I think it definitely depends on the situation -- and the intent with which the word is spoken. I can say to my friends: "Oh, you're such a bitch!!!" -- whereupon they'll reply, "Thank you!!"

let's see what the OED sayeth:

oooh!! Interesting!
Smug [adjective]

the original definition was "A Blacksmith" first incidence in print was during the 17th and 18th centuries.

Then, it was "A hard working University Student" and/or "A self-satisfied person" (19th Centuries, mainly in America)

Most currently, it is "[from the low German *smuk* meaning 'pretty'] Originally: trim, neat, spruce, smart, tidy; (esp. of the face) smooth, sleek. Now, having a self-satisfied, conceited, complacent, or conscientiously respectable air; indicative of or characterized by complacency or self-satisfaction."

it also can be a verb transitive -- whereupon it may mean to "smarten up (oneself, one's appearance, etc.), make neat or spruce. Usually followed by the word "up" -- or verb intransitive: "caress or fondle" (ooh!)

Finally --- an extra rare slang, another verb transitive use: "Steal, filch, run away with."

huh.

That's the LONG ANSWER fulla MORE INFORMATION than you could possibly ever need or want.

Short answer is, in my opinion: it's not exactly the most flattering thing a person could be called, but I don't think it's the worst --- I'd rather be called smug than a mephitic merdivorous prevaricator ---

;)