Geox S.p.A. (GEO) Earnings Call Transcript & Summary

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Geox First Half 2026 Financial Results Conference Call. [Operator Instructions] Let me introduce you to today's call speakers, the Geox Group CEO, Mr. Francesco Di Giovanni; and the CFO, Mr. Andrea Maldi. Geox would like to remind that any forward-looking statements disclosed during this call involve risks, uncertainties and other factors that may cause actual results to differ significantly from what is expressed or implies. Many of these factors are behind the group's control. At this time, I would like to turn the conference over to Mr. Francesco Di Giovanni, CEO of Geox. Please go ahead, sir.

Thank you very much indeed. Well, good evening. Thank you all for joining us today. We are going to comment on our first half 2026 financial results. I must say that Geox, as much as many other competitors, have faced a very challenging and sharply contracting market in this first half of 2026, which was already impacted by extremely fierce competition, which we all faced and other extraordinary events, both natural events such as very high temperature for such a long period of time. In addition to works that have created uncertainty in many segments of the population and in particular, to those who are the main component of our customers. How did we react to all of that, to all of this? We -- as you may probably remember, we started last year with a significant revision of our cost structure in order to equip the company to face a challenging situation. We were coming from a very challenging situation. The result of that strategy has translated in an adjusted EBITDA of approximately EUR 13 million for the period compared to EUR 9 million in the same period of last year, which is a percentage, a very significant improvement. The adjusted EBIT for the period is approximately EUR 6 million compared to EUR 1 million in the previous -- in the same period of the previous year. The bank debt has been reduced further to EUR 95 million compared to more than EUR 100 million the same period of last year -- at the end of the same period of last year. And working capital is representing 21.9%, 22% over the last 12 months sales and is perfectly in line with seasonal dynamics. Now all the efficiency measures allowed to generate a saving in operating cost of approximately EUR 19.1 million in the first half of the current fiscal year. All these major rationalization measures implemented in product processes, and in order to facilitate time to market to our products, the result of this has not really come to full fruition yet, but it will come into full fruition during the current fiscal year. We have changed timing and method in procurement and sourcing strategies that have generated already a very significant benefit in terms of cost. But moreover, allow us to project a reduced bank debt by the end of the year in the range of approximately -- to get to approximately EUR 40 million to EUR 45 million at the end of 2026. And this represents a very significant improvement, considering that the debt stood at EUR 93 million at the end of 2025. Needless to say that to contribute to this reduction, there is also the contribution by the capital increase that is part of the financial maneuver for approximately EUR 30 million. But even by removing the EUR 30 million, the improvement is really significant, really dramatic. Now we reported sales in the first half 2026 with a decline of 8.8% on a comparable basis. What it means on a comparable basis? Some of it -- some of this drop is market-driven. Some of this drop is driven by our own decisions, which are related to reducing participation or eliminating participation to sales channels that do not generate margins, clients that have conditions that are not acceptable under the current market circumstances. And in addition to that, some additional credit control, which is very relevant as market deteriorates for everybody, including, of course, ourselves. The -- on a comparable basis, the same period is 11.4% drop, and this is across all the channels, wholesale, retail and even unfortunately, the web. The second half of 2025 was further affected by a very delicate situation in international markets as we all know. Now this -- in this very challenging environment, we have kept investing. We have changed a number of things that are related to the -- our marketing spending. We are spending far less in producing our commercial -- I'm sorry, I'm missing the English words, ads. We are spending more in terms of communicating. We are investing a lot in our technological products. We have recently introduced and was very successful a new sandal that is called ClimaSandal, and we distributed approximately 20,000 pairs in our top shops around the world, and it was sold out in a matter of weeks. This is a new technology, which is called the ventilated cushioning system, which allows an active ventilation of the feet while walking, we generated, thanks to the natural walking motion. Now this comfort and lightness makes this product unique compared to all other products offered in the market. In addition to that, we should consider that 2026, we have been -- we are still selling the collections that do not benefit yet of the investments we have made on the new designer who has been helping us the new collection that will hit first the market in the first half of 2027 is currently sold to our wholesale channels, and we are recording a quite significant interesting result in terms of success of this new collection. Now this is all to say that we have not backed up despite the very bad market. We have -- we keep investing in our product portfolio. We keep investing on our technology. We keep investing in communication. As a matter of fact, we invest more than before in communication, considering that we have reduced by using artificial intelligence, we have reduced dramatically the cost of production, and therefore, we have increased very dramatically the cost of distribution. I guess this is it for the moment. Happy to answer any questions. I will pass the floor to Andrea to get to Andrea Maldi to get deeper into the analysis of our financial results. Thank you very much for your listen.

Thank you, Francesco, and good afternoon, everybody. I will try to deep dive you through the numbers of the first half of 2026. Let me start from the Page #7 of the presentation that has been distributed, which is starting from the commenting on sales. As you can see, the sales are setting at a level of EUR 270 million in the first six months of 2026. This means clearly registering a decline compared to the first half of the previous year in the range of EUR 35 million. Out of the EUR 35 million, more than EUR 8 million are coming from a reduction in perimeter effect. Perimeter effect, which means a reduction mainly of physical shops or closing of platform as we will see later during the presentation that we will -- we are considering that we did consider not profitable at the time. The gross margin on the opposite is giving us positive signals because it's moving from the 52.2% of the first year to the 51.2% of the first year to the 52.6% of first half of 2026. And this is mainly driven by improvement in the way we manage our operation and the purchase of our products. And thanks to the mix of channel, which is most favorable when clearly the D2C channel is improving in terms of weight compared to the total sales. The last comment, which is clearly very important is about the EBIT, which is moving to the level of EUR 5.6 million positive compared to the EUR 500,000 positive of the same period of 2025. This is another important positive result of the semester, which is basically result in the story in which despite the decline of sales, our profitability is strongly increasing mainly to the efficiency that we are driving in the operation. Just to further explain what I was mentioning so far, if we move to Page 8, we can see the results, a bridge on the net results. And it's clearly coming out from looking at the chart that the results from operation, mainly -- so focusing on the attention of what we are driving in terms of operation, is showing a decline on gross margin of EUR 14 million, which is the result of the decline on sales of the EUR 35 million, but this is completely offset by an improvement on cost, OpEx in the range of EUR 20 million, which is basically saying that at the end, the performance from operation is improving compared to last year for about EUR 5 million. This is clearly one of the positive elements of the first six months of 2026. The company is strongly focused on improving operation and driving efficiency, while at the same time, cleaning the marketing and trying to position the product to, in a way, softer the decline of the market in terms of sales. If you look at the sales by channel, and we move to Page 9, I think that is -- we need to comment on the fact that the wholesale market is declining from EUR 100 million to EUR 88 million. No big surprise in the first half of 2026. This was pretty much expected because this is mainly driven by the order campaign that we have registered the year before when we sold -- when we conclude our campaign with our wholesaler distributor. The -- instead, what is a bit disappointing in our performance in the first half of 2026 is the decline on the retail side, which is down 8.5% compared to the previous year -- the same period in the previous year. It's worth to say that out of the -- sorry, EUR 11 million decline, EUR 4 million are driven by perimeter effect, so reduction of shops which were not profitable. And the negative performance, so the performance which is directly linked to our operation is amounting to EUR 7 million, which is clearly mainly impacted by the decline in the store traffic. The decline -- physical decline in the store traffic and let me say, in our shop is something that all the retail -- the entire retail market is experiencing. This is mainly clearly part of this decline is surely due to the economic -- macroeconomic and geopolitical condition, which has clearly impacting the capability of consumers to spend, especially on goods that are not considered primary goods or -- if we look at the sales by -- on the digital channel, I think that it's worth to comment the double speed. The positive one is the one related to our dot-com, which is still growing up with the like-for-like performance in the range of 10%. And despite we are increasing over the period the discount that we applied on the website. And if we look at the wholesale platform, the wholesale business is that is mainly decreasing significantly in the range of EUR 8.6 million, which is clearly coming mainly from some cleaning of the market, order reduction on the Russian area and on other important key customer. If we would like to move directly on the financial element of the performance, which is Page 16. As we can see, we are managing an operating working capital as of June 26 of about 21.9%, which is improving from the same, let's say, from December 2025, which was setting at 22.3% and in line more or less with the same period in June 2025. Worth to say that the improvement in the operating working capital is mainly driven by efficiency in inventory. Inventory is improving significantly in terms of aging and quality of the stock as well as in terms of quantity. We are reworking with new approach on the way we purchase, and we are working with better sell-through and better efficiency, which means clearly a better management of our stock and a better management of our cash flow. The results are pretty evident because our bank debt as of June 26 amounted to EUR 95 million, which is EUR 5 million lower than the one that we had in the same period in June 2025. It's worth to say that clearly, despite the reduction from June 2025 to June 2026 of the sales and the reduction of sales of EUR 45 million in the last semester, we have been able to prevent any kind of cash erosion because our cash is resulting in an improvement compared to June 2025 of about EUR 5 million, as I already mentioned. If we try to forecast and to have a look of what will be our full year 2026, basically, we can see that we are still seeing a decline on sale compared to the full year 2025. We will be in the area of the high single digit for about, let's say, estimate in the range of about EUR 550 million sales at the end of the year with an EBITDA adjusted still in the range of the EUR 33-plus million, which means that we are still working well in terms of recovering profitability, and we are confirming the estimates for the EBITDA remain unchanged in the area of the 2% to 3%. The dramatic improvement is coming on the financial position. We are expecting to close the year in the range of the EUR 40 million, EUR 45 million, which means that the new approach on managing working capital and the cash that is produced from operations despite the decline on sale is strongly positive. I think that the last point that I would like to comment is the fact that we will be -- we are still working deeply on the finalizing our review of the business plan, mainly an adjustment and a communication related to the year '26, '27, '28 and '29 we are expecting, and we will be ready to make further communication on this point probably in early September. Thanks, and we are really open to get questions.

[Operator Instructions] The first question is from Oriana Cardani of Intesa Sanpaolo.

The first one is on the evolution of the gross margin. Do you see further room for expansion in the second half of the year? The second question is on the one-off cost. Can you provide us with an estimate of the one-off budgeted for this year? And third question is on current trade. Can you give comment on July trend? And have you got any first preliminary feedbacks on the spring/summer collection by customers?