Geox’s orders for its fall/winter collections have collapsed by 13 percent compared with a year earlier, with footwear down by 16 percent and apparel up by 6 percent. The news sent the company’s share price down by nearly 9 percent on the day of the announcement.
Geox’s management said, nevertheless, that its target is to close 2009 with sales in line with the €892.5 million booked in 2008. It also confirmed its guidance of opening about 150 single-brand stores this year, compared with 216 in 2008.
Orders from Italy fell by 10 percent, while orders from the rest of Europe dropped by 15 percent, While North American orders rose by 7 percent, those from the rest of the world plummeted by 24 percent.
Geox immediately engaged in damage control, explaining that the figure concerned only accepted orders and that some orders from South American, Russian and Ukrainian clients were still awaiting approval because they had been sent without financial guarantees. It added that many orders had been lodged by clients with whom it has an established working relationship and that it expects the situation to be solved.
In the first quarter of the year, Geox opened 22 new stores and closed nine, bringing the total number of single-brand shops to 953 at the end of March compared with 940 at the end of 2008. The number of directly operated stores increased to 220 from 218. During the month of April, the company managed to open another 26 Geox stores.
Apart from the order figures, Geox’s quarterly results were slightly above expectations of financial analysts. The company posted a turnover of €384.2 million, up by 5.3 percent at actual currency rates and up by 4.0 percent at constant rates, compared with market expectations of nearly €379 million.
Shoe sales rose by 3.0 percent, and increased by 2.0 percent at constant currency rates, to €348.1 million, while apparel revenues jumped by 32.9 percent to €36.1 million.
By region, turnover rose by 9.4 percent to €138.2 million in Italy, fell by 2.7 percent to €184.9 million in the rest of Europe, jumped by 22.6 percent to €16.8 million in North America and increased by 26.4 percent to €44.2 million in the rest of the world. At constant foreign exchange rates, revenues rose by 18 percent both in North America and the rest of the world.
By channel, sales were up by 1.3 percent to €285.5 million at multi-brand shops, by 2.6 percent to €60.4 million at franchisees and by 58.2 percent to €38.3 million at directly operated stores (DOS).
Comparable sales in the group's DOS rose by 9 percent, three times the pace seen for the whole of 2008. The company said that it carried out promotional sales at its DOS in January and February.
The group’s gross profit margin slipped to 51.7 percent of sales from 53.2 percent due to an increase in production costs. General and administrative costs jumped to €56.0 million from €43.0 million a year earlier due to the opening and management of new DOS, while advertising and promotion costs dropped to €8.7 million from €15.3 million partly thanks to a significant fall in advertising prices.
Gross operating profit (Ebitda) slipped to €124.9 million from €125.1 million, operating profit (Ebit) shrank to €116.5 million from €119.4 million and net profit was €72.4 million compared with €80.1 million.
Geox halved capital expenditures to €11.5 million in the first quarter from €22.6 million a year earlier, thus narrowing its negative free cash flow to €22.4 million from €51.2 million. The group’s cash pile fell to €22.6 million at the end of March from €58.2 million at the end of 2008.
The strong results obtained by Geox in the last year have led Mediobanca to single it out as the most dynamic Italian company with more than 499 employees during the 2004-07 period, which saw a 126.5 percent increase in its revenues to €770 million. The bank also looked at other parameters such as profit margins, corporate governance, internal organization, innovation and foreign market penetration.