Geox anticipates posting a significant cash burn in the first quarter of the year due to seasonal effects and the impact of the Covid-19 pandemic. But, the situation is continuing in the second quarter and the company is negotiating the extension of credit lines.
Geox usually registers a cash burn in the first and third quarters, when it pays suppliers, while generating cash in the second and fourth quarters, when it is paid by clients and thanks to sales at its mono-brand stores. But this year, the first quarter will also be hit by the lockdowns caused by the pandemic, resulting in a “significant one-off absorption of cash.”
Geox noted that the temporary closure of stores and a slowdown in payments by wholesale and franchising clients “is leading the entire sector to face a temporary negative cash flow during the second quarter” caused by an “abnormal” increase in working capital.
The company said that it has significant lines of credit available. Nevertheless, it is “actively” negotiating for them to be increased and prolonged.
Geox aims to efficiently manage the payment of receivables, which are generally insured, while safeguarding relationships with clients, and to manage excess stock from 2020 in a profitable way over an 18-24 month period, by including new and ongoing models in future collections and selling the remainder through the network of outlets and promotional channels.
As part of the company’s efforts to cut costs, the top management renounced all variable fees for 2020.