Geox : Press release - first half 2016 results

PRESS RELEASE - FIRST HALF 2016 RESULTS

+5.5% INCREASE IN REVENUES THANKS TO POSITIVE PERFORMANCE RECORDED ACROSS ALL SALES CHANNELS AND, IN PARTICULAR, IN THE WHOLESALE CHANNEL, UP 9.9%, AND IN THE ON LINE CHANNEL, UP BY OVER 30%

IN THE FIRST HALF OF THE YEAR, ADVERTISING INVESTMENTS WERE INCREASED BY EURO 6 MILLION, REACHING EURO 25 MILLION OVERALL. THE OBJECTIVE WAS TO FURTHER STRENGTHEN THE BRAND, BOOST STORE SALES AND, WITH REGARD TO THE WHOLESALE CHANNEL, INCREASE ORDER COLLECTION FOR THE 2016 FALL/WINTER SEASON, WHICH HAS ALREADY REPORTED A GROWTH OF 14%, CONFIRMING EXCELLENT PERFORMANCE ACROSS ALL GEOGRAPHIC AREAS.

• Sales: Euro 450.3 million, +5.5% (Euro 426.9 million in the first half of 2015)

• EBITDA: Euro 22.1 million (Euro 26.6 million in the first half of 2015)

• EBIT: Euro 4.6 million (Euro 7.4 million in the first half of 2015)

• Net Financial Position: Euro -27.7 million (+20.8 million as of December 31, 2015, +27.6 million as of June 30, 2015)

Biadene di Montebelluna, July 28, 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 first half 2016 financial results.

Mario Moretti Polegato, Chairman and founder of Geox, commented: "A solid growth in turnover was recorded in the first half of the year, despite somewhat challenging consumption trends.

Revenues recorded a 5.5% increase thanks to the positive performance across all sales channels and in the company's main markets. In particular, the wholesale channel reported a growth of 9.9% with the on line channel up by over 30% and sales also increased for both our directly operated and franchised mono-brand stores, by 1.7% and 4.5% respectively.

With regard to the second half of the year, encouraging results have already been recorded by the wholesale channel, with a 14% growth in order backlog thanks to excellent performance across all geographic areas.

These achievements are a result of the ongoing implementation of our development strategy, investments in product innovation -representing our hallmark and competitive advantage-, the high degree of specialization of our sales channels and the significant investments made in advertising in order to boost both in-store sales and order collection during the sales campaign. Furthermore, we must remain vigilant in the management of costs, margin and channel specialization.

Looking towards the future, I am therefore confident that the solid foundations of our business will continue to support our growth, helping us to face the challenges posed by volatile macroeconomic conditions and currency market fluctuations."

THE GROUP'S ECONOMIC PERFORMANCE

Sales

First half 2016 consolidated net sales increased by 5.5% to Euro 450.3 million (+6.1% at constant forex). Footwear sales, which accounted for about 91% of consolidated sales, amounting to Euro 410.1 million, increased 5.1% compared to first half of 2015. Apparel sales, which represented 9% of consolidated sales, are equal to Euro 40.2 million, compared to Euro 36.6 million of the first half 2015, with an increase of 9.9%.

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

Sales in Italy, which accounted for 32% of sales (33% in the first half of 2015) amounted to Euro 143.6 million showing a 1.0% increase compared to first half of 2015.

Sales in Europe, which accounted for 43% of sales increased by 7.1% to Euro 195.8 million, compared with Euro 182.8 million in the first half of 2015.

North American sales amounted to Euro 30.1 million, showing an increase of 4.6% (+9.4% at constant exchange rates). Sales in Other Countries increased by 10.4% compared to the first half of 2015 (+12.3% at constant forex).

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

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

Sales of the DOS channel, which represent 42% of Group revenues, grew 1.7% to Euro 187.4 million compared to the first half of 2015 (+2.5% at constant forex). The improvement is mainly driven by comparable store sales growth recorded on DOS channel (+1.8% against +6.4% from the first half last year). Like for like performance is positive in all countries excluding France and Belgium, following the recent events and in China, HK and Japan reflecting a low footfall.

Like for like performance year to date (week 1- week 29) is up 2.0% (+4.5% last year). After a solid start to the year, a slowdown in footfall was experienced in March and April, which wasn't completely offset by the better conversion rate. This trend was reversed in May and June, when an overall comparable growth of 3.5% was recorded, also thanks to the positive impact of the significant marketing initiatives implemented.

Sales of the franchising channel, which account for 16% of Group revenues, amount to Euro 73.5 million, with an increase of 4.5% (+5.0% at constant forex).

Wholesale stores representing 42% of Group revenues amount to Euro 189.4 million, with an increase of 9.9% (10.5% at constant forex).

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

As of June 30, 2016, the overall number of Geox Shops was 1,151 of which 461 DOS. During the first half of 2016, 37 new Geox Shops were opened and 47 have been closed, in line with the rationalization plan of the DOS network.

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

(**) Includes Under License Agreement Shops (144 as of June 30, 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 50.5% compared to 48.2% of the first half 2015, producing a gross margin of 49.5% (51.8% in the first half of 2015).

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

Operating expenses and Operating income (EBIT)

Selling and distribution expenses as a percentage of sales were 5.4% (6.0% in the first half of 2015).

General and administrative expenses were equal to Euro 168.8 million, in line with the first half of 2015. General and administrative expenses, as a percentage of sales, were 37.5% (39.6% in the first half 2015).

Advertising and promotions expenses were equal to Euro 25.1 million, 5.6% of sales, compared with Euro 19.1 million, 4.5% of sales, in the first half of 2015. This increase was due to the significant investment in advertising made in the first half in order to improve the weak LFL performance of March and April and to boost order collection during the FW16 Wholesale campaign.

The operating result (EBIT) is equal to Euro 4.6 million (1.0% on sales) compared with Euro 7.4 million of the first half of 2015 (1.7% on sales). EBITDA was Euro 22.1 million, 4.9% of sales, compared to Euro 26.6 million (6.2% on sales) of the first half of 2015.

The decrease in operating profit is due to the previously announced reduction in gross margin performance, which is linked to the euro's depreciation against the dollar, and to the significant investments in advertising made in the first half.

Income taxes and tax rate

Income taxes were equal to Euro 2.6 million in the first half of 2016, compared to Euro 2.2 million of the same period of the previous year.