Mario Moretti Polegato, Chairman and founder of Geox
Mario Moretti Polegato, Chairman and founder of Geox
 

12 Nov. 2012

Geox announces decrease in sales

The Board of Directors of Geox S.p.A., approved the nine months 2012 financial results.Mario Moretti Polegato, Chairman and founder of Geox, commented: “As expected 2012 is proving to be difficult due to the economic downturn of the Europe's Mediterranean countries where the contraction in consumption is most widespread and in the wholesale channel. However, the solidity of the Group, with 60 million cash at the end of September, the dynamic development of many countries such as Russia, Eastern Europe and the Far East, the new direct operated store openings in China and Hong Kong and the encouraging trend in sales at our direct stores in general, showing comparable growth of 9% in the Fall/Winter season, confirm the validity of our growth strategy focused on these emerging markets and on opening new retail stores".

Sales nine months 2012 consolidated net sales decreased by 9% (10% at constant exchange rates) to Euro 701.5 million. Footwear sales represented 86% of consolidated sales, amounting to Euro 601.8 million, with a 8% decrease compared to the same period of 2011. Apparel sales accounted for 14% of consolidated sales equal to Euro 99.7 million, with a 12% decrease.

Sales in Italy, the Group’s main market, which accounted for 37% of sales (40% in the nine months of 2011) amounted to Euro 261.9 million showing a 14% decrease. Sales in Europe, which accounted for 42% of sales (in line with the nine months of 2011) declined by 8% to Euro 295.9 million, compared with Euro 321.5 million in the nine months of 2011. North American sales decreased by 1% at Euro 41.1 million (-9% at constant exchange rates). Sales in the other Countries slightly increased (-3% at constant exchange rates).

The Geox Shop channel including franchising and Directly Operated Stores - DOS) increased by 5%. This channel represented 49% of sales (43% in the nine months of 2011). The sales of directly operated stores (DOS), which accounted for 24% of sales, increased by 10% to Euro 171.5 million, thanks to new openings and to the positive performance (+5%) of the stores that have been open for at least 12 months (comparable stores sales). Comparable store sales related to the Fall/Winter 2012 collections only (i.e. from the retail week 35 to week 42 – August 27th to October 21st) increased by 9%. Franchising channel reported an increase of 1% in the nine months of 2012 to Euro 172.3 million, equal to 25% of sales. Multibrand channe,l which accounted for 51% of sales (57% in the nine months of 2011), declined by 19% to Euro 357.7 million.

As of September 2012 the overall number of Geox Shops was 1,195 of which 273 DOS. During the nine months of 2012, 156 new Geox Shops were opened and 101 have been closed. New openings of the third quarter include shops in Moscow, Hong Kong, Shanghai, Beijing and Tianjin. For the whole of 2012, management is expecting to see a decrease in sales of around 8% and is assuming that a similar decrease will continue in the first half of 2013.

Given the current situation, the Geox Group has announced to react with measures aimed to generate cash and boost gross margins, which are confirmed by the orders book in terms of product mix, channels and prices. Furthermore, significant investments related to new shop openings, management hiring and commercial structure improvements in Russia, Eastern Europe and Asia should allow as announced to achieve the important potential growth opportunity in these markets, where the Group's presence is still limited, but rapidly growing. These investments will however lead to pressure on 2012 fiscal year operating margins (EBITDA).

Melanie Gropler

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