Cost Cutting And Market Exits Will Drive Limited Recovery While Digital Channel Slowly Gains Relevance

Catalysts

About Geox

Geox designs, manufactures and distributes branded footwear and apparel with a focus on breathable comfort technologies.

What are the underlying business or industry changes driving this perspective?

• Although the company is extracting meaningful savings from personnel restructuring and indirect cost reductions, the reliance on cost cutting rather than top line growth risks exhausting easy efficiencies and could cap adjusted EBIT margin expansion beyond 2026.
• While the own e commerce DOS channel is growing and gaining relevance as consumer purchasing shifts online, the deliberate downsizing of marketplace and wholesale web partners may constrain digital reach, limiting revenue recovery and scale benefits on fulfillment and logistics costs.
• Although the brand continues to hold resilient retail positions in core markets like Italy and parts of Europe, ongoing weakness in wholesale orders and the structural exit from the U.S. and China reduce geographic diversification and may weigh on midterm sales growth and operating leverage.
• Despite a leaner brick and mortar and franchise network improving average store productivity, the reduced number of doors can compress physical distribution and hamper the ability to capture demand when sector conditions normalize, constraining revenue and slowing deleveraging of fixed retail costs.
• While the restructuring plan is designed to pay back within a year and support a stable bank net debt level of about EUR 100 million to EUR 110 million, any further decline in women and seasonal categories or continued pressure in Russia and other wholesale markets could offset savings and limit progress in net margins and earnings.

Assumptions

This narrative explores a more pessimistic perspective on Geox compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Geox's revenue will grow by 1.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Geox will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Geox's profit margin will increase from -3.1% to the average GB Luxury industry of 7.2% in 3 years.
• If Geox's profit margin were to converge on the industry average, you could expect earnings to reach €49.0 million (and earnings per share of €0.11) by about December 2028, up from €-19.8 million today.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 4.4x on those 2028 earnings, up from -5.8x today. This future PE is lower than the current PE for the GB Luxury industry at 21.7x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.3%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The ongoing high single digit decline in sales and continued softness in wholesale campaigns for Spring and Summer 2026 indicate that demand weakness may be more structural than cyclical. This could drive a sustained deterioration in revenue and limit any recovery in operating earnings over the long term.
• The strategy of exiting key markets such as the U.S. and China, together with sharp reductions in franchise doors and pressure in regions like Russia, France and Iberia, reduces geographic diversification and future growth optionality. This may weigh on top line expansion and constrain operating leverage in net margins.
• The heavy reliance on cost rationalization, personnel restructuring and indirect cost cuts, including a EUR 20 million reduction in the first nine months of 2025, risks exhausting easy savings and may leave the company vulnerable if sector conditions improve and competitors reinvest for growth. This could potentially cap long term EBIT margin expansion and earnings power.
• The weak performance in women’s categories and marketplaces, combined with only modest growth of Geox’s own web channel, suggests that the brand could be losing relevance in key customer segments and digital ecosystems. This may hinder the ability to capture secular shifts to online and fashion driven purchasing, thereby limiting revenue growth and pressuring gross margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Geox is €0.33, which represents up to two standard deviations below the consensus price target of €0.92. This valuation is based on what can be assumed as the expectations of Geox's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €1.5, and the most bearish reporting a price target of just €0.33.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be €680.7 million, earnings will come to €49.0 million, and it would be trading on a PE ratio of 4.4x, assuming you use a discount rate of 13.3%.
  
• Given the current share price of €0.31, the analyst price target of €0.33 is 5.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.