Geox nine month revenues decline 0.9 percent

Consolidated revenues for the first nine months of 2017 at Geox amounted to 732.7 million euros (850 million dollars), which the company said were substantially in line with last year, representing 0.9 percent decline at current forex and 1.3 percent at constant forex, with the growth of the wholesale channel partially compensating for the planned optimization of the mono-brand store network. Footwear sales were down 1.4 percent at current and 1.7 percent at constant exchange to 659.6 million euros (765 million dollars), while apparel sales of 73.2 million euros (84 million dollars) were up 4 percent at current and 2.9 percent at constant forex.

Commenting on the nine month results, Mario Moretti Polegato, Chairman and Founder of Geox, said in press release: “Geox is performing well, and we’re seeing the first concrete results of our new strategy focused on boosting profitability. The wholesale channel has also reported a 3.5 percent growth in order backlog for the upcoming spring/summer 2018 season, confirming the significant potential of Russia and China, where the group's presence is developing well, and of the e-commerce channel, which we believe to be increasingly important for the group's future strategies.”

Geox witnesses rise in wholesale revenues for the nine months period

Wholesale revenue, representing 48 percent of group revenues amounted to 352.7 million euros (409 million dollars), with an increase of 2 percent at current and 1.5 percent at constant forex compared with last year. This trend, the company said, is due to a stable performance in Italy and Europe, double-digit growth recorded in Russia, Eastern Europe, China and by the online channel.

Geox added that the slight decline recorded in the third quarter was affected by fewer promotional sales due to the planned reduction in stock from previous seasons, resulting from improved operating efficiency, some postponement of Q3 deliveries and a general conservative approach towards credit risk management, especially in some countries like Ukraine and Thailand that are experiencing renewed turmoil.

Revenues generated by directly-operated stores, DOS, representing 37 percent of group revenues, declined 1.9 percent at constant forex to 269 million euros (312 million dollars). This performance, the company added, is due to the planned network optimization in Europe and expansion in more responsive markets such as Russia, Eastern Europe and China which saw 31 net closures, stable LFL sales in 9M 2017 which was up 0.5 percent due to 3.2 percent growth in Q3 boosted by positive performance in September in all main markets. Geox further said that comparable sales generated by directly operated stores to date are substantially stable with negative 0.2 percent growth caused by the drop in footfall experienced in October led by unusual weather conditions in key markets.

Sales generated by the franchising channel, which account for 15 percent of group revenues, amounted to 111 million euros (128 million dollars), a decline of 7.3 percent at current and 7.9 percent at constant forex. The performance of the franchising channel reflects the dynamics reported above, and is also due to the store network rationalization plan with 42 net closures and a decline in comparable sales.

At September 30, 2017, there was a total of 1,095 “Geox Shops”, of which 424 were DOS. Over the first nine months of 2017, 54 new Geox Shops were opened and 120 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.

Geox’s performance across geographies

Revenues generated in Italy, representing 30 percent of the group's total revenues decreased to 222.4 million euros (258 million dollars), compared to 231.2 million euros (268 million dollars) of the previous year due to the planned optimization of the retail network that saw 43 net closures, the reduction in LFL sales recorded by DOS, and a stable wholesale channel.

Sales in Europe, which accounted for 43 percent of sales decreased by 1.4 percent to 318.3 million euros (369 million dollars) due to closure of 31 mono-brand stores, the low single-digit growth in LFL recorded by DOS, and a stable wholesale channel.

North American sales amounted to 43.9 million euros (50 million dollars), down 6.2 percent or 7.2 percent at constant forex mainly due to the performance on the Canadian market, closing of 5 of mono-brand stores and the stable LFL recorded by DOS. Sales in other countries increased by 6.9 percent or 5 at constant forex) with positive performance both in the wholesale channel and in terms of LFL recorded by DOS, with particularly strong growth in Russia, Eastern Europe and China.

Geox reveals outlook for FY17

With regard to FY2017, management expects a slight decrease in top line and a material increase in profitability compared to the previous year. On the basis of assumptions and facts, as of today, the management expects a low single-digit decrease in turnover in 2017, whereby the single-digit growth of the wholesale channel will nearly offset the planned network optimization and the expected slight decline in like-for-like performance of both directly operated and franchised stores, in line with the trend experienced at the end of October.

The management also assumes that the aforementioned slight decline in turnover and the expected improvement in gross margin, combined with the measures taken to boost efficiency and cost control, will allow the group to achieve a material increase in profitability compared to the previous year.

With regard to business outlook for the nine months of 2018, Geox said, the order backlog (wholesale channel) for the 2018 spring/summer season shows a 3.5 percent growth, showing positive results in almost all regions including stable performance of Italy and slightly negative in Europe, Eastern Europe and the Middle East recording double-digit growth, with Russia showing even stronger performance, North America showing slightly positive performance thanks to double-digit growth in the US, high single-digit growth in APAC, with double-digit growth in China and 21 percent growth in ecommerce.

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