Geox S p A : Preliminary Results For 2020

PRESS RELEASE - PRELIMINARY RESULTS FOR 2020

THE BOARD OF DIRECTORS OF GEOX S.P.A. HAS:

1. EXAMINED THE GROUP'S PRELIMINARY SALES1 FIGURES AND NET FINANCIAL POSITION AT 31 DECEMBER 2020:

• SALES EQUAL TO EURO 534.9 MILLION (-33.6% AT CURRENT FOREX,
  -33.0% AT CONSTANT FOREX), DUE TO THE TEMPORARY CLOSURES
  RESULTING FROM THE PANDEMIC AND THE STEPS TAKEN BY THE GROUP TO RATIONALISE THE NETWORK.
• RUSSIA AND CHINA SHOWED SIGNS OF RECOVERY IN THE FOURTH QUARTER, WITH POSITIVE LIKE-FOR-LIKE SALES PERFORMANCE.
• THE DIRECT E-COMMERCE CHANNEL CONTINUES TO RECORD SIGNIFICANT GROWTH: +41% (+44% IN THE FOURTH QUARTER OF THE YEAR).
• THE NET FINANCIAL POSITION AT 31 DECEMBER 2020 (BEFORE IFRS

16) STOOD AT EURO -99.8 MILLION (EURO +6.5 MILLION AT 31

DECEMBER 2019).

2. APPROVED A STRATEGIC REDEFINITION OF THE GROUP'S DIRECT DISTRIBUTION NETWORK, AIMED AT PERFECTLY INTEGRATING PHYSICAL AND DIGITAL CHANNELS TO ENHANCE CUSTOMERS' IN- STORE EXPERIENCE AND BOOST PROFITABILITY:

 THE PHYSICAL STORE NETWORK WILL UNDERGO A RATIONALISATION PROCESS BASED ON GEOGRAPHICAL AREA, WITH THE CLOSURE OF AROUND 110 STORES OVER THREE YEARS. THESE CLOSURES WILL INVOLVE SMALLER AND LESS PROFITABLE STORES THAT ARE AT THE END OF THEIR LIFE CYCLE, AS WELL AS A NUMBER OF STORES WHERE THE LEVEL OF RENT IS NO LONGER DEEMED TO BE IN LINE WITH THE CURRENT ECONOMIC CONTEXT.

 GEOX WILL FURTHER BOOST ITS DIGITAL PRESENCE BY OPENING AN E-COMMERCE WEBSITE IN RUSSIA, BY ENTERING THE MARKETPLACES OF LEADING PLAYERS IN EUROPE AND NORTH AMERICA IN A STRUCTURED WAY AND BY STRENGTHENING ITS POSITION ON DIGITAL PLATFORMS IN CHINA.

1 The figures presented in this press release have not been audited.

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Biadene di Montebelluna, 29 January 2021 - Geox S.p.A., a leading brand in classic and casual footwear, listed on the Milan Stock Exchange (GEO.MI), today examined its preliminary sales figures and net financial position at 31 December 2020.

The Company commented: "Performance in 2020 was severely affected by the COVID-19 pandemic; in addition to serious health and social repercussions, this crisis has also led to a significant reduction in people's mobility, substantially wiping out tourism, as well as ongoing measures to temporarily suspend non-essential businesses.

Last year had got off to a positive start. However, sales performance went on to be seriously affected by the lockdown measures introduced by various countries around the world in an attempt to contain the spread of the virus; these measures led to the temporary closure of stores, especially in the second quarter (when, on average, around 50% of Geox stores remained closed) and in the fourth quarter (when, on average, over 20% of Geox stores were closed).

During the third quarter, on the other hand, stores around the world had gradually returned to being fully operational and we recorded a continuous improvement in performance, which culminated in August with the positive sales figures generated thanks to the summer sales and back-to-school collections.

The direct e-commerce channel remained fully operational throughout the year, recording constant, solid growth in each quarter; at the end of the year, this channel reported a performance of over +40%. As well as allowing us to at least partly absorb the drop in turnover caused by the closure of our physical stores, this result is also further raising our awareness and confidence that we need to continue defining an omnichannel and customer-centric business model.

Building on the steps already taken and its careful cost management to date, the Group is now in the process of completing a significant review of its distribution, organisational and operational structure, ensuring its products, services and customer experience reflect the ongoing changes in consumer behaviour while fully meeting shoppers' needs at each point of contact.

These measures will be accompanied by further initiatives (some of which have already been implemented, while others are still being analysed) to streamline the company's general cost structure, making it more flexible with respect to business performance; these initiatives will also free up the necessary resources to fund other strategic projects for the Group, with the aim of revamping the brand's image through new marketing campaigns and improving the sales mix using innovative merchandising tools.

Conditions are still extremely difficult, and our priority remains to protect our employees and our customers; however, we are starting to see the first important indicators of results in terms of both business performance and quality, adding to the excellent growth recorded by the e-commerce channel: (i) Russia and China recorded positive like-for-like sales performance in the fourth quarter; (ii) the children's collection has generated good sales performance in both our e-commerce channel and via wholesale clients; (iii) research carried out by Ipsos and Largo Consumo magazine on a group of consumers named Geox as Italy's best footwear brand in terms of the shopping experience; (iv) in its report on Customer Experience Excellence and the omnichannel approach, KPMG included Geox in the list of Italy's top 10 companies for meeting customers' needs and expectations (based on feedback from a representative sample of consumers); (v) the Group's 'digital transformation: digital learning and up-skilling' project for employees was named as Italy's best training scheme in 2020 by the Italian association of HR managers ("AIDP").

These initial results confirm the fact that consumers are starting to see signs of change, making us even more confident about the path we have embarked on - a path based on valuing people, focusing on the end consumer and completing our journey towards the digital transformation of our business model; once the pandemic is over, this will allow Geox to return to sustainable growth and profitability."

GROUP PERFORMANCE

Preliminary sales figures for 2020

Consolidated sales in 2020 amounted to Euro 534.9 million, down 33.6% compared with the previous year (-33.0% at constant forex), affected by the spread of the Covid-19 pandemic and the rationalisation of the store network completed over the course of the year.

The performance recorded in the fourth quarter (-35.3% and -33.5% at constant forex) is mainly due to three factors: the new temporary closures imposed by governments in the various countries, the completion of the 2020 store rationalisation plan and demand from the market to postpone deliveries of the 2021 Spring-Summer collection.

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Sales by distribution channel

	(Thousands of Euro)	2020	%	2019	%	Var. %
	Wholesale	258,330	48.3%	360,448	44.7%	(28.3%)
	Franchising	43,106	8.1%	84,302	10.5%	(48.9%)
	DOS*	233,461	43.6%	361,108	44.8%	(35.3%)
	Geox Shops	276,567	51.7%	445,410	55.3%	(37.9%)
	Net sales	534,897	100.0%	805,858	100.0%	(33.6%)
	* Directly Operated Store

Sales generated by wholesale stores, representing 48.3% of Group revenues (44.7% in 2019), amounted to Euro 258.3 million (-28.3% at current forex, -27.4% at constant forex), compared with Euro 360.4 million in 2019. This trend is due to the temporary closures of wholesale stores in the second and third quarter, which led our clients to: cancel some of their orders for the spring/summer season; reduce stock replenishment during the season; extend the sellout period for the spring collection, closely working with Geox to review their initial orders for the winter season; postpone delivery advances for the SS21 collection. The Group also recorded fewer sales of stock from previous seasons.

Performance improved during the fourth quarter (-17.5% at current forex and -12.2% at constant forex), with sales amounting to Euro 36.9 million (Euro 44.7 million in the fourth quarter of 2019). This performance is substantially in line with the reduction in purchases for the FW20 collection (-21%), after orders were reviewed in close cooperation with clients in order to minimise the risk of cancellations. In addition, sound performance in terms of stock replenishment for the FW20 collection was also recorded, offsetting the negative timing effect regarding deliveries of the SS21 collection.

Sales in the franchising channel, accounting for 8.1% of Group revenues, amounted to Euro 43.1 million, reporting a decline of 48.9% (-48.3% at constant forex), compared with Euro 84.3 million in 2019. Performance for the year was affected by the temporary closures and by the reduction in the store network (around Euro 14 million, or 17%), down from 386 stores in December 2019 to 322 in December 2020.

This channel reported sales of Euro 9.6 million in the fourth quarter (Euro 16.7 million in the fourth quarter of 2019), down 42.8% (-42.2% at constant forex); this is due to both the reduction in the store network (-17%) and the negative timing effect regarding deliveries of items from the SS21 collection.

Sales generated by directly operated stores (DOS), representing 43.6% of Group revenues, amounted to Euro 233.5 million, compared with Euro 361.1 million in 2019 (-35.3% at current forex, -34.9% at constant forex). Like-for-like sales performance of -33.8% was recorded at the end of 2020, reflecting the high percentage of stores that were temporarily closed during the year (over 20% on average) and the reduction in footfall caused by the restrictions on people's mobility. As already mentioned, the rationalisation of the store network must also be taken into consideration (around 10%), with a net reduction of 44 DOS mainly being recorded in the second half of the year.

After stores were reopened at the beginning of May, sales performance gradually recovered and recorded positive figures once again in August, coinciding with the summer sales in Italy and France. However, at the beginning of the fourth quarter, cases of contagion began to increase again, leading to more temporary closures in the main European markets and in Canada.

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The Group's direct e-commerce channel recorded significant growth during the year, up 41% compared with 2019 (+21% in the first quarter, +59% in the second quarter, +37% in the third quarter and +44% in the fourth quarter) and has continued to record positive results in the first weeks of 2021 (+41% since the beginning of the year).

During the fourth quarter, sales generated by directly operated stores (DOS) amounted to Euro 58.7 million, down 41.9% (- 41.1% at constant forex), compared with Euro 101.0 million in the fourth quarter of 2019. The trend during this quarter reflects the LFL performance for the period (-37.9%), as well as the aforementioned reduction in the store network.

Sales by region

(Thousands of Euro)	2020	%	2019	%	Var. %
Italy	124,923	23.4%	228,453	28.3%	(45.3%)
Europe (*)	250,293	46.8%	344,258	42.7%	(27.3%)
North America	24,772	4.6%	46,189	5.7%	(46.4%)
Other countries	134,909	25.2%	186,958	23.2%	(27.8%)
Net sales	534,897	100.0%	805,858	100.0%	(33.6%)

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

Sales generated in Italy, representing 23.4% of Group revenues (28.3% in 2019), amounted to Euro 124.9 million, compared with Euro 228.5 million in 2019. Performance in Italy was more seriously affected by the Covid-19 emergency than in other European countries, as this was the first country in the area where the epidemic began to spread and is also the country where the Group has the highest number of physical stores. The rationalisation of the store network over the course of the year also affected annual performance (46 net closures, equal to 17% of the network).

In this context, all channels were affected by the pandemic emergency. Directly operated stores, which had recorded a positive start to the year, were affected by the temporary closures, recording a drop in sales for the year substantially in line with the Group figure. With regard to performance in the wholesale and franchising channels, on the other hand, the drop in sales was mainly down to the factors already described. The franchising channel was particularly affected by the reduction in the store network during the period (37 net closures, equal to 30% of the network).

Performance of the e-commerce channel was particularly impressive, recording +79% at the end of December.

During the fourth quarter, sales generated in Italy amounted to Euro 22.7 million, down 48.9% compared with Euro 44.4 million in the fourth quarter of 2019. In addition to the difficult context described above, the trend for the quarter was also affected by the rationalisation of the store network. LFL sales performance was equal to -48%, with the direct e-commerce channel growing by +81%.

Sales generated in Europe, representing 46.8% of Group revenues (42.7% in 2019), amounted to Euro 250.3 million, compared to Euro 344.3 million in 2019, recording a decline of 27.3%, mainly due, as was the case for Italy, to the effects of the spread of the epidemic, which led to stores being temporarily closed mainly in the second and fourth quarter. Annual performance was also affected by the rationalisation of the store network over the course of the year (24 net closures, equal to 9% of the network).

After the year got off to a positive start (approximately +5%), LFL sales generated by directly operated stores recorded a decline of around 31% for the year.

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