Geox plans to launch an e-commerce platform on Sept. 20. The system is already operational and undergoing trials. The system is being opened to a selected group of high-profile clients and then to the company's employees on Aug. 20.

The company said that the business will not have a dedicated warehouse and will rely on the inventories of the group's stores. It will initially be rolled out in Italy, Germany and the U.K.

The announcement was made with the release of first-half results, which showed resilience in retail sales during the second quarter, but were not sufficient to avoid the company from downgrading its full-year guidance on sales and earnings.

In the first half of 2012, Geox booked a 4.3 percent decrease in sales to €429.1 million. On a currency-neutral basis, sales fell by 5.0 percent.

Footwear revenues were down by 4.6 percent to €375.5 million and apparel sales decreased by 1.8 percent to €53.6 million. At constant foreign exchange rates, revenues fell by 5.6 percent for footwear and by 1.8 percent for apparel.

Geox Consolidated Income Statement

(Million Euros, Six months ended June 30)

 

2012

2011

%
Change

Footwear Sales

375.4

393.7

-4.6

Apparel Sales

53.6

54.6

-1.8

Total Net Sales

429.1

448.3

-4.3

Cost of Goods

220.3

242.8

-9.3

Gross Profit

208.8

205.5

1.6

Selling & Distribution

23.2

23.6

-1.7

General & Administrative

125.0

116.4

7.4

Advertising & Promotion

23.5

24.0

-2.1

Net Interest

-1.8

-2.4

-25.0

Pre-Tax

33.1

39.3

-15.8

Tax

11.8

14.9

-20.8

NET

21.3

24.3

-12.3

Euro/share

0.08

0.09

-11.1

By region, sales were down by 7.9 percent to €156.6 million in Italy and dropped by 4.8 percent to €183.1 million in the rest of Western Europe. Revenues fell by 3.9 percent to €25.4 million in North America and rose by 7.6 percent to €64.0 million in the rest of the world, led by Eastern Europe and Russia. Greece, which is lumped in with rest of the world, booked a double-digit rate drop.

On a similar currency basis, sales were down by 5.2 percent in Europe, excluding Italy. They fell by 9.7 percent in North America and increased by 5.1 percent in the rest of the world.

By channel, quarterly revenues fell by 13.6 percent to €220.8 million for wholesale, as the group rejected some orders made by clients, especially in Italy, Spain, Portugal and Greece, who were slow in paying or not considered financially solid. The group also suffered from lower-than-expected reorders for the spring/summer collection from both wholesalers and franchisees.

Sales to franchisees rose by 8.4 percent to €95.3 million and increased by 7.6 percent to €113.0 million for directly operated stores (DOS).

On a currency-neutral basis, sales were down by 14.5 percent at wholesale. They were up by 8.4 percent for franchising and up by 6.4 percent for DOS.

In the first half, same-store sales at DOS rose by 3.0 percent. During the period running from Feb. 27 to July 22, comparable store sales of the spring/summer collection were up by 6.0 percent helped by a higher average selling price and higher sales per client. Same-store sales were also up in Italy and Spain, by 3.0 percent and 6.0 percent respectively. The group's flagship stores outperformed other DOS, booking a 9.0 percent growth.

Geox said that DOS benefited from the implementation of an automatic replenishment system. The platform will be rolled out to franchisees for the next spring/summer collection.

The group continued to restructure its retail network, closing down nonperforming stores but also accelerating the opening of new ones to take advantage of location availability and more reasonable rents. Geox usually enters lease deals varying from five to 12 years.

In the first half, Geox increased its mono-brand network by 32 stores to 1,172 locations, of which 261 were DOS, one less than at the end of 2011. For full-year 2012, it aims to have about 70 additional franchisees and about 25 more DOS compared with 2011.

About 65 extra stores will be opened in Europe; the bulk will be Italy, with 40 openings, followed by France, with 19; Spain, with four; and the Netherlands with three. An additional 25 locations are scheduled in Eastern Europe.

In China, the group plans to have 18 stores in place, but the network will only increase by three locations because the other shops will replace the ones operated by Belle International, the big Chinese group, as Geox has decided to have a direct presence in the country.

The termination of the distribution agreement in China and Hong Kong with Belle has contributed to the decrease in bookings for the fall/winter collection. Orders to wholesale and franchisees fell by a mid-teen rate as the group continues to rationalize its wholesale network in Europe and cautious buying by wholesale clients and franchisees after disappointing sales during the previous winter season, which has caused a stock overhang.

In the first half, Geox improved its gross margin to 48.7 percent from 45.9 percent a year earlier thanks to improved sales at the DOS, favorable foreign exchanges and price increases. The Ebitda margin fell to 12.7 percent from 13.6 percent due to higher general and administrative expenses stemming from the expansion of the DOS network and the creation of new subsidiaries in Eastern Europe and Asia. The net profit narrowed to €21.3 million from €24.3 million.

In a conference call, the corporate managing director, Massimo Stefanello, said full-year sales are now expected to be in the lower part of the of €820-830 million guidance released in May.

The gross margin will increase by 1.0 percentage point in 2012 compared with 2011, while the Ebitda margin will be slightly above 10.0 percent and the net profit will be €23-26 million. Previously, Geox had forecast a bottom line of €30 million, which was already down from the €50.2 million posted in 2011. The Ebitda margin is forecast to narrow by 3.0-3.5 percentage points, against a previous guidance of 2.0-3.0 points, due to the increase in investments. In the first half, capital expenditure rose to €23.3 million from €14.3 million a year earlier.