After a board meeting presided by Marino Poretti Polegato, chairman of the company, Geox announced last Thursday the appointment of a new chief executive, Gregorio Borio, who comes from Pirelli, the big Italian tire company. Replacing Giorgio Presca, he has taken office with immediate effect. He has also been given a seat on the board.
Borgo, 52, worked in sales and marketing for the Pirelli Group for more than 20 years, spending time for the Italian company at its head office in Turin, in North America, Japan and China. In particular, he was in charge of the Asia-Pacific region from 2011 to 2013. Most recently, he served as general manager for the group's operations in the tire sector until the end of last year, handling manufacturing, the supply chain, marketing and sales as well as the group's different regions.
Presca's dismissal, which was reportedly abrupt, followed the departure late last year of the company's marketing manager, Giovanni Peracin. According to a well-informed source, these actions followed lower-than-expected sales, especially in Asia, and a lack of tangible results from a recent expensive marketing campaign.
As previously reported, the company's sales grew by only 2.5 percent in the third quarter of 2016. Comparable store sales were down, and they were particularly weak in France, Belgium, China, Hong Kong and Japan in the first nine months of the year, although they turned positive in China from the month of October.
Conceding the fact that other companies in the fashion segment have suffered from the recent slowdown in Chinese consumption, a spokesman for Geox said the choice of a well-travelled manager such as the new CEO was meant to speed up the internationalization of Geox, which is still getting about 80 percent of its revenues from Italy and other parts of Europe. On the marketing side, the board was said to feel that Geox should return to a message that highlights the technical benefits of the brand's breathable technology.
Geox' board thanked Presca for his contribution during his tenure. In addition to his normal compensation and statutory severance fees, Geox will pay him an additional gross amount of €4,340,000 for the termination of his contract with the company. As part of a settlement, it will give him an extra €10,000 in return for waiving any claims against Geox related to his employment and its resolution. In addition, Presca will not be bound by a non-competition clause. Presca has no shares in the company and no rights to any stock options.
Presca, a very nice man who was liked by the staff, is a seasoned marketer who worked for Nordica, Lotto, Levi Strauss, Diesel and VF Corp. before he was made CEO of Geox in 2012, replacing Diego Bolzonello after 17 years. Peracin worked at many of these same companies before he was made marketing director of Geox in January 2015. Bolzonello is still active in the footwear and sporting goods sector as a consultant, specializing in mergers and acquisitions.
Financial analysts and other insiders were surprised by the departure of Presca and generally viewed the news negatively. One broker, Kepler Cheuvreux, said the unexpected replacement “reduces the visibility” regarding the implementation of the group's turnaround plan. The current business plan calls for an Ebitda margin of 10-11 percent on sales of €1,025-1,100 million in 2018.
Citigroup also expressed concern that the transition could slow down the company's relaunch. Websim expects Borgo to confirm the existing business plan and stressed that the new CEO has a good reputation for developing new markets. Noting the “excellent work” done by Presca in restructuring the group, an influential investment bank, Mediobanca, said that even if Borgo has “strong skills” in exploiting growth opportunities, he still has to build up a positive track record with the financial community.
Geox said its board of directors fully confirmed the plans put forward by the management to increase productivity, simplification and operating efficiencies in order to boost the company's profitability. Geox' statement said the board reserves the right to approve the budget for 2017 during the next board meeting, where the final 2016 results will also be approved and where Borgo will be able to make his contribution. A company spokesman denied a suspicion that the preliminary results for the first nine months of 2016 may have been slightly inflated.