UPDATE: Geox Maintains Full-Year Targets As 1st Half Profit Falls 33%

ROME (DOW JONES)--Italian shoemaker Geox SpA (GEO.MI) Thursday confirmed its full-year guidance after reporting a lower-than-expected 33% drop in first-half net profit, adding it is confident markets will recover.

The company's founder and Chairman Mario Moretti Polegato cited a 2% yearly rise in orders for the Autumn/Winter collection in the wholesale and franchising channels, as well as improved sales in the second quarter as reasons to be positive about the full-year result.

"Net sales in the second quarter, which are 4% up on the same period of 2009, are reflecting an encouraging performance in our shops which in May and June show comparable growth of 3%," Polegato said in a statement.

"We still expect revenue to drop between 6% and 8% in 2010 and Ebitda [earnings before interest, taxes, depreciation and amortization] to fall between 4% and 5%," Corporate Managing Director Massimo Stefanello told Dow Jones Newswires in an interview.

He said retail sales accounted for the 60% of the company's revenue in the second quarter compared with an average 20% in previous quarters.

However, sales in its core markets by revenue--Italy and Europe--fell 5% and 15% respectively in the second quarter, while sales in the U.S. fell almost 9%.

Stefanello said newspaper reports suggested "we shouldn't be too cheerful about consumption in Europe in the next 12 months," adding the company had backtracked in the US market and had paid a high cost for the mistake of rapid expansion.

Geox, which owns more than 1000 shops worldwide, openeded 61 stores in the first half of 2010, and closed 37 non-performing stores.

While sales of shoes, which total around 90% of revenue, fell 12%, clothing sales rose 8% on the year.

"Our president always says that he would like to see the 50% of total revenues coming from clothes," Stefanello said.

Geox's first-half net profit fell to EUR37.9 million from EUR56.6 million a year earlier.

Best known for its "breathable" shoes, the shoemaker said first-half earnings before interest and taxes, or EBIT, fell to EUR59.0 million from EUR96.5 million in the first half of 2009.

Revenue for the first half fell 10% to EUR435.5 million.

Geox's shares rose up to EUR4.31 after the release, as the drop was less than analysts had expected.

Analysts at Equita Sim had predicted revenue of EUR432 million and net profit of EUR37 million.

-By Chiara Vasarri, Dow Jones Newswires; +39 06 69766923; chiara.vasarri@dowjones.com

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