The Board of Directors of Geox S.p.A., the Italian company for classic and casual footwear listed on the Milan Stock Exchange (MSE: GEO.MI), has approved the 2012 financial results.
Geox reported that consolidated net sales decreased by 9.0% (-9.9% at constant exchange rates) to Euro 807.6 million 2012. Footwear sales represented 85% of consolidated sales, amounting to Euro 689.0 million, with a 8.7% decrease compared to 2011. Apparel sales accounted for 15% of consolidated sales equal to Euro 118.6 million, with a 10.5% decrease. Sales in Italy, the Group’s main market, which accounted for 35% of sales (38% in 2011) amounted to Euro 285.9 million showing a 15.3% decrease. Sales in Europe, which accounted for 42% of sales (in line with 2011) declined by 8.0% to Euro 341.9 million, compared with Euro 371.6 million in 2011. North American sales increased by 2.7% at Euro 55.1 million (-4.5% at constant exchange rates). Sales in the Other Countries were stable (-2.6% at constant exchange rates).
Analyzing sales by distribution, the Geox Shop channel (franchising and Directly Operated Stores - DOS) increased by 4.2%. This channel represented 52% of sales (45% in 2011). The sales of directly operated stores (DOS), which accounted for 29% of sales, increased by 10.0% to Euro 234.2 million. Franchising channel declined by 2.4% in 2012 to Euro 183.2 million, equal to 23% of sales. Multibrand channel, which accounted for 48% of sales (55% in 2011), declined by 19.8% to Euro 390.3 million.
As of December 2012 the overall number of Geox Shops was 1,212 of which 300 DOS. During 2012, 212 new Geox Shops were opened and 140 have been closed. New openings of 2012 include shops in St. Petersburg, Hong Kong, Beijing and Shanghai.
Mario Moretti Polegato, Chairman and founder of Geox, commented: “Geox has closed 2012 with results in line with expectations, reflecting the difficult economic situation in some of the Group's most important markets, such as Italy, Spain and Greece, where the contraction in consumer spending is particularly marked. On the other hand, there has been expansion in Russia, Eastern Europe, China and Hong Kong, which is encouraging. The Group has continued its growth strategy focused on these emerging markets and has continued to invest in the development and opening of more than 70 monobrand stores. In particular, the Group plans to open in China, over the next 5 year’s, 100 directly operated stores and a further 400 stores (stores, shop in shop, corner) will be opened by partners".
Geox announced that in 2012, the macroeconomic and financial environment has become increasingly difficult in Europe, especially in the Mediterranean area, with the introduction of growing austere fiscal policies, restrictions on access to credit for commercial distribution and a deterioration in consumer expectations. In this context, management decided to adopt prudent policies with a view to containing business risk, rationalization of the wholesale accounts, maintaining strong control over working capital and focus on margins. This
led, among other things, to lower promotions during the sales period and selective cancellations of orders of customers in financial difficulty.
Given that these problems are generally expected to linger on in 2013, especially in commercially important countries like Italy, Spain, Portugal and Greece, and bearing in mind that there are still products in stock with the distribution network in certain geographical areas, because of unsatisfactory sales during 2012, above all in the wholesale channel, management believes that it will have to take a very prudent look at sales and is expecting to see a high single digit decrease in sales of in the first half of 2013.
Given the current situation, the Geox Group has reacted 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 that should provide growing opportunity in these markets.