Geox' sales in its own stores suffered an unexpected slowdown in November and December, stemming from the Paris terrorist attacks that killed 130 people on Nov. 13, and the record warm weather in Europe. In the past months, the group's same-store sales suffered a roller-coaster ride, rising year-on-year by 7 percent in September, followed by 17 percent increase in October. After slight gains in November and December, they surged again by 8.1 percent in the first seven weeks of 2016. On average, comparable store sales were up by 4.8 percent in the fourth quarter, compared with a company forecast of 9.5 percent. The opening weeks of 2016 beat the 5.9 percent increase seen during the same period in 2015.

Overall, fourth-quarter revenues rose by 6.1 percent, exactly in line with the full year. At constant currency rates, quarterly sales were up by 4.1 percent and annual revenues rose by 3.9 percent.

Geox' total revenues reached €874.3 million for the year, driven by increases in footwear of 8.8 percent at actual currency rates and by 6.3 percent at constant rates. Apparel fell by 12.9 percent in euros and by 13.0 percent in local currencies, down to €89.3 million due to the downsizing of the collection. The company stressed that comparable sales for the fall/winter apparel collection increased in directly-operated stores (DOS) by 14 percent in the 17 weeks between Aug. 25 and the end of December. 

Geox, Regional Breakdown of Net Sales

(Million Euros, Year ended Dec. 31)

 

2015

2014

%
Change

Italy

281,1

272,6

3,1

Europe (*)

375,6

359,3

4,5

North America

62,8

55,5

13,2

Other Countries*

154,8

136,8

13,2

T O T A L

874,3

824,2

6,4

       

(*) Austria, Benelux, France, Germany, UK, Iberia, Scandinavia, Switzerland.

The group's sales in Italy rose by 3.1 percent to €281.1 million. In the rest of Europe, turnover rose by 4.6 percent in euros and by 4.0 percent on a currency-neutral basis, settling at €375.6 million. Sales increased by 13.1 percent to €62.8 million in North America, but they were up by only 2.8 percent in constant currencies.

In other countries, sales reached €154.8 million, up by 13.1 percent in euros and by 5.8 percent in local currencies. This was in spite of negative factors such as the dismissal of Geox' former Chinese distributor and the situation in Hong Kong, Ukraine and Greece. Excluding those countries, revenues were up by 17.7 percent in the rest of the world at constant currency rates.

The wholesale segment represented 40.5 percent of total sales with a turnover of €353.8 million last year. They were up by 7.2 percent in euros and by 4.1 percent in local currencies in 2015. Sales to franchisees, whose share of sales fell to 16.2 percent from 18.0 percent of the total, due to the closure of non-performing stores and some conversions into directly-operated stores (DOS), registered drops of 4.4 percent in euros and 3.6 percent at constant rates. However, the franchisees themselves enjoyed a 3.9 percent increase in comparable store sales.

DOS generated 43.3 percent of group revenues in the 12-month period, up from 42.0 percent in the prior year. Their sales went up by 9.5 percent to €378.5 million, and grew 6.9 percent in local currencies, thanks to new openings and a 4.2 percent increase on a same-store basis. Comparable store sales for the fall/winter collection during the 17 weeks to Dec. 31 were up by 5.4 percent in this channel.

Geox Consolidated Income Statement

(Million Euros. Year ended Dec. 31)

 

2015

2014

%
Change

Footwear

785.0

721.7

8.8

Apparel

89.3

102.5

-12.9

TOTAL NET SALES

874.3

824.2

6.1

Cost of Goods

423.5

420.4

0.7

Gross Profit

450.8

403.8

11.6

Selling & Distribution

49.4

48.5

1.9

General & Administrative

344.2

308.3

11.6

Advertising & Promotion

42.3

42.1

0.5

Net Interest

5.8

6.3

-7.9

Pre-Tax

19.1

(1.4)

-

Tax

(9.1)

(1.5)

-

NET INCOME (LOSS)

10.0

(2.9)

-

Earnings/Share

0.04

(0.01)

-

At the end of December, Geox had 1,161 mono-brand stores worldwide, of which 476 were DOS, down from 1,225 stores, including 477 DOS, at the end of 2014. During the year, the group closed 185 locations and opened 121, resulting in a net decrease of 64 units. Geox noted that 41 closures were small concessions in Italian department stores that were no longer needed following the downsizing of the apparel collection.

Geox' gross margin rose to 51.6 percent of sales in 2015 from 49.0 percent a year earlier.

The gross operating margin before amortization (Ebitda) improved by 1.9 percentage points to 7.1 percent, while the Ebit margin increased to 2.8 percent from 0.6 percent. Geox posted a net profit of €10.0 million for the year against a net loss of €2.9 million in 2014 and resumed paying a dividend, which will amount to €0.06 a share, representing a total outlay of €15.6 million. The adjusted bottom line, which normalizes a change in taxation, reached €12.0 million. The company also erased its debt and finished the year with a net cash pile of €20.8 million against net debt of €13.0 million at the end of 2014.

The group's management pointed out that over the past two years its sales have risen by €120 million and the gross margin has improved by 5.0 percentage. With these achievements and the return to profitability, it estimates it has completed its turnaround.

In 2015, Geox also generated free cash flow of €46.6 million compared with a cash burn of €21.8 million a year earlier, despite an increase in net capital expenditure to €38.1 million from €32.8 million.

The cash flow benefited from an improvement in the operating working capital, which fell to €193.8 million from €226.7 million, representing 22.2 percent of sales against 27.5 percent a year earlier. Under its new business plan (see following article), Geox expects the operating working capital to remain within a band of 22-25 percent of sales in the three years to 2018.