Geox S.p.A. (0KHH.IL) Earnings Call Transcript & Summary

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Geox First Half 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Luca Amadini, Investor Relations Manager of Geox. Please go ahead, sir.

Good evening, everybody, and thank you for joining our call today. This is Luca Amadini speaking. Let me introduce you to today's call speakers, the Geox Group CEO, Mr. Francesco Di Giovanni; and the CFO, Mr. Andrea Maldi. Mr. Di Giovanni will start by providing you a brief introduction, then Andrea will dive deeper into the financial results and our first half 2025. Following that, Mr. Di Giovanni and Mr. Maldi will be happy to take your questions. I would like to remind you that the presentation may contain statements that do not reflect reported financial results or other historical information. Any forward-looking statements are based on the group current expectations and projections concerning future events. Let me also underline that given the nature of the Geox business, interim results can be influenced by seasonal effects and therefore, cannot be taken as a proxy for full year trends or results. Let me now hand over to our CEO, Mr. Francesco Di Giovanni.

Hello. Good evening. My name is Francesco Di Giovanni. As you may know, I've been appointed just recently. As a matter of fact, I believe, no more than a week ago. That by itself, it might trigger some curiosity, and I'll be happy to answer any questions that you might have, I would say, at the end of the conversation as was anticipated by Luca. Just a few words as an introduction, I've been around the Geox offices [indiscernible] for the last 6 months now. I was involved immediately after -- by the company immediately after the year-end 2024 that, as you may remember, was marked by a number of important events, including the agreement that had been reached with the banks. And the idea of my involvement at that time was to have a proper set of second eyes on the likelihood of the performance of the business and of the performance of the business plan that had been concluded. What has happened recently is that there was a sort of say, discussion on the speed and the focus to deliver the business plan or to deliver the results of the business plan, so to say it better, which led eventually to the decision by the Board of Directors and the shareholders to appoint me to improve the chances of driving the accelerated actions that are needed in order to meet the quite challenging market conditions under which the company as much as all its competitors are actually facing at the moment. I guess I can anticipate that I will turn the floor to Andrea Maldi in a second, but I can tell you that the results of the first 6 months won't disappoint you, will not disappoint you. There are a number of important initiatives that have been taken by the company over the last few months, which are already bearing fruit. We would expect a number of other actions that have been discussed over the last few months to be implemented over the coming months. I will not speculate on what that translates into -- potentially translates into numbers and results, figures and so on. But I guess we will have opportunities in the future to discuss further what the expectations of the company are for the future. With that in mind, I leave the floor to Andrea Maldi. Happy to take any questions at the end.

Thank you, Francesco, and good afternoon, everybody. I will try to deep dive with you on the results of the first half of the financial year 2025 and to give you the main highlights of this semester. Starting from the sales, it's worth to notice that we have reached a value of EUR 305 million as of June '25, which compared to the same period of last year, where we reached a value of EUR 320 million, it means that we have a gap of EUR 15 million. Worth to notice that this EUR 15 million gap is mainly explained by the shutdown of our operation in U.S. and China, which has been closed as of December '24. Therefore, the comparison takes us to the point that we just have a slight decrease in sales compared to the same period of last year in the region of EUR 6 million. And it's also worth to notice that the results of the first half of the year in terms of sales is quite close to our budget expectation that we have set for the period at EUR 312 million. Despite the drop in sales of EUR 15 million, which means overall an EUR 8 million of margin less compared to the same period of last year, we have been able, thanks to a series of action in cost control and thanks to the support also of Francesco that was acting at the time as a consultant in the company, we've been able to drive an improvement of our profitability and to recover about EUR 14 million of cost compared to the same period of June 2024. That said, it means that we are able to close our semester with an EBIT adjusted in the positive path of about EUR 600,000, let's say, EUR 1 million, just to run the number compared to the loss that we have incurred in the same period of last year, which was set in the region of minus EUR 5 million. So I would say, a dramatically significant improvement in terms of profitability of the company over the first 6 months. If we -- and significantly better than our expectation for the same period that are based on the assumption that are noted in our budget, which, as you might remember, it was basically aligned to the first year of the financial and industrial business plan that has been presented to the stock exchange and to the market in March. If we look at the net results, clearly, we are positive benefiting of this recovery of profitability. And at the same time, we are having a favorable exchange rate with the Russian ruble that is taking us to register a loss for the first half of 2025 in the region of the EUR 5 million compared to the EUR 15 million negative that we have incurred last year in the same period. So that are the main highlights on the financial. Therefore, I would like to again stress the point of net sales overall aligned. We are speaking about minus 4.7%. And if we exclude the perimeter effect of U.S.A. and China, we're just taking the number down to 1.9% compared to the last year, and we are benefiting of good profitability in terms of recoverability of profitability, which is mainly coming from cost control. If we move down a little bit more into the footprint, in terms of shops, our number is set for the June 2025 in the range of 590 shops, including direct operated stores and the franchisee, which is lower than the same period last year where the number was at 630. The decline is mainly in the franchisee department and not in the direct operating shop. The other good news is on the like-for-like performance of our workshops, which is basically doing a positive -- slightly positive 0.3% compared to last year. So I would say flat positive. And we are also benefiting of the strong results of our website, direct operated website, which is performing 8.6% better than 2024. At the same time, we are instead incurring a significant decrease of performance on the line of the marketplace, which is down 14% -- 17%, I apologize compared to the perimeter of the 2024. The other, I think, interesting note for the market is that our financial position for the first semester, the so-called PFN on the bank, bank debt is set at EUR 100 million which is lower compared to the period of 2024, where we registered a PFN debt of about EUR 112 million. Basically, we are worth noting that we are benefiting in our first 6 months of the capital increase, which has been concluded in the range of EUR 30 million just a few weeks ago before the end of June. I think that if you look at the sales in terms of -- by channel, and we try to drill down the evolution of the different channels, and we compare the two results of the first 6 months, we are basically having an wholesale and brick-and-mortar, which is down EUR 5 million, which is quite a good result. And we have retail business and e-commerce, which are basically flat in terms of results compared to the same period of last year. I think that these are the main financial highlights. I think that we can have a quick look also at the net working capital. We know that we are having at June a net working capital of about EUR 140 million, which is a little bit higher than the one of EUR 126 million as of June '24 and higher than the one at the end of 2024, where we registered EUR 105 million. I think basically, most of the increase is coming from the payable side, where we have improved our payment terms condition. At the same time, we have also reduced our base cost. So the 2 effects combined are clearly increasing the net working capital. Good story on the inventory, which is in setting the value in the range of EUR 245 million with an improvement on the certification and of the season included in inventory. So I think that having said that the results of the first semester are quite good, quite in line with our expectation. At the same time, we are looking forward at what's going on for the rest of the year. And we are still foreseeing some significant important issue that might come in terms of sales. Therefore, we want to remain prudent. We know that we have taken the right path in terms of profitability. At the same time, we can conclude that looking at the results that we confirm to the market, we are expecting a slight decrease in the range of the mid-single digit compared to our last communication, while we are confirming fully the profitability expected in terms of first margin. I'm happy to take questions on specific, if any.

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

The first one is for Mr. Di Giovanni. Can you tell us what areas will be your focus immediately? And what potential deviations from the current plan may be introduced? And just a confirmation, is the '25-'29 business plan still valid? My second question is on the spring/summer collection for '26. How was the feedback received in May? And what are your expectations regarding the order intake, a flat or a low single-digit decline compared to last year, maybe a realistic scenario? The third question is on the weakness in the online wholesale in the second quarter. Can you elaborate on the reasons and whether there were temporary factors that contributed to the decline? Or are difficulties expected to persist in coming months? And finally, can you give us the expectation of net debt by year-end?