Geox S.p.A. said its first-half results showed a significant improvement compared to H1 2022, with a 3.8 percent positive trend in sales, combined with a 370 basis point improvement in gross margins and the resulting positive operating result (EBIT) of €3.6 million compared to an operating loss of approximately €11 million in the first half of 2022.

Consolidated sales for the first half of 2023 grew to €353.6 million, up 3.8 percent (+4.1 percent currency-neutral) compared to H1 2022, which the company attributed to the “good performance” of the wholesale channel (+10.4 percent). The performance in the first half of the year was negatively affected by a month of May that proved weak due to unusual weather conditions that “blocked in-season restocking by the Wholesale and Franchising channels and slowed down sales in direct shops.” The company said unusually rainy weather delayed purchases of sandals and other rope products, typically summer products.

“First half of 2023 results show growth primarily driven by a solid Wholesale order portfolio related to the Spring/Summer collection,” company Chairman Mario Moretti Polegato explained. “The good performance was partially offset by a slowdown observed in May, which was affected by bad and unusual weather conditions having a negative impact on sales in our stores and cooled in-season reorders by wholesale channel in our key markets.”

Wholesale sales increased 10.4 percent in euro terms to €185.8 million (+10.6 percent currency-neutral) compared to €168.3 million in June 2022. Wholesale accounted for 52.5 percent of Group sales in H1 2023 versus 49.4 percent in H1 2022. The trend reportedly saw an upside from a positive (+17 percent approx.) order collection for the SS23. Geox said that strong transport and supply chain improvements made it possible to anticipate part of the shipments for this season as early as the end of 2022.

Franchising channel sales, equal to 7.8 percent of Group sales, declined 4.6 percent in euro terms to €27.6 million. The slightly positive comp store sales performance (+0.7 percent) in the channel was said to be more than offset by the postponement effect of previous seasons and what the company called “the negative perimeter effect.” The total number of franchised shops decreased from 301 in June 2022 to 288 in June 2023.

Directly-Operated Stores (DOS) sales, which account for 39.7 percent of Group sales, declined 2.2 percent in euro terms (-1.7 percent currency-neutral) to €140.2 million in the first half, compared to €143.4 million in H1 2022. Comp-store sales (LFL) grew 2.9 percent for the period. Geox said physical stores reported comparable sales growth of about 4.7 percent compared to 5.5 percent to date, while the online channel showed a decline of 4.9 percent in H1 compared to a decline of 4.8 percent to date. However, the company said the growth of its direct online channel remained high (about +47.8 percent to date) compared to 2019.

Directly-Operated stores decreased from 337 in June 2022 to 277 in June 2023 and 315 at the end of 2022. Geox said the reduction substantially defined the overall change in the channel’s revenue, which, despite growing LFL sales, finished the reporting period with a 2.2 percent decline.

“Comparable sales from our network, DOS and Franchising increased, both compared to 2022 and 2019, thanks to the strong rebound in June and the regained performance of the online channel in the second quarter,” shared Polegato. “This growth, however, did not fully compensate for the effect resulting from the rationalization of the network carried out in the last 12 months and now nearing completion. July picked up the pace, with a strong performance in all markets during the sales period, showing an 8 percent growth compared to 2022 and 13 percent compared to 2019, along with a significant reduction in discounts.”

Sales by Region
Italy region sales increased 6.6 percent in euro terms to €98.8 million compared to €92.6 million in H1 2022. The region represented 27.9 percent of the Group’s sales this year compared to 27.2 percent in H1 2022, led by the Wholesale channel (+25.8 percent), which accounts for approximately 36 percent of market revenues, a performance favored by a 23 percent increase in the SS23 order book. The Franchising channel was down 12.5 percent in the region, affected by both the perimeter and timing effects of shipments at the turn of the year. The Direct shop’s channel inched up 0.4 percent in the half, thanks to a slightly positive trend in comparable sales, which offset the negative perimeter effect of closures (net negative seven shops in the half year).

Europe region sales decreased 5.6 percent in euro terms to €149 million, compared to €157.8 million in the first half of 2022. Year-to-date sales represented 42.1 percent of Group sales compared to 46.3 percent in the first half of 2022. The decline in the region was said to be mainly due to the performance of the Wholesale channel (-4.3 percent), which accounted for approximately 56 percent of market revenues impacted by lower in-season reorders compared to the first half of 2022. As in Italy, the perimeter and shipment timing effect negatively impacted the Franchising channel (-19.5 percent). Comp-store sales rose 3.3 percent. Directly-Operated Stores in Europe reported a 5.3 percent decline which Geox said was due to a 10.8 percent drop in the online channel and the perimeter reduction. Comp-store sales growth of 5.8 percent did not offset these effects.

North America reported sales grew 0.4 percent in euro terms (+3.3 percent currency-neutral) to €13.6 million. The Wholesale channel was up 21.2 percent and accounted for approximately 46 percent of market revenues, leading the growth. Directly-Operated stores declined 12.3 percent in the period, reportedly affected by the perimeter reduction not offset by the 8.4 percent comp store sales increase in the physical channel and online growth of 19.6 percent.

Other Countries reported sales growth of 20.4 percent (+20.6 percent currency-neutral) compared to H1 2022. In the Asia Pacific region, sales increased by 50.1 percent, mainly driven by 73.1 percent growth in the Wholesale channel.

Sales by Product Category
Footwear accounted for approximately 91.8 percent of consolidated sales in the first half, growing 5.4 percent to €324.8 million, up 5.4 percent in Europe terms (+5.6 percent currency-neutral) compared to H1 2022. Apparel accounted for about 8.2 percent of consolidated sales, amounting to €28.8 million (-11.1 percent in euro terms and -11.0 percent currency-neutral). Sales were said to be adversely affected by the lack of product following the fire in September last year, which was reimbursed by the insurance company.

Mono-Brand Store Network | Geox Shops
The total number of Geox Shops was 678 on June 30, of which 277 were Directly-Operated stores. During the first half of 2023, the company opened 18 new Geox Shops and closed 57, in line with the planned optimization of shops in the more mature markets and an expansion in countries where the Group’s presence is still limited but developing positively.

Gross Margin
Consolidated gross margin was 51 percent of sales in the first half, compared to 47.3 percent in H1 2022. The margin improvement was mainly due to the pre-announced stabilization of supply chain conditions, mainly an easing of pressure on raw material and transportation costs compared to the first half of 2022. The company also noted the reduction in average discounts in direct stores, which were down approximately 1.9 percent compared to the first half of 2022.

Operating Expenses
Total operating expenses (general and administrative expenses, selling and distribution costs and advertising) in the first half amounted to €177.0 million (accounting for 50 percent of sales) compared to €172 million in the first half of 2022 (accounting for 50.6 percent of sales).

  • Selling and distribution costs amounted to €18.6 million versus €18.5 million in the first half of 2022, accounting for 5.3 percent of sales (5.4 percent of the incidence in the first half of 2022);
  • General and administrative expenses (net of other revenues) amounted to €140.9 million with an incidence of 39.9 percent compared to €138.4 million in the first half of 2022 (40.7 percent incidence in the first half of 2022);
  • Advertising and promotion costs amounted to €17.2 million with an incidence of 4.9 percent of sales, up from €15.2 million in the corresponding period of the previous year (4.5 percent incidence in the first half of 2022). The increase is substantially related to the increased marketing initiatives undertaken in the period in line with the Strategic Plan.

EBITDA and EBIT
EBITDA increased to €40.2 million, or 11.4 percent of sales, compared to €25.5 million, or 7.5 percent of sales, in the first half of 2022. The EBITDA before IFRS 16 amounts to €13.9 million in H1, compared to negative €0.2 million in the first half of 2022. EBIT improved back to a positive figure at €3.6 million compared to a negative €11.0 million EBIT in the first half of 2022).

Full Year Outlook
Sales are forecasted to be slightly positive in the second half of the year. Total sales are expected to grow around 4 percent to 6 percent compared to 2022. Gross margin improvement is expected, thanks to strong performance of discounts and transportation costs, to be about +130/+150 bps in the second half of the year and then by about +220/+240 bps over the full year.

The annual forecasts are also based on the following future performance assumptions:

  1. Consumer behavior allows the continuation of the careful discount management implemented so far in direct stores;
  2. No changes in consumer habits compared to current ones;
  3. Improving supply chain reliability trend will continue and reducing transportation costs compared with the past fiscal year;
  4. The complex geo-political situation in the markets relevant to the Group does not lead to significant deterioration from what was observed in the first half of 2023 and/or impacts of further significant devaluation of their currencies against the euro.

The company stressed that these performance forecasts are subject to significant uncertainties regarding the geopolitical and cost inflation environment.

Photo courtesy Geox