, I did not want to break them up by month because I think it is a little bit too granular. But, that is the indication I can give you for the Q1. Again, we are still very confident and our business is much more international, obviously, than it has been in the past. January is a big month though, there is no doubt. It is one of our biggest months of the year.

Market share, hopefully you are not asking me to name names. I can tell you a couple of things. Who are we gaining market share from in France? I would not only look at 3% growth last year in a declining market or a flat market but if you even go back – I do not know if you remember – but our trading was quite solid. It has been very solid in France for quite some time. We were posting, two or three years ago, growth of 9-10% in France. How we do that is all the like-for-like levers that I mentioned, this is what we put in place. We put them in place mainly in France at the time.

Without getting too specific in names, unless you ask a follow-up and you ask me to give names, which I might not, I can just say that we are gaining market share from companies who have been always in accessible luxury. We are not seeing a big trading down from luxury. It is not we are capturing more luxury customers and we are stealing it from luxury brands. It has been more in our space. We know that has been some of the regular suspects that I will let you think about, have had sales decline in the past years. This we know. I get the monthly benchmarking from department stores. This is my gauge. We have been gaining market shares from important, accessible luxury brands in France. I hope that was not too vague.

Philippe Gautier: In terms of EBITDA margin, you would not be surprised because it is basically the same message which applies to 2018, which is if you break it down by the various components, the gross margin we do not expect it to change that much. If there is any gain from forex, for example on dollar, we would rather reinvest it in the product content. We do not expect to drive up the gross margin. It is already at a great level. It will not go down either. It should be stable.

The retail margin is where we expect the most leverage and that is based on the continued growth online and in China, no surprise.

Lastly, SG&A, it is a little bit like pay-as-you-go. We can monitor a little bit our level of SG&A and what we do we try to reinvest, invest to prepare the growth. For example, [inaudible], we invested a little bit more in marketing as we saw great development in our business. That is what we can do. But, as we grow, obviously we get more leverage in our structure. Even if we reinvest a little bit in marketing, you should see long-term some leverage.

Chloe Liang: I know you started breaking down EBITDA since the IPO so do you mind just telling us what the Q3 and Q4 figures are? Or just Q3 so I can get Q4?

Philippe Gautier: Yes, I can tell you, you had already the H1 so I guess the H2 is relatively easy to calculate. We were at €80m H2 EBITDA, which is up 16.7% versus H2 last year,

13 SMCP Full Year 2017 Results Wednesday, 21st March 2018 which is higher than the top-line growth. The only thing which was a bit peculiar between H1 and H2 is that in H1 we had the shift in the summer sales period in France, which means that we did a little bit less business in H1 than usual. However, we had a higher gross margin in H1 that reversed a bit in H2. That is the key driver. Importantly, the EBITDA is always growing more than the net sales. That is what you would expect, right?

Chloe Liang: Yes. You are not able to provide like-for-like for Q4 standalone, or EBITDA alone for Q4 on a standalone basis?

Philippe Gautier: Yes, we provide EBITDA every half year and then we provide like-for-like on the Group level for the full-year and half-year.

Alexandre Casas (Casas & Associés): Comme nous sommes dans le mois de la francophonie, je vais poser mes deux questions en français. Ma première question concerne les marques. Vous avez trois marques. C’est juste pour 2019 et 2020. Est-il possible d’attendre une quatrième marque? Si oui, dans quels secteurs? Sinon, pourquoi? Le temps a passé depuis votre IPO. Les choses ont donc peut-être évolué.

Ma deuxième question c’est sur la politique immobilière. Vous n’en avez pas trop parlé, mais vous l’avez évoqué au moment de l’IPO. On note des mouvements de concentration dans les centres commerciaux. C’est tout récent. Il y a eu deux grandes opérations en décembre et janvier. Il y a eu hier matin une opération éventuelle. Cela pourrait avoir un impact sur les CO[?] et sur les centres commerciaux, d’autant que l’opération d’Unibail-Westfield touche votre segment dans les grands centres commerciaux. Pouvez-vous nous donner une réflexion sur ces coûts immobiliers et, surtout, nous donner votre taux d’effort? Je vous remercie.

Daniel Lalonde: Je vais répondre en français. Envisageons-nous d’acquérir des marques dans le futur?

Alexandre Casas (Casas & Associés): Ou d’en faire une quatrième…

Daniel Lalonde: On peut aussi en faire une. Pour l’instant, la priorité du groupe reste de développer ces trois marques. Il y en a une pour l’homme et la femme, Sandro. On a souvent la question aussi de savoir si on va introduire l’homme chez Maje ou Claudie Pierlot. Pour l’instant, ce n’est pas inscrit dans nos plans. C’est même pour nous très confortable de continuer à développer nos trois jolies marques qui ont tellement de potentiel dans le monde, comme je viens de le montrer. La priorité reste donc de préserver ce portefeuille de marques et de continuer à les développer avec une stratégie cohérente et connue.

En revanche, depuis l’IPO, nous avons été sollicités davantage par des marques qui souhaitent se vendre. On ne dit pas « jamais ». Si on pense qu’il y a une marque intéressante pour laquelle on peut créer de la valeur par le biais de notre business model unique (on partage les codes du luxe et du fast-fashion, on est retailer, on a un réseau international assez puissant ainsi qu’une connaissance des marchés et une compétence digitale très importantes), pourquoi pas? On pourra l’étudier. En revanche, selon moi, elle devrait être dans le contexte de notre stratégie, c’est-à-dire rester dans le luxe accessible. Nous voulons en effet devenir leaders du luxe accessible.

Nous avons trois marques dont les origines sont le prêt-à-porter. On pourrait dire que, dans une stratégie like for like, on se développe dans le digital, dans les accessoires ou pour

14 SMCP Full Year 2017 Results Wednesday, 21st March 2018 l’homme. Cela peut être des idées. Mais, si on le fait, je resterai très focalisé. Je souligne que la priorité est de continuer à développer nos marques qui ont de forts potentiels.

Concernant les centres commerciaux, si vous parlez d’Unibail et Westfield, cela a très peu d’impact pour nous en termes de coût. J’ai vu le PDG d’Unibail récemment. On se connaît assez bien. On a quelques magasins aux États-Unis avec Westfield. On vient de développer deux magasins récemment à Los Angeles, à Century City. Ce sont de jolis magasins Sandro et Maje. On a moins de dix magasins avec Westfield dans le monde (Londres évidemment). Avec Unibail, on a quelques magasins dans leurs centres commerciaux. C’est un acteur important pour nous. Ce n’est pas le plus important. En Europe, on est dans très peu de malls. C’est plutôt aux États-Unis, en Angleterre et en Asie.

Alexandre Casas (Casas & Associés): [Inaudible]?

Daniel Lalonde: Non, pas beaucoup, franchement.

Alexandre Casas (Casas & Associés): [Inaudible].

Daniel Lalonde: Très peu, exactement. Pour nous, cela ne change pas beaucoup de choses. C’est plutôt les relations avec les grands magasins développées en Asie qui deviennent de plus en plus concentrées. Les deux que vous citez sont importants, mais cela reste marginal dans notre activité.

Melanie Flouquet (JP Morgan): I have three questions. My first question is on Maje. There has been more volatility in this brand probably than at Sandro. Clearly a very good H2, but nonetheless more volatility. I was wondering whether you would say this brand has more fashion risk to some extent embedded into the brand. How can you address this? Notably speed to market, a big project in the firm to try and shorten the time to market.

The second question is on China. I was interested with your comments that you are negotiating with developers and are not on the floor of luxury goods. As you mentioned, there are a number of luxury goods brands that create an environment on the ground floor, so how does SMCP manage to create this? Do you have enough other accessible brands to actually be able to capitalise on this development on the first floor or the second floors?

My third question is on average selling price. You mentioned that you would reinvest forex gains into the quality of the products. How do you see average selling price evolving? Maybe this means the customer remark that, 'I have the impression that dresses are getting a bit out of our range.' Thank you.

Daniel Lalonde: Okay. Melanie, thank you. I will work backwards. I will take three, two, one. Average selling price has been roughly 1.5% over the past years, and will continue to stay fairly modest in the future. We are very comfortable with the positioning we have. We know we have a lot of value that we propose to our customers. A big, big part of our growth has been volume-based as opposed to taking price.

Pricing structure remains fairly similar this year to last year, in terms of indexing the euro to pound. The big change has been maybe Hong Kong has come down a little bit, closer to 130, in terms of an index. However, the rest of the markets have stayed fairly similar. Modest, I guess, is my quick answer. Very modest between 1% and 1.5%. I look at every collection planning before we price so that we make sure that we have the profitability built into the

15 SMCP Full Year 2017 Results Wednesday, 21st March 2018 collection, first of all, and that we are very modest in prices because we want to stay very competitive.

China, yes, how do we build that? Not every mall is the same, fine. Sometimes, we are on the ground floor. Not always, but they will have the big luxury stores that you know. We are right above. We have fairly prominent locations. The ones around us – that is your question – who is around us to create this mix?

There are some interesting Chinese brands developing today. I will cite three. You might know, you might not know. One is called Marisfrolg. I will try to spell it after. It is not 'frog,' 'frolg'. There is one, we say ICICLE's. It is a brand I see there. Dazzle is another brand. They are not very known to the Western world, but they are there. They are not always close to us, necessarily, but they are further down in the wing.

Brands that have a good footprint in Greater China, that are more western; we will get some usual suspects from America. We will have Kate Spade; Tory Burch, sometimes; Max Mara. Max & Co. does very well, actually. I think they have done a great job in Greater China. Now, they have two brands in our space called Max & Co. and Max Mara Weekend. They are in a lot of malls that we are in as well. You get some Chinese brands, a couple of American brands and mainly Max & Co. Sometimes, I see Liu Jo being pulled, but not very much.

There is not a lot of French brands. Fine. We are first to market, by far. I think we are becoming very prominent. However, it is mostly those brands that we see building up on the first floor, let’s say rez-de-chaussée. Many luxury on the first floor. That is how they are building the portfolio.

I get also the statistics. In China, it is great. I have a hard time getting them in Europe and North America. Of every mall, I get the monthly statistics of sell-through and the ranking by accessible luxury brand. And we are still doing very well. We are consistently in the top three. It is often Sandro, Maje or Maje, Sandro. We have spaces that are smaller than those other brands that we are compared with. Some of them are the big American brands.

We will do more chiffre d'affaires than big American accessible luxury brands with bigger stores. I think that is why some of these people, like Sun Hung Kai and Wharf and Hongkong Land and all the big developers, Mix-C, China Resources, which is an incredible developer. All are looking for us to engage with them early on so that they can build these malls. If they get our brands and a couple of big luxury brands, I think their mall becomes more successful, in probability.

Maje – your last question, or your first question – is the more fashion risk. I do not think I would define it fashion risk. I think just there is a lot more, Maje is different than Sandro. I remember talking to you about this here last summer, with Judith as well, about Maje. Maje is bohemian chic, effervescent, solo brand.

There is a certain style that maybe some people think maybe slightly more creative than Sandro, which is more contemporary, androgynous, chic, sleek and cool. I think Maje maybe is slightly more fashion-oriented. But, we use the same business model throughout the three brands. We mitigate as much as possible the fashion risk.

That is by not buying all the collection upfront, leaving a lot of space for replenishments within season, by always being in, designing all the time and launching products all the time.

16 SMCP Full Year 2017 Results Wednesday, 21st March 2018

That is the biggest part of our model. For us, our model is really – if you want to turn the phrase – see now, buy now, wear now. We are big into the 'wear now.' We are trying to improve in that as well because customers are not buying way in advance anymore.

Also, what happens is often, maybe Sandro will do a very strong season. Maje then comes back and has a stronger season than Sandro. There is, I do not want to say an internal competition, but we see, over time, the same level of growth for both brands. It is not always in parallel. It is not always at the same time, but there is a strong catch-up.

But, if you look at the average of the past years, the like-for-like growth has been very, very similar for Sandro and Maje. Claudie has been obviously higher than the other two brands. But, you are partially right on the creative aesthetic, it is a little bit more fashion-forward, I would say. Evelyne is upstairs, so I have to be very careful that she cannot hear me. Probably, that is a good insight.

Mariana Horn (Berenberg): I have three questions, please. The first one is regarding your channel strategy. I think you have previously discussed the attractiveness of the travel retail channel. I was thinking if you could provide an update on that, maybe across brands?

The second one on online. Given that now, a lot of traffic comes from tablets and apps, are you thinking of maybe starting an app for one of your brands?

The last one, if you could please update on the share of accessories across the three brands and what the midterm or long-term target is? Thank you.

Daniel Lalonde: Okay. Thank you. We love these three-part questions. Channel strategy, travel retail? I do not see it yet as a big opportunity for us, or it is not one that we are pursuing aggressively today. One day, yes, clearly. But, travel retail is a thing that I know very well. It is a great channel. Love travel retail. But, travel retail is often for consumers who do not have that much time and you need a quick purchase – something that you do not necessarily need to try on and very iconic.

I think travel retail is very well-suited for companies who have a large accessories business, number one. You have to try it on. Or number two, you can have ready-to-wear business, yes. But, there needs to be a very strong iconic part of your business. I think for those types of businesses, travel retail is great. One day, I see this as a very important channel for us, but not today.

Our accessories are penetrating a little bit – your second question – around 8% of total business, 7.5% to 8% of total business. The answer is one day, when the accessories part of our business becomes larger, which we plan it to happen, I think it will be more appropriate then to go into the travel retail business. It is about 7.5% to 8% of our business today.

With our three brands we have today, we do not want it to develop to 50%. It is not our ambition. We are a strong, ready-to-wear company with a very unique business model. We think accessories can grow in penetration one day to 15% to max, I would say, 20%. Both are important.

Bags are important. Shoes are really important. In fact, equally important. We have a shoe now being sold by Sandro. It is called Flame – I do not know if you have seen it. It is like the Birkin bag. It is great. We are just sold out everywhere, all the time. It is a running shoe, but this is where the market is growing.

17 SMCP Full Year 2017 Results Wednesday, 21st March 2018

There are some great collections coming. I think even shoes is probably even larger, as an opportunity, for us than bags – equal, but probably more important. We would like to get to 15%. A very profitable business, 15% or maybe a little bit more. However, we certainly do not have the ambition to become 30%, 40% of our business, like some of the American accessible luxury brands which, basically, started with accessories and are trying to develop ready-to-wear. We are going at it the other way.

Then, online. Do I have an app? Online, what we do over best-in-class – not on everything, but best-in-class is the use of mobile or iPad. From memory, globally, roughly 60-65% of our traffic comes through mobile. A large part of our sales, from 35% to 40% of our sales, comes mobile. In Asia, it is 95%. It is the name of the game. We are best-in-class there.

We do not have an app. My Head of Digital, my Chief Digital Officer, because I ask him very often, he says we do not need an app because people come naturally to our site. Because I have asked the team this question many times, it is not a key brick in our strategy to develop an app, necessarily. We do not have the plans to develop an app.

I differ to them because they are millennials. They are in this space and they say apps are a little bit a thing of the past for companies like us. It is interesting because I ask the question every six months and I get the same answer. But, they are more the experts than me. We do not have plans to do an app. We have many, many exciting things going on in the digital space.

Edouard Aubin (Morgan Stanley): Hi. Just one question, actually, on Japan. If you could give us an update on your expansion plan in that country and why it could potentially be an exciting market for you. Related to that, to what extent you are collaborating maybe with your controlling shareholders in that market?

Daniel Lalonde: Japan, we have said mid-term. Some of you want us to define more in mid- term. Let us say within 18-ish months is when we plan to launch our business in Japan. It is an important market. It is the only meaningful market today that we are not present in. A lot of brands do up to 10% of their business in Japan. We have a very specific plan. We spent a lot of time out there as well. I would say within 18 months. It is mid-term, 18 months, we plan to launch in Japan.

It could be an interesting market. We want to make sure that we do it well, we do it right, with some good supportive key department stores, obviously, in Tokyo and in Osaka. We have met with them. We met with the Isetan, Hankyu – some of these potential partners. We would like to launch a multi-channel strategy as well – digital, department store, freestanding store – at the same time. So, within 18 months.

Shandong Ruyi is helping us because they own a company called Renown, which is a big distributor for Japan. They have a couple thousand stores. We did talk to the Renown people, throughout[?] their insights. But, we are doing it relatively independently because we feel that that is the best route to market. But, we have used some of the experience and expertise that they could bring, and share a lot of good insights on how to launch properly in Japan. More of a consulting than using their infrastructure.

Jean-François Delcaire (HMG Finance): A small question about purchasing. Which percentage of your purchasing is based on US dollars, please, and any hedging policy?

18 SMCP Full Year 2017 Results Wednesday, 21st March 2018

Daniel Lalonde: Sure. Maybe I will ask Philippe to answer this.

Philippe Gautier: If I keep it simple, in outsourcing, you have roughly 50% which is the Euro-Med region, which would be like Southern Europe, Eastern Europe, Northern Africa, Turkey. Another 50% which is Asia, which could be India, importantly; China, obviously. In total, we have about one third, which is either dollar or dollar-related. It could be renminbi or HKD. That is the short answer.

Interestingly, if you look at our sales, we have about one third which is outside of the Eurozone, in US or renminbi-related currency. There is a natural hedge. We are different from luxury, for example, where there is an imbalance between the outsourcing, which is in euro, and ourselves very much internationally. We are between the mass market and luxury. Mass market in this is in the other direction, so we are balanced.

The main forex impact that we have on our business, that is just the translation risk. It is not on our margin. If you look at 2018, it would be about 2%. I have seen studies to say in luxury, it is about 5% to 6%. For us, it would be lower. It is 2%.

Marion Boucheron (Raymond James): Hi. Two questions, please. One on the guidance. The growth you expect this year is much slower than last year. What would you see the mix evolving between like-for-like and the space growth?

Then, second question. Could you explain us a bit how customers evolved this year? Because I think the number of new customers has increased by 30% while sales were up like 18%. Is it people that did not repurchase or average basket price had decreased?

Then, maybe, if you can give us a word on the IFRS 16 impact?

Daniel Lalonde: That is going to be for Philippe. Quickly on the guidance. 11% to 13% at constant currency. I guess you could ask the question, 'You did 17.5% last year.' Great. We love that. We have had this guidance. We wanted to stay very consistent. We have just come off an IPO on 20th October last year.

It is what we said, leading up to the IPO, we wanted to, again, stay as consistent as possible. Are we going to try to shoot to beat it? Of course we will. Then, the way to look at it, big picture again, a third of that growth is a third is like-for-like and two thirds is space growth. I think that is probably the best way to look at it, big pictures.

Customers. I do not know if I understood your question correctly. Customers, we have had a lot of new customers. You are right. Our customer base has grown a lot. It has grown a lot in Asia as well. We have a lot of plans in Asia using WeChat, even for the future. We are very convinced it is a big tool. It is going to have a big impact worldwide.

We have a very complex definition of the customer base as segmentation, based on ones like people that come in every week or people that come once a year. There has been a normal amount of churn in the database. But, we have acquired a lot of new customers, mainly in the new markets, and it is where we expect it to grow again further. We have a lot of repeat customers in some of our bigger existing markets, like France. Maybe I can talk to you offline, if you want to get more specific on how segment and how we grow this database.

19 SMCP Full Year 2017 Results Wednesday, 21st March 2018

Again, but, very excited in WeChat. We think WeChat is big application worldwide. You are scanned. You are identified when you come in the store. We capture the information. We do that in China. We do that in Europe, as a matter of fact, as well.

Philippe, you had a question about IFRS 16.

Philippe Gautier: Okay. I do not know why I get the question on IFRS 16 –

Daniel Lalonde: I could take it, if you want.

Philippe Gautier: – and you get the question on customers. IFRS 16, so that will start in January 2019. The first thing is if you look at our store mix, you need to have in mind that we have a balanced portfolio between our stores. You have online. You have the freestanding stores, where we pay rent. Then, you have department store concessions where we do not pay rent, we pay a percentage commission. Already, this percentage commission is not part of the topic. We are only talking about the rent portion. We will work on that. If you compare with our other retailers who do not have this mix, we will be less impacted than them. It is the short answer.

If you look at our current commitment, in terms of rental, it is €330 million. That gives you an idea. Yes, we will work on that and provide a number in 2019. But, we will be less impacted than most people in the retail space.

Daniel Lalonde: Thank you for your wonderful questions and thank you for being part of this morning on our long journey to be a leader in accessible luxury. I wish you a very nice day. Thank you for coming.

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