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Italy based Geox announced 6.6% decline in sales

May 16, 2014 Italy
Italy based Geox announced 6.6% decline in sales
In 2013 Geox net sales totaled 754.2 million euros, a 6.6% decrease compared to 807.6 million euros in 2012. Net income was -29.7 million euros, sinking from the 10.0 million euros result in 2012
In 2013 Geox total sales were down by 6.6% reaching 754.2 million euros; 43% of net sales were generated by the wholesale channel (multibrand stores) with a total of 323.3 million euros, 38% by the Directly Operated Stores (DOS) with a total of 285.7 million euros and the remaining 19% by the franchising segment (145.2 million euros).

The decline in total sales was driven mainly by the franchising stores (-20.7%) and the wholesale segment (-17.2%). According to Geox, wholesale was impacted by the poor performance in Italy, Spain, Portugal and Greece, and in particular to the selective cancelation of orders from customers in financial difficulty and the reduction of orders caused by a wide de-stocking process. The decline of sales within the franchising segment is attributable to the company’ stores management strategy, with net closure of 34 franchising stores and the conversion of 60 stores previously managed by independent agents to DOS. The growth of the DOS net sales also results from the 90 net openings and the referred conversion of franchising stores. 

63.6% of the total Geoxx stores are based in Europe: 465 shops are based in Italy (of which 169 are DOS) and 361 stores (162 DOS) are located in other European countries. North America has a total of 40 stores (all DOS) and the rest of the world 433 (only 79 DOS).

Footwear was still the main segment of Geox sales in 2013, reaching 654.2 million euros representing 87% of total net sales and consolidating its share from 2012 (85%). Apparel sales totaled 100.0 million euros. Both segments registered decreases in total net sales: footwear was down 5.1% compared to 2012, while apparel had a 15.6% decline.

Europe (excluding Italy) is the most representative region in the company’s total sales with a 44% share in 2013 and a total of 328.8 million euros. Italy follows with 239.9 million euros (32% share of sales), a 16.1% decrease from previous year. North America maintained its 7% share in total sales, with 53.7 million euros. The Rest of the World segment was the only region that managed to increment sales, with a 5.6% increase compared to 2012, reaching now 131.8 million euros.

Net result in 2013 totaled -29.7 million euros, a massive decrease from net income of 10.0 million euros obtained by the company in 2012. Such results reflect the huge investment in the stores, as G&A (General & Administrative Expenses) increased from 251.9 million euros to 282.0 million euros as a result of the referred campaign.

Geox says the company is on track to deliver on its 2014/2016 Business Plan, whose key objectives are: focus on the core brand identity and core promise; focus on the core business; invest on core product innovation; simplify the business complexity to become more effective and cost efficient; specialize the organization; rationalize the network of monobrand stores in EU and EMEA (Europe, Middle East and Africa) and expanding in APAC (Asia Pacific region).

The company expects to reach sales of 800 million euros, which is subject to:
- gradual stabilization of the wholesale channel (assuming that EMEA and North America will still show a certain level of weakness in the first half, partially recovered in the second half; assuming Asia will confirm the significant growth expected)
- an improvement in the performance of the franchise channel with at least some growth in comparable sales and a positive net balance between closures and new openings
- growth in the DOS channel, with about 20 new net openings and growth in comparable sales of existing stores
- a second half improvement in the gross profit margin due to a combination of pricing policies and limited promotional sales, as well as a reduction in product cost

The company expects the first half of 2014 to continue to be impacted by the change in the channel mix: sales are assumed to in line with last year with an expected positive performance by the monobrand channel which should offset the expected weakness of the wholesale channel.

Geox shares were last traded at 3.06 euros on the 14th of May.

The Geox group operates in the classic and casual footwear sector for men, women and children, with a medium / high level, and also in the apparel sector. Research and development plays an important part in the company’s activity, and some innovations developed by them are protected by over 60 different patents registered and extended internationally (special note to its special patented technology of the breathable rubber-soled and the waterproof leather-soled shoes).

For more information about Geox please visit the company's website.

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