Geox : Gruppo Geox - 2015 Results

IL CDA DI GEOX S

PRESS RELEASE - 2015 RESULTS

GEOX RECORDED A 6.1% GROWTH IN TURNOVER FOR 2015, WHICH RESULTED IN A 45% INCREASE IN EBITDA AND A FIVE FOLD INCREASE IN EBIT TO EURO 24.9 MILLION.

THESE RESULTS ENABLED TO THE COMPANY TO GENERATE NET FREE CASH FLOW OF EURO 47 MILLION.

GEOX BOARD HAS PROPOSED AN ANNUAL DIVIDEND OF EURO 0.06 PER SHARE.

• Sales: Euro 874.3 million (Euro 824.2 million in 2014)

  
  

• EBITDA: Euro 61.8 million, +45% (Euro 42,6 million in 2014)

  
  

• EBIT: Euro 24.9 million (Euro 4.9 million in 2014)

  
  

• Net Result: Euro 10.0 million (Euro -2.9 million in 2014)

  
  

• Positive Net Financial Position: Euro 20.8 million (Euro -13 million as of December 31,2014)

  
  

  Milan, February 25, 2016 - The Board of Directors of Geox S.p.A., one of the leading brands worldwide in the classic and casual footwear market listed on the Milan Stock Exchange (MSE: GEO.MI), approved today the 2015 financial results.

  
  

  Mario Moretti Polegato, Chairman and founder of Geox, commented: "I am satisfied with the results achieved in 2015, with Geox recording a growth in revenues and an increase in profitability. Turnover grew by 6.1% thanks to the excellent performance of the multi-brand channel (+7.2%) and the increase in comparable sales for both directly operated mono-brand stores (+4.2%) and franchised mono-brand stores (+3.9%).

  
  

  Positive business performance and operational efficiency allowed the group to achieve strong cash generation of Euro 47 million, following Euro 39 million of capex, thus closing the year with a sound cash position of Euro 21 million.

  
  

  The fact that these results have been achieved despite challenging macroeconomic conditions is a clear demonstration of the strength of our brand, the distinctive nature of our technical know-how and the fact that our products are popular with consumers, who appreciate their style and comfort. This makes me confident that the strategy being followed, based on continuous innovation, the creation of a flexible supply chain and focus on boosting efficiency across all departments, is undoubtedly on the right track.

  
  

  With reference to the first half of 2016, the multi-brand channel has recorded a solid 10% increase in orders for the Spring/Summer season and directly operated stores are currently boasting an 8% growth in comparable sales.

  
  

  However, macro conditions remain volatile, presenting us with a number of challenges that we must transform into opportunities. It is therefore essential that we pursue our goals with conviction: on the one hand, boosting sales and having the right geographic balance to mitigate the effects of currency volatility; and, on the other hand, ensuring appropriate levels of production efficiency and effective retail management in order to further improve performance. Given these objectives, we have formalized the company's strategy in a newly developed 2016-2018 Strategic Plan, which will address the initiatives we intend to implement to achieve solid and sustainable growth, profitability and cash flows."

  
  

  
  

  THE GROU P' S ECONOMIC PERFORMANCE

  
  

  Sales

  
  

  2015 consolidated net sales increased by 6.1% to Euro 874.3 million. Footwear sales represented 90% of consolidated sales, amounting to Euro 785.0 million, with a 8.8% increase compared to 2014. Apparel sales accounted for 10% of consolidated sales amounting to Euro 102.6 million.

  
  

  (Thousands of Euro)	2015	%	2014	%	Var. %
  Footwear	784,983	89.8%	721,686	87.6%	8.8%
  Apparel	89,321	10.2%	102,557	12.4%	(12.9%)
  Net sales	874,304	100.0%	824,243	100.0%	6.1%

  
  

  
  

  Sales in Italy, the Group's main market, which accounted for 32% of sales (33% in 2014) amounted to Euro 281.1 million showing a 3.1% increase compared with 2014.

  
  

  Sales in Europe, which accounted for 43% of sales increased by 4.6% to Euro 375.6 million, compared with Euro 359.3 million in 2014.

  
  

  North American sales amounted to Euro 62.8 million, showing an increase of 13.1% (+2.8% at constant exchange rates). Sales in Other Countries increased by 13.1% compared to 2014 (+5.8% at constant exchange rates).

  
  

  (Thousands of Euro)	2015	%	2014	%	Var. %
  Italy	281,095	32.2%	272,666	33.1%	3.1%
  Europe (*)	375,647	43.0%	359,273	43.6%	4.6%
  North America	62,795	7.2%	55,512	6.7%	13.1%
  Other countries	154,767	17.7%	136,792	16.6%	13.1%
  Net sales	874,304	100.0%	824,243	100.0%	6.1%
  (*) Europe includes: Austria, Benelux, France, Germany, UK, Iberia, Scandinavia, Switzerland.

  
  

  In 2015, sales of the DOS channel, which represent 43% of Group revenues, grew 9.5% to Euro 378.5 million. The improvement is mainly driven by new openings and by comparable store sales growth recorded on DOS channel (+4.2%).

  
  

  Sales of the franchising channel, which account for 16% of Group revenues, amount to Euro 142.0 million, with a decrease of 4.4%. This trend is due to the effect of closing of shops not in line with the expected profitability standards which has been partially offset by the positive trend in comparable store sales at locations that have been opened for at least 12 months (+3.9%).

  
  

  Multibrand stores representing 41% of Group revenues (40% in 2014) amount to Euro 353.8 million, with an increase of 7.2%, thanks to a good performance in the second half (+8.0%).

  
  

  (Thousands of Euro)	2015	%	2014	%	Var. %
  Multibrand	353,796	40.5%	329,920	40.0%	7.2%
  Franchising	142,021	16.2%	148,575	18.0%	(4.4%)
  DOS*	378,487	43.3%	345,748	42.0%	9.5%
  Geox Shops	520,508	59.5%	494,323	60.0%	5.3%
  Net sales	874,304	100.0%	824,243	100.0%	6.1%
  * Directly Operated Store

  
  

  As of December 31, 2015, the overall number of Geox Shops was 1,161 of which 476 DOS. During 2015, 121 new Geox Shops were opened and 185 have been closed, mainly franchising stores, in line with the rationalization plan of the DOS network.

  
  

  12-31-2015			12-31-2014		2015
  Geox	of which	Geox	of which	Net	Openings	Closings
  Shops	DOS	Shops	DOS	Openings
  Italy	360	131	421	173	(61)	11	(72)
  Europe (*)	348	179	350	167	(2)	22	(24)
  North America	47	47	44	44	3	7	(4)
  Other countries (**)	406	119	410	93	(4)	81	(85)
  Total	1,161	476	1,225	477	(64)	121	(185)

  
  

  (*) Europe includes: Austria, Benelux, France, Germany, UK, Iberia, Scandinavia, Switzerland.

  
  

  (**) Includes Under License Agreement Shops (142 as of December 31 2015, 161 as of December 31 2014). Sales from these shops are not included in the franchising channel.

  
  

  
  

  Cost of sales and Gross Profit

  
  

  Cost of sales, as a percentage of sales, was 48.4% compared to 51.0% of 2014, producing a gross margin of 51.6% (49.0% in 2014).

  
  

  The increase in gross profit is explained by the increased profitability in sales and the steps taken in terms of product mix, channels, prices.

  
  

  Operating expenses and Operating income (EBIT)

  
  

  Selling and distribution expenses as a percentage of sales were 5.6% (5.9% in 2014).

  
  

  General and administrative expenses were equal to Euro 334.3 million, compared with Euro 308.3 million of 2014. General and administrative expenses, as a percentage of sales, were 38.2%.

  
  

  The increase in these costs is mainly due to:

  • the implementation of projects designed to generate greater efficiency on the part of the production and distribution structure, new hires at management level and strengthening of the structures in the business areas that are growing, those in strategic countries and those with significant development potential;

  • costs of opening and running of new directly operated stores (DOS) including the conversion to directly operated stores of stores previously managed by some franchisees.

Advertising and promotions expenses were equal to Euro 42.3 million, in line with 2014.

The operating result (EBIT) is equal to Euro 24.9 million (2.8% on sales) compared with Euro 4.9 million of 2014 (0.6% on sales).

EBITDA

EBITDA was Euro 61.8 million, 7.1% of sales, compared to Euro 42.6 million (5.2% on sales) of 2014.

Income taxes and tax rate

Income taxes were equal to Euro 9.1 million, with a 47.6% tax rate, compared to Euro 1.5 million of 2014

It is to be noted that Italian Law no. 208 dated 28/12/2015 (the so-called '2016 Stability Law') introduced a reduction in the IRES (Italian Corporate Income Tax) rate from 27.5% to 24%, valid from the 2017 tax year onwards. As a result, adjustments were made to deferred tax assets and liabilities relating to 2017 and following tax years. The effect of this tax rate alteration has led the company's tax liability for the year to increase by Euro 1,947 thousand, equal to 10.2%. Without this effect, the tax rate for the year would have been 37.4%.