After Chinese issues affected FY results, Geox exits local partnerships

In March, Italian shoemaker Geox advanced that its operating and net profit would rise this year but hinted that its financial targets will not be easily hit due to problems with its distributing partner in China. One month on and Geox said goodbye to that Chinese partner.

In early March, Geox reported a 9.3 rise in 2014 sales to 824 million euros, well ahead an average analyst forecast of 810 million euros based on Thomson Reuters SmartEstimate.

Looking ahead, the footwear company reinforced its commitment to fulfil the forecast sales of 887 million euros this year in a 2014-2016 business plan it presented in November 2013 as it embarked on a turnaround of its business.

But given that Geox is at the lookout for a new distribution partner in China and a new partnership is unlikely to be in place before 2016.

In fact, Geox revealed that it had filed for arbitration to review its accord with its Chinese distributor and wanted to drastically cut investments in new shops while keeping an exclusivity agreement in place. Concretely, the partnership ended covered distribution outside of the areas of Shanghai and Beijing, where Geox is opening direct points of sale.

Asia Pacific won´t grow in 2015

"Asia Pacific, which represents around 7 percent of annual sales, cannot be expected to grow in 2015," a Geox top executive told an analyst call, reported Reuters.

It is noteworthy that distribution accounts for around 40 percent of Geox' business in China, where it also directly operates shops, and 1 percent of its total sales, management told analysts.

‘La Republicca’ reported earlier this month that the reason behind Geox’ exit from the partnership to distribute its goods in China was "mainly financial issues related to the size" of the partners, which resulted in "repeated breaches of contract" with "partial cancellation of orders."