Geox posted first-quarter sales of €260.9 million, down by a reported 1.3 percent and by 1.6 percent at constant exchange rates, but they beat market expectations by over €2 million. It described the quarterly results as “good” but warned that reaching analysts' forecasts of Ebitda of €54 million on annual revenues of about €850 million could be challenging.
In the quarter, footwear revenues totaled €236.5 million, down by 1.4 percent at actual currency rates and by 1.8 percent at constant rates. Apparel fell by 0.6 percent to €24.4 million, with constant-currency sales up by 0.1 percent.
The company's total sales in Italy dropped by 4.0 percent to €79.8 million. Geox closed a net of five mono-brands stores in the country during the quarter, trimming the network to 281 units, of which 145 were directly-operated domestic stores (DOS). The latter's revenues increased by a high-single digit rate, with comparable store sales above the group's average growth of 3.4 percent.
In the rest of Western Europe and Scandinavia, the top line decreased by 1.0 percent to €112.7 million, with currency-neutral sales down by 1.1 percent. In the region, the number of Geox stores declined by eight units. However, DOS sales were up by a mid- to high single-digit rate and same-store sales were above the global average.
Sales decreased by 9.8 percent to €10.7 million in North America. At constant currency rates, the decline widened to 13.1 percent, driven by the ongoing clean-up of the wholesale channel. Comparable sales were down slightly at DOS, where the number of stores remained unchanged.
In the rest of the world, sales reached €57.7 million, up by 3.8 percent on a reported basis and by 3.4 percent in local currencies. Geox closed a net 11 stores in the region during the quarter. In Eastern Europe, the group enjoyed double-digit rate growth in both comparable DOS sales and wholesale revenues. In Asia-Pacific, sales were “substantially stable” in the wholesale channel and slightly negative at directly operated stores.
The wholesale channel, which represented 53.8 percent of group sales with a turnover of €140.3 million, posted a decrease in revenues of 1.9 percent in euros and of 2.0 percent at constant currency rates. The group said that the decline stemmed from a “prudent and selective approach and rationalization of the wholesale channel.” It expects sales in this channel to fall by a mid-single-digit rate for the full year.
Franchising suffered a 12.9 percent drop in sales, or 12.6 percent at constant currency rates, declining to €36.8 million after the group downsized the franchised store network by 10 percent year-on-year through closures and conversions into DOS. Sales were also negatively affected by timing issues that are expected to be recouped in the second quarter. Same-store sales were stable in this segment.
Sales at DOS, including e-commerce, rose by 5.8 percent to €83.8 million, and increased by 4.9 percent at constant currency rates. Comparable online sales were up by 25 percent. Geox noted that same-store sales slumped in April and early March, inverting a trend seen in the first quarter. Since the beginning of the year, overall comparable store sales have been slightly negative, with online sales up by 24 percent. A drop that took place for six weeks in April and May was attributed to adverse weather, lower customer traffic and a tough comparative basis. The company does not expect to recover lost sales in this segment during the rest of the year.
At the end of March, Geox had 991 mono-brand stores worldwide, down from 1,015 at the end of December, but the number of DOS was unchanged at 444. The company anticipates that the overall size of the mono-brand network will remain substantially stable during the year, but the share of DOS will grow due to new openings, especially in China, and the conversion of a limited number of franchisees. Geox had 415 stores under franchising agreements at the end of March, 18 less than three months earlier. Geox expects sales in the franchising channel to decrease in 2019 but at slower rate than in the first quarter.
The company will continue upgrading its DOS network, closing down non-performing stores. By the end of March, Geox had upgraded 168 locations to its X Store concept, up from 136 at the end of 2018. The company pointed out that it is renovating more than 100 stores a year.
During the second quarter, a digital campaign using key influencers that was launched in Italy in the second part of 2018 will be rolled out in some of the other main European markets. The campaign will also be extended to Asia by the end of the year. At the end of March, Geox had 230,000 followers on Instagram, up by 65,000 from eight months earlier.
One of the other initiatives in the pipeline is to bring the North American e-commerce channel in-house by the end of June, as the company did in Europe last July. Geox also plans to build up its omni-channel business model by gradually introducing on a global scale, sales tools for “click and collect” and “reserve in store” functionalities currently being tested in a number of stores in Italy.