The 2006 results presented a few days ago show no let-down in the group’s sustained growth, which is expected to continue at a double-digit rate in 2007. Geox’ consolidated sales rose last year by 34.6 percent to €612.258 million, with footwear up by 33.9 percent to €573.993 million. Sales of apparel were still relatively minor at €33.862 million, but they increased by 55.8 percent. Other revenues fell by 0.4 percent to €4.403 million.

Total sales in Italy grew by only 12.1 percent to €233.876 million, representing a share of 40.7 percent against 48.7 percent in the previous year, while the rest of the world showed a hefty increase of 54.5 percent to €340.117 million, with a share of 59.3 percent of total sales against 54.5 percent.

Geox’ turnover jumped by more than 35 percent in all the major countries - even in Germany, Spain and Portugal where its position is already strong.

On the other hand, an increasing proportion of the footwear is being distributed through franchised or company-owned stores. Footwear sales to multi-brand stores rose by 30.1 percent to €432.508 million, representing 73.8 percent of the total, down from 75.9 percent a year earlier, while revenues from Geox stores increased 45.9 percent to €150.485, with the bulk of the growth coming from directly-operated stores.

In Italy, multi-brand stores represented 63 percent of Geox’ sales, or €147.4 million, growing by 7 percent from the previous year. Sales through Geox stores instead rose by 21 percent to €86.5 million, and came to represent 37 percent of the total national turnover. In other countries, multi-brand stores represented 81 percent of group sales, growing by 47 percent to €276.2 million, but the Geox stores’ sales increased by 102 percent to €64.0 million.

Directly operated Geox stores performed very well, with those opened for at least 12 months boasting increases on a comparable basis of 15 percent for the whole of 2006 and 35 percent for the last quarter.

Geox opened 145 single-brand stores in 2006, including 18 in Italy, 54 in Europe and five in the USA. Geox is now planning to open a total of 150 single-brand stores this year, of which 20 would be in Italy, 60 in the rest of Europe, 10 in the US, five in Canada, five in Japan and the rest in other countries including mainland China, Russia and Hong Kong.

Store openings in the USA could be accelerated depending on the performance of existing shops in the country. The company already opened a new store in January in the USA and the next opening in the country is scheduled in May on Berveley Drive, followed by two others by the summer. The Berveley Drive store will be over 350 square meters, in line with the group’s global strategy of increasing the size of its shops to accommodate apparel.

So far, the company has been struggling to become a strong player in the USA and there has been ongoing speculation that the cash-rich company could carry out an acquisition there to accelerate growth.

Another country of concern is France, where dealing with a highly fragmented retail network is yet producing the expected return on investment. Proportionately to its sales, Geox has spent more money in advertising and promotion in France than in other European countries and claims to have obtained very encouraging results from its strategy of opening single-brand stores in French cities. Spending on A&P in France corresponded to 14.0 percent of sales in 2006, compared with an average of 10.6 percent for the rest of Europe, excluding Italy. The ratios were 4.5 percent of sales in Italy, where Geox is already very strong, and 21.9 percent in the USA, where it is still in an expansion mode.

 

 

Geox’s overall gross margin fell to 53.8 percent of sales in 2006 from 56.9 percent in 2005, mainly due to one-off costs due to the shift of production from Vietnam and China, which were hit by the new European anti-dumping duties, to Indonesia, Brazil and Tunisia. The shoe maker is confident that it will be able to return to a gross margin of 56 percent for 2007 and 2008, enabling the company to continue paying out 40 percent of its net profits in dividends as it had announced for its 2006 results. The group’s chairman and major shareholder, Marino Moretti Polegato, will evidently be the main beneficiary.

Net income rose by 29.0 percent to €97.262 million for Geox last year. EBITDA (earnings before interest, tax, depreciation and amortization) increased by 27.0 percent to €153.470 million, implying a margin 25.1 percent of sales. EBIT (earnings before interest and tax) rose by 31.0 percent to 134.906 million, equal to a margin of 22.0 percent.

The company had a positive financial position of €78.2 million at the end of 2006, up from €48.4 million a year earlier. Free cash flow generated during the year amounted to €56.6 million, compared with €35.9 million in 2005.

Results are expected to continue to improve in 2007 thanks to a continued double-digit increase in the order backlog. Bookings in hand for the Spring/Summer collection are 28.0 percent higher than for the same season a year ago. Footwear backlogs are 9.0 percent higher in Italy, 30.0 percent higher in the rest of Europe, 52.0 percent higher in the USA, and 78.0 percent higher for the rest of the world. Backlog for apparel, which is still largely sold in Italy, is up by 53.0 percent for the season at €17.1 million.