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Declining sales for Geox

Sep 25, 2018 Italy
Declining sales for Geox
In the first half of 2018, the Italian-based brand Geox achieved revenue of 414 million euros, a decrease of 8.2% compared to the same period last year. Sales in Europe accounted for almost 75% of the total. However, this represents a decline of 9.5% year on year
Consolidated Geox sales in the first semestre of 2018 amounted to 414.1 million euros, down by 8.2% compared with the previous year (-7.2% at constant forex). Results for the first half of the year were mainly affected by performance in the first quarter (characterised by lower discounted sales and the delayed start to the spring season) and by the ramp-up of the rationalization programme for mono-brand stores, especially with regard to franchised stores, whose network has been reduced by approximately 20% over the last 18 months.

Sales generated by wholesale stores, representing 46% of Geox's revenue (45% in the first half of 2017), amounted to 191.2 million euros (-5.4% at current forex, -4.6% at constant forex). The decline recorded in the first half of the year is mainly down to a more selective approach with regard to partners, fewer sales of discounted goods from previous seasons (as a result of stock levels being significantly reduced in 2017) and a more unfavourable exchange rate effect. However, the second quarter recorded positive performance (+10.6% compared with the second quarter of 2017) thanks to a recovery in orders, as certain clients had asked for deliveries to be postponed during the first quarter (in light of the delayed start to the spring season).

Sales generated by directly-operated stores, DOS, representing 42% of the group revenue, recorded a reduction at 174.4 million euros (-3.8% at current exchange rates, -2.1% at constant forex). This performance was mainly due to lower discounted sales in January and February (after stock levels were optimised in 2017) and the unusual weather conditions in March. The trend improved in the second quarter and sales were in line with the same period of the previous year.

Comparable  sales  generated  by  directly-operated stores report a decline of -3.7%, recovering  from  the -4.7% recorded at the end of June and -8.9% recorded at the end of March. In particular, improved performance has been recorded since mid-April, thanks also to the return of more normal  weather conditions in the group’s main markets. Positive performance has also been recorded in July, thanks to the summer sales getting off to a good start.

Sales generated by the franchising channel, which account for 12% of Geox's revenue, amounted to 48.5 million euros, reporting a decline of 28.5% (-28.3% at constant forex). Performance in the franchising channel particularly reflects the planned rationalization of the store network in the last quarters, with a net reduction of 62 stores in 2017 and 34 in the first half of 2018 (approximately 20% of the entire franchising network) due to closures and conversions into DOS.

Sales generated in Italy, representing 30% of the group's  revenue (30% also in the first half of 2017), amounted to 124.3 million euros, compared with 137.0  million euros in the first half of 2017 (-9.3%). This trend is mainly due to the aforementioned optimization of the mono-brand store network (48 net closures in 2017 and 13 in the first half of 2018) and to the unusual weather conditions (above  all  in March). A positive trend was recorded in the second quarter compared with the second quarter of 2017 both in the wholesale channel and in directly-operated stores.

Sales generated in Europe, representing 43% of Geox's revenue (44% in the first half of 2017), amounted to 179.9 million euros, compared with 198.9 million euros in the first half of 2017, recording a decline of -9.6%. This performance was mainly due to the aforementioned rationalization of the mono-brand store network (36 net closures in 2017 and 16 in the first half of 2018) and to the decline recorded in the first quarter due to the delayed start to the spring season. The second quarter recorded an improved trend both in the wholesale channel and in directly-operated stores. North America recorded a turnover equal to 24.1 million euros, reporting a decline of 15.1% (-9.9% at constant forex) mainly due to the negative performance of the wholesale channel, which has been subject of a careful review and selection process for partners, with a focus on players more in line with the group's planned strategy to improve brand perception.

Footwear sales
represented 91% of consolidated sales, amounting to 376.7 million euros, down by 7.7% compared with the first half of 2017 (-6.7% at constant forex). Apparel sales represented 9% of consolidated sales, amounting to 37.4 million euros compared with 42.9 million euros in the first half of 2017 (-12.9% at current forex, -12.5% at constant forex).
 
As of the 30th June 2018, there was a total of 1 040 Geox shops, of which 436 DOS. During the first half of 2018, 19 new Geox Shops were opened and 74 were closed, in line with the store network optimization planned in more mature markets and the expansion in countries where the group’s presence is still limited but developing well.

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