The parent companies of French fashion brands Maje and Sandro, beloved by Chinese white-collar workers, are facing a change of ownership.

According to fashion business news, Shandong Ruyi Group confirmed on Tuesday that its indirect holding company in Luxembourg, European Topsoho Sàrl, failed to redeem 250 million euros of bonds that could be converted into SMCP Group stocks. The controlling stake in the brand's French fashion house is about to change.

To put it simply, Shandong Ruyi, who once hailed itself as the future Chinese version of LVMH, will lose the SMCP Group, which has set its fashion ambitions for itself.

In 2016, Topsoho, a subsidiary of Shandong Ruyi Group, controlled the French fashion group SMCP, the parent company of Sandro, Maje and Claudie Pierlot, with 1.3 billion euros, holding 53% of the shares, and another 40% of the shares were circulated on Euronext , the founders and principals hold the remaining 7%.

Topsoho then issued a three-year convertible bond worth 250 million euros in September 2018, but it failed to repay the debt three years later. According to the preliminary agreement between Topsoho and creditors, after the bond matures, creditors can claim the right to recover 37% of the capital held, or 28 million shares out of a total of 75.6 million shares. But if the amount is less than the promised 250 million euros, creditors can also claim the other 16% stake held by Topsoho.

According to the current market value of SMCP of 529 million euros, the market value of 37% of the equity is only 196 million yuan, which means that creditors will obtain all 53% of the equity held by Shandong Ruyi through Topsoho. It is reported that the creditors of the debt include private equity funds Anchorage Capital, Carlyle Group, French Boussard & Gavaudan and American asset management company Blackrock.

Shandong Ruyi's withdrawal from SMCP seems to have made the European market feel proud. The share price of SMCP Group has risen by 22% since the news on September 17, the highest increase in nearly 4 months, and the market value has exceeded 500 million euros. Analysts at Jefferies Investment Company said in a research note that an imminent exit from troubled shareholder Shandong Ruyi was expected, removing share price headwinds since the SMCP listing in 2017, and thus upgraded the stock to "buy."

However, the road ahead for SMCP will not be smoother. The current situation is that creditors do not seem willing to take over SMCP Group, or otherwise.

A company called Glas SAS, which described itself as a trustee for bondholders on Tuesday, revealed in a filing with France's market regulator that it currently exercises just under 29 percent of the SMCP Group's shareholder vote. This is because the market stipulates that once a shareholder holds more than 30% of the shares, it must issue an overall takeover offer, but it is not willing to acquire SMCP Group in the form of a consortium. The group has shrunk by more than 70% when it went public in 2017, and even if creditors can get all 53% of the equity, they can only recover about 280 million euros.

Therefore, a source pointed out that since these creditors are eager to sell these stakes, SMCP Group is in essence for sale, and revealed that the bondholders are looking for a single buyer. In addition, the analyst added that SMCP Group may attract interest including private equity funds and American luxury luxury goods groups, and the change of ownership is a long process.

It is worth noting that TopSoho said on Wednesday that it has initiated legal proceedings in the British court. The lawsuit targets Glas SAS, which serves bondholders, Celf Advisors LLP, an affiliate of the Carlyle Group, and BNP Paribas Trust Company UK Ltd., which is the stock custodian of the SMCP bond collateral.

The lawsuit alleges that the companies are conspiring to harm the company by unlawful means, forcing the company into a loss and seeking to acquire SMCP at a low price. In a statement, SMCP confirmed that Topsoho is initiating legal proceedings and that the transfer of shares to bondholders could begin on October 19. SMCP, which has finally ushered in a recovery, may be placed in a protracted legal and financial battle due to ownership issues, affecting the long-term sustainable development of its brands.

On the other hand, the head of Maje, Isebelle Guichot, took over in August from Daniel Lalonde, who had led the SMCP for eight years, and now has to face the impending massive earthquake of investors. According to the data, Isabelle Guichot was previously an executive of Kering Group. He served as the president and CEO of Balenciaga from April 2007 to December 2016. He also led the luxury shoe brand Sergio Rossi and the French luxury handbag brand Lancel. He was CEO of Van Cleef & Arpels and Cartier, both owned by Richemont Group, from 1995 to 2005.

Although the outside world is worried about the future of SMCP, the newly appointed CEO said that the financing and business operations of SMCP Group will not be greatly affected by Shandong Ruyi's exit and changes in creditors.

Affected by the severe epidemic in the European and American markets, SMCP's sales fell 22.9% year-on-year to 873 million euros last year. The Asia-Pacific region performed best, and sales in mainland China rose by 21%. However, thanks to effective cost control measures, the group saved more than 100 million euros last year, and EBITDA recorded 179 million euros, far exceeding analysts' previous forecast of less than 128 million euros.

Aside from the upcoming turmoil, SMCP's sales data shows that it has gradually recovered from the epidemic. In the first half of this year, the group's revenue rose by 21.6% year-on-year to 450 million euros, and its net profit also recorded 600,000 euros, a loss compared to the same period last year. 29.7 million euros is a marked improvement. Isebelle Guichot also revealed that as of the end of June, SMCP had more than 240 million euros of liquidity and the asset situation was very healthy.

This achievement is mainly due to the boost of the same-store sales growth of 54.6% in the Chinese market. Under the prevalence of French style, Sandro, Maje and other brands have achieved extremely dazzling results in China in recent years as representatives of affordable luxury. The group stated in 2017 that the approachable Parisian fashion style displayed by the brand continues to attract Chinese consumers. In 2020, its global Chinese consumers accounted for more than 30% of its business, and it is expected to reach close to 50% by 2025.

There is no doubt that the light luxury category still has great market potential in China.

Bain & Company estimates that China's affordable luxury market will be worth 11 billion euros in 2020, up 10 percent from 2019. While growth has been modest compared to the luxury segment as a whole, its performance amid the pandemic remains noteworthy. In last year's Singles' Day event, almost all of the top-performing brands in Tmall's luxury category were affordable luxury brands, including Theory, ICICLE, Sandro and Maje, among others.

One of the main customers of this category is the growing middle-class consumers. According to data, it is expected that by 2027, China's middle-class consumers will account for 65% of the total number of Chinese households. They are generally buyers of luxury handbags, but in the more accessible ready-to-wear category, they are more interested in brands that balance price, design and quality.

In addition, Bain analyzed that consumers from lower-tier cities in China, as well as consumers buying luxury goods for the first time, are also a solid driving force for affordable luxury brands. Approaching luxury from the bottom of the pyramid, these consumers crave creative, high-quality products at affordable prices. This kind of consumption desire may no longer exist in the European and American markets, but it is still very strong in the Chinese market.

However, there are also more entrants targeting these opportunities.

First of all, many high-end luxury brands have also realized the purchasing power of this group, and are increasing their efforts to develop entry-level products to attract such consumers. The second-hand luxury market, which also relies on cost-effective development, will undoubtedly affect entry-level products. The future performance of luxury brands.

In addition to the pressure from high-end luxury goods, emerging high-end basic brands and high-street brands are also carving up domestic market share at an alarming rate. ARKET and &Other Stories, which focus on the Nordic lifestyle, are gradually gaining the favor of young Chinese consumers. The brand is also accelerating its deployment in the Chinese market through online and offline channels after gaining the popularity of social media. Recently, ARKET and &Other Stories have their first stores in China in Beijing and Opening in Shanghai.

Totême, founded by Swedish bloggers, is also growing in a low-key manner. It not only relies on several high-end basic products, but also relies on a set of brand concepts that are deeply recognized by a certain community to meet the needs of the middle class who are pursuing consumption upgrades. The middle ground they step on satisfies the value rationality of most middle-class consumers, and they also understand the dual needs of consumers for minimalist basic models and identification.

Totême, founded by a Swedish blogger, meets the needs of the middle class pursuing consumption upgrades

The Danish fashion brand GANNI, which entered Tmall this year, reversed the stereotype of Nordic fashion, either a very conceptual minimalism or a more feminine bohemian style, when it launched, and launched a fun, colorful, The "Scandinavian Style 2.0" of contrasts and individuality found a market void in the two Scandinavian styles of the time, the minimalist and the maximalist, warmer than minimalism and more modern than bohemian.

At the same time, GANNI is also known for its friendly pricing strategy. Similar to Totême, the price band of GANNI products is also distributed in the reasonable price range that middle-class women can afford, or even lower. Dresses in the early 2,000 yuan range, coats in the early 3,000 yuan range, and the highest-priced items in the Tmall flagship store are high boots that cost less than 5,000 yuan.

Danish fashion brand GANNI is also known for its approachable pricing strategy

GANNI also recently announced that it is stepping up its global expansion, focusing on the two major markets of the United States and China. Given that the United States has become GANNI's largest market, the brand will open physical stores in key cities in the United States in the next few years, and establish online sales channels and physical stores in regions such as South Korea and Australia. In China, GANNI entered Xiaohongshu in April to open a brand name, and landed on Tmall to open an official flagship store at the end of June.

Maje and Sandro have fallen short in terms of style and brand value compared to other brands that focus on brand value and sustainable fashion.

In terms of style, Maje and Sandro's French style and Parisian elegance are being overtaken by Scandinavian fashion and trendy fashion in general. Young consumers immersed in TikTok and Xiaohongshu are chasing more personalized niche designer brands.

Rouje's expansion represents an iteration in French fashion

While French fashion still has a loyal audience, in this segment, emerging blogger brands like Rouje are also rapidly entering China, eroding the market share of Maje and Sandro. These brands often rely on more recognizable explosions, such as floral dresses, to deepen the impression of consumers.

In contrast, although Maje and Sandro, which opened stores in shopping malls, are still the shopping destinations of many domestic white-collar consumers, the trend of the brand in 2017 has passed. Today, white-collar people do not prefer these brands, but they Considered a conservative choice when there are no other options.

The rapid growth of SMCP over the past five years may only be a temporary market bonus. What is even more vigilant is that the three women's clothing brands under SMCP have a very low degree of distinction, and have not released the diversity and synergy that the brand matrix should have.

In the domestic shopping mall channel where the three brands are heavily invested, French fashion brands Maje, Sandro and Claudie Pierlot are also facing competition with other domestic women's clothing brands, such as the high-end brand Edition of the same group as MO&Co., and the DAZZLE of Disu fashion. And DIAMONDDAZZLE, these rising stars have gradually cultivated a certain brand personality.

Even for affordable luxury brands, price cannot be the only advantage, and brand personality and brand value are becoming more and more important. Whether it is a light luxury brand such as Michael Kors and Coach, or a fast fashion brand, this is the predicament that has been tried to get out of in recent years. Extended reading: fast fashion accelerates high-end

Realizing this, COS is trying to reshape the brand value. In September this year, COS changed the brand logo and participated in the London Fashion Week for the first time and released the 2021 autumn and winter series, indicating that COS is positioning itself more as a trend-setting fashion brand, providing more designs on the basis of minimalist basic models. Instead of being satisfied with the functional role of building basic wardrobes for consumers in the past.

For savvy middle-class consumers, who are more and more fashion-conscious, they do not mind buying a Uniqlo T-shirt that costs about 100 yuan, but they are often willing to buy a dress that costs 5,000 yuan, provided they know why they are Pay, and COS today seems to be overpriced for the product and brand value it offers, as do Maje and Sandro.

Shandong Ruyi, which cannot guarantee itself, has indeed failed to support SMCP in adapting to the essential changes of the market in the past five years and giving full play to the advantages of China's online market. However, in the foreseeable future brand ownership turmoil and relatively conservative European professional managers, SMCP may not be able to get rid of the tepid situation.

Although it has tried to capture young consumers through a partnership with Tmall, the possibility that SMCP will be able to give it a shot is still extremely low.