Geox : Press Release - 2016 Results

PRESS RELEASE - 2016 RESULTS

+3% INCREASE IN REVENUES TO 900.8 MILLION DRIVEN BY A POSITIVE PERFORMANCE OF THE WHOLESALE CHANNEL, UP 12%, AND ONLINE SALES, WHICH GREW BY MORE THAN 30%.

+9% INCREASE IN ORDER BACKLOG RECORDED BY THE WHOLESALE CHANNEL FOR THE 2017 SPRING/SUMMER SEASON, WITH SOLID GROWTH IN THE GROUP'S MAIN EUROPEAN MARKETS COMBINED WITH POSITIVE TRENDS IN OTHER GEOGRAPHIC AREAS.

GEOX BOARD HAS PROPOSED AN ANNUAL DIVIDEND OF EURO 0.02 PER SHARE.

Biadene di Montebelluna, March 2, 2017 - 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 2016 financial results.

Mario Moretti Polegato, Chairman and founder of Geox, commented: "Geox closes 2016 with a 3% growth in revenues, thanks to the excellent performance, in all major markets, of the wholesale channel, increasing by 12%, and of the e-commerce channel which grew by more than 30%. Russia and countries in Eastern Europe are driving this growth, but Austria, Switzerland and the UK are also giving us satisfaction with double-digit growth.

The wholesale channel confirms a good level of growth also with regard to order collection for the coming 2017 Spring/Summer season, increasing by 9%. This growth has been driven by solid overall performance in Italy and other main European markets, combined with a positive trend in other geographical areas.

With regard to mono-brand stores, on the one hand, we're continuing with our targeted expansion in more reactive markets such as Russia, Eastern Europe and China, and, on the other hand, we're carrying out a fast process of store network optimization in mature markets which will lead to more efficient retail management. The aim is to favour sustainable and profitable returns over a strategy of expansion which, in this phase, is supported by the results generated by the wholesale channel.

I am therefore confident that our Group, despite a context of uncertainty in some markets, will be able to achieve positive results this year, based on a different sales channel mix, with profitability in line with expectations".

THE GROUP'S ECONOMIC PERFORMANCE

Sales

2016 consolidated net sales increased by 3.0% to Euro 900.8 million (+3.3% at constant forex). Footwear sales represented 91% of consolidated sales, amounting to Euro 815.5 million, with a 3.9% increase compared to 2015 (+4.2% at constant forex). Apparel sales accounted for 9% of consolidated sales amounting to Euro 85.2 million, compared to Euro 89.3 million of 2015 (-4.6%, -4.5% at constant forex).

(Thousands of Euro) 2016 % 2015 % Var. % Revenues generated in Italy, representing 30% of the Group's total revenues (32% in 2015), amounted to Euro 270.1 million, compared to Euro 281.1 million of the previous year. This performance is a result of the planned rationalization of a number of mono-brand stores, which was partially offset by the positive performance of the wholesale channel, up +5.4%.

Sales in Europe, which accounted for 44% of sales increased by 5.6% to Euro 396.6 million, compared with Euro 375.6 million of 2015.

North American sales amounted to Euro 60.7 million, showing a decrease of 3.4% (-1.1% at constant forex). Sales in Other Countries increased by 12.0% compared to 2015 (+12.8% at constant forex).

(Thousands of Euro) 2016 % 2015 % Var. %

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

Revenues generated by directly-operated stores, DOS, representing 41% of Group revenues, recorded a 2.0% reduction at Euro 370.8 million (-1.6% at constant forex). This performance is due to the planned rationalization of stores and to the decline (-1.0%) in like-for-like sales of stores that have been open for at least 12 months (comparable store sales) (+4.2% in 2015).

Sales of the franchising channel, which account for 15% of Group revenues, amount to Euro 134.6 million, reporting a decline of 5.2% (-5.1% at constant forex). Also the performance of franchising channel is due to the store network

rationalization plan and the decline in comparable sales, slightly greater than the one recorded by directly operated stores (compared to a like-for-like growth of +3.9% in 2015).

Wholesale stores representing 44% of Group revenues (41% in 2015) amount to Euro 395.3 million, with an increase of 11.7% (+12.0% at constant forex) compared with last year. This trend is due to a positive performance recorded in the Group's main markets.

(Thousands of Euro) 2016 % 2015 % Var. %

As of December 31, 2016 the overall number of Geox Shops was 1,161 of which 455 DOS. During 2016, 104 new Geox Shops were opened and 104 have been closed, in line with the rationalization plan of the mono-brand network.

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

(**) Includes Under License Agreement Shops (156 as of December 31 2016, 142 as of December 31 2015). 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 52.3% compared to 48.4% of 2015, producing a gross margin of 47.7% (51.6% in 2015).

Gross margin dilution is due to the previously announced increase in product costs, mainly caused by the euro's depreciation against the dollar, to a reduction in revenues generated by directly-operated stores and to the increased promotions introduced in order to stimulate consumer purchases amid difficult market conditions.

Operating expenses and Operating income (EBIT)

Over the course of the fourth quarter, in view of the underperformance of the retail channel compared to original growth expectations, the management adopted incisive measures to improve efficiency, cut costs and reduce business risk. In particular:

Selling and distribution expenses as a percentage of sales were 5.5%, showing a slightly decrease compared to last year (5.6% in 2015).

General and administrative expenses were equal to Euro 325.0 million, recording a decrease of Euro 9.3 million compared to the previous year thanks to the actions taken to improve efficiency, reduce structural costs and renegotiate store rents.

Advertising and promotions expenses amounted to Euro 36.8 million, equal to 4.1% of revenues, compared to Euro

The operating result adjusted, excluding special items mentioned above, was equal to Euro 18.1 million (2.0% on sales) compared to 24.9 million of 2015 (2.8% on sales). The reduction in the operating result adjusted is due to the decrease in Gross margin while other costs recorded a strong performance.

The operating result (EBIT) was equal to Euro 12.8 million (1.4% on sales) compared with Euro 24.9 million of 2015 (2.8% on sales).

EBITDA

EBITDA was Euro 47.6 million, 5.3% of sales, compared to Euro 61.8 million of 2015 (7.1% on sales).

The EBITDA adjusted, excluding special items mentioned above, was equal to Euro 52.8 million, 5.9% on sales compared to 61.8 million of 2015 (7.1% on sales).