The Geox company: “We Are Planning to Increase Investments in The Develoing Markets”

January 2013 | Investments

The Geox company is one of the largest shoe manufacturers in the world. At the moment it is rapidly developing its business in the Eastern part of the world. For several years, the company plans include opening of four hundred stores in China and increasing the number of stores in Russia to one hundred units. Mario Moretti Polegato, the Founder and Chairman of Geox company and Juan Carlos Venti, Head of External Relation, told WEJ on the present and the future of the Company and its performances on the Milan Stock Exchange.

Mr. Moretti, can you please tell us about the unique breathable technology of the footwear created by you?
Mario Moretti Polegato: The “Breathing” technology is what distinguishes our company from all other shoemakers. Besides its esthetic beauty and traditional Italian style, it is high-tech we are talking about here. We took a simple rubber sole and made a special perforation in it. In the inner part of the sole there is another special patented sole that prevents moisture from penetrating inside. Thanks to this new technology, the foot in the shoe is always dry. This technology was accidentally invented by me in the early 90s when, during a walk in a desert, my feet felt hot in my shoes.

And so after that you have patented the technology in over one hundred countries around the world?
M.M.: Yes, and that is exactly why we are now a few steps ahead of the rest of the market we work in. We decided to extend the capabilities of the aforementioned technology, and now, in addition to traditional perforated sole, we are actively using this membrane all around the shoe. This technology is called Amphibiox. As a result we got the classic elegant shoes, but the water-repellent and waterproof ones. During all these procedures we, of course, used Italian leather and design, which are considered the best in the world. Thus, this innovative solution was a real revolution, not only in the footwear industry.

So do you produce clothing as well?…
M.M.: Well, if before we had only the shoes that breathe, nowadays clothing has also found such breathing qualities, I am talking about coats and jackets, made according to the same technology. Perforations are located at the top of the jacket, so the body heat is rising up to the shoulder level, at the same time it does not stay there and comes out, therefore people do not overheat.

Juan Carlos Venti (H.V.): Clothing and footwear produced according to this technology are ideal for the markets of countries with long snowy winters and humidity. For example, for the Russian market.

Can you say that the company has high hopes for the Russian market, despite the fact that you have decided to double the number of the country’s single-brand stores?
H.V.: Of course, we are now expanding our presence in the Russian Federation. At the moment there are 45 single-brand stores, including in Moscow and St. Petersburg, but we are planning to double this number within the next two years. Russia is one of the countries to the east of Europe which has a lot of potential at the moment.

By expanding into the East, do you think that the situation in the BRICS countries is better now in terms of business than in Europe?
M.M.: The global financial crisis in Europe has forced us to take a closer look at the emerging markets, in which we are now actively investing. For example, we recently concluded a major contract in China, having opened branches in Shanghai and Hong Kong. Within three years 400 stores will be opened in the country. By the way, at this moment there are 1,250 mono-brand GEOX stores operating in the world, in addition, more than 11,000 multi-brand stores sell our shoes. Yet at the moment, Italy, Spain, Germany and France are our biggest markets in terms of sales volumes. European markets account for 80% of the profits, but given the rapid pace of development in the BRICS, we want to change that number.

You are actively investing in emerging markets, but at the same time, this year, the company has a flat position. What is the reason for this?
M.M.: The Geox company is listed on the Milan Stock Exchange (MSE: GEO.MI.). My family holding (LIR) owns 71% of shares and the remaining 29% are present in the market. Despite the fact that in previous years the company has always seen growth in profits, this year the situation in the market is flat, due to the economic recession.

H.V.: However, this flat situation does not interfere with our sales, which are now growing even in Europe. Let us recall the history of the company – in the beginning we were making collections just for the kids, the next were men collections, and only then we started working on women collections. Now 9 of 10 top sales are women shoes. This is an example of the speed with which the company is moving. We are working to increase the profitability of our production and we feel pretty optimistic for the future.

What do you think how has the global footwear market changed recently?
H.V.: Well, first of all, I would like to note the fact that the client has changed. According to recent studies, the clients in the emerging economies with an income above average, who earn 30 to 50 thousand euros per year, use to buy affordable products more than luxury ones. This is true also for shoes and that’s the reason why Geox is targeting this segment of market offering stylish and comfortable at an affordable price.

Does Italy still hold the leading position in the world in terms of shoes production?
M.M.: Italy is the birthplace of unrivaled design. All of the most famous brands seek guidance from the Italian designers during creation of their collections. In addition, the secret of success of the country in this regard is the exceptional quality of the leather, which is made according to a unique manufacturing technology. Every country in the world buys the leather from us. The shoes are produced everywhere, but all eyes are on Italy. In turn, we, as Italian producers, must, of course, try to hold the position as market leader.

The company has announced plans to increase profits in the next few years. In what ways do you intend to achieve the aforementioned goals?
M.M.: Our annual sales volume amounts around 900 millions euros and Geox is considered one the best success stories in Italian industry. In order to increase our turnover and further improve our leadership on the market, we are implementing important structural changes in the company and redesigning the organization which has started with the arrival of a new CEO.

Will these changes affect the investment priorities?
M.M.: Yes, first of all, we are planning to increase investments in the developing markets of the BRICS countries. But the company’s philosophy will also undergo some changes aimed not only at creating the high-tech shoes and clothing, but also more fashionable ones. We pay great attention to the style and quality. This combination is very important if you want to find your niche in the market, especially this is true when it comes to women’s shoes and clothing. Indeed, when buying shoes and clothing, women, first of all, pay attention to fashion and style. As you know, 65% of world sales of clothing and footwear account for women’s collection, the remaining 35% is shared by men and children, so women are our most important clients. Therefore, we decided to focus our efforts on the combination of beauty, technology and functionality of our collections.

Does the involvement of world famous stylists in the development of your new collections related to this?
M.M.: Absolutely Well-known designers are working on our collections, including the Englishman Patrick Cox who is in charge of creating the men’s collection. As for the collections for women, these are also created by the designers who used to work for various luxury brands in the world. Therefore, we have already started making shoes with the middle and high heels, previously we used to make shoes without heels – ballet flats, boat shoes. In addition, we have expanded the range of colors in our new collections.

What do you think will this help increase sales volumes of your company’s products?
M.M.: The new generation of Geox product which combine our technology with an Italian contemporary style already got an amazing success in terms of sales in countries like Italy and that makes us more and more confident about the fact that today the consumer is more focused on value for money and then requests beautiful and original shoes and clothing, With this kind of products together with the the future openings of new stores around the world we intend to increase our sales volumes. That’s our strategy and we are fully committed to implement it.