Geox faced a complex environment in the first nine months of the year. While the retail sector has undergone digitalization in response to changing consumer behavior, geopolitical tensions like Brexit have taken a toll on the company's business performance. For these reasons, and in view of the implementation of various projects, the management believes that 2019 will be a year of transition for the company.

It expects a low- to mid-single-digit decline in total sales for this year. The gross margin should remain stable, but the operating margin (Ebit) will be slightly negative because of additional logistics costs, the operation of a greater number of directly-operated stores, higher advertising expenses and the implementation of the company new strategic business plan for 2019/21.

Besides new investments in IT to support a better omni-channel operating model, the plan calls for the introduction of new window displays in the stores, new visuals inside the stores and new buying and product assortment strategies. The company pointed out that it still has a solid financial position.

Geox' revenues fell by 4.3 percent in the first nine months of the year to €643.4 million, mainly because of a rationalization in the wholesale and franchising channels. They were down by 4.9 percent in local currencies. Evidently, the situation deteriorated in the third quarter as the figures given for the first half of this year showed declines of 3.5 percent in euros and 3.6 percent in constant currencies.

Year-on-year, the wholesale channel saw a decrease of 5.0 percent in net sales to €315.7 million in the first nine months, with drop of 5.6 percent in constant currencies. The management blamed the shutdown of many small independent retailers, extreme competition from online players and the consolidation of the sector among the larger players, particularly in Germany, where the Karstadt department store chain has merged with Galeria Kaufhof.

The company managed to improve the sales results in the wholesale channel after collecting the initial orders through better reorders and through higher sales of left-over stock from previous seasons.

Net sales for the store franchising channel, which accounted for 10.5 percent of the company's revenues, went down by 16.2 percent to €67.6 million, and they were off by 16.0 percent in local currencies. The channel's performance was affected especially by a reduction of about 10 percent in total number of franchised stores and by their negative performance on a comparable-store basis.

The company's directly operated stores (DOS), which represented 40.4 percent of Geox' turnover, recorded a positive trend, with sales rising by 0.2 percent to €260.1 million, as a 3 percent decline in same-store sales was more than offset by the expansion of the retail network. A positive performance of the autumn/winter 2019 collection was insufficient to offset the weak performance of Geox' spring/summer line.

The total number of Geox shops declined to 975 units by Sept. 30, a decrease of 40 doors from last Dec. 31, after 51 openings and 91 shutdowns, but the number of DOS increased by five units to 449. The company and its franchisees opened 43 new Geox shops in Russia and Asia-Pacific, seven in Europe and one in Italy. They closed 16 stores in Italy, 24 in the rest of Europe, one in North America and 50 in Russia and Asia-Pacific.

On the other hand, sales went up by 31 percent in Geox' e-commerce channel. The company insourced its e-commerce in Europe back in July 2018 and did the same for the U.S. and Canada a year later, creating an IT platform and leveraging its distribution capacity.

Footwear sales went down by 4.5 percent to €580 million, representing 90.2 percent of the total turnover, while apparel grew by 2.8 percent to €63 million. Apparel sold through the DOS grew by 15 percent, thanks to the new collections' positive performance.

Regionally, Geox' sales went down by 7.4 percent in Italy, hit by the rationalization of the wholesale and franchising networks, but direct online sales in the country grew by 35 percent. The rationalization in the wholesale and franchising channels caused a sales decline of 4.9 percent to €276.5 million in the rest of Europe. On a comparable basis, sales were substantially stable in the directly operated stores in the region, supported by a 38 percent increase in the e-commerce.

The top line fell by 8.7 percent in the U.S. because of a negative performance in the wholesale channel. Wholesale revenues were positive in Canada but failed to compensate for the rationalization of the wholesale channel in the U.S. The online channel delivered double-digit growth both in the U.S. and Canada.

In the rest of the world, sales grew by 2.2 percent to €148.7 million. Eastern Europe and Russia saw double-digit growth in same-store sales and in the wholesale segment. The top line was in the negative high-single-digit range in the Asia-Pacific region, as a result of the protests in Hong Kong and the reorganization of the direct e-commerce channel in China.