Following are excerpts from the transcript of a CNBC interview in Davos by Geoff Cutmore and Steve Sedgwick with Mario Moretti Polegato, Founder of GEOX.
SS: Italian shoemaker Geox has partnered up with Pou Sheng International last year in an exclusive distribution agreement for China. The deal with the Hong Kong listed sportswear retailer is set to create 350 new stores by 2020, and I'm delighted to welcome to Squawk Box Mario Moretti Polegato, who is the President and Founder of Geox. Nice to see you, Mario.
MP: Yes, you as well.
SS: Thank you for joining us. We'll talk about Italy in a few moments time, we'll talk about domestic Europe, as well. Tell me about China, as well, because if there was an embodiment of the pivot towards the consumer and the services sector, it's this kind of deal, isn't it, and you still think there's enormous growth potential, obviously, in China.
MP: China, in the fashion now is a strong market, particularly in the luxury area. Geox is in another position, because our reg price is the medium item, and we have confidence in that our new operation in China will have success. Because in the middle class in China, we have a new consumer. We calculated that until now we have 200 million people in the middle class in China, and our product, shoes and apparel, is in this reg price.
SS: Now, I want to pick you up a little bit on this, because the luxury goods sector used to trade at 25 times, whether they were based in Milan or whether they were based in Paris, it was pretty much 25 times. Now it trades on about 17 times, and it's come off that great multiple because of concerns about the luxury end and the upper middle band, as well, now which you're falling into as well. So are you concerned that some of the excitement about the Chinese consumer growth story on the luxury end and on the middle band as well, it's actually peaked and now we're off the top?
MP: China, the GDP is growing, every year it's growing, and now we have many, many consumers who have the possibility to buy goods at this medium reg price, and it's a new market in china, I believe, particularly in the shoe business, because in China we have the low price, is the product that is made in China, with a local company, and we have the luxury, that's imported from Europe and the United States.
GC: Mario, let me ask you, how do you think Europe is doing, and how do you think Matteo Renzi is doing in trying to get the Italian economy firing on all cylinders again?
MP: The European market, particularly in my business, is flat, but in our position it's really important, because at Geox, 80% of our turnover, we represent the European market, and fortunately in 2014, Geox grew 9.6% and this year again, we continued to grow in our market. Italy represents 30% of our turnover, and Italy is a good market for us, and in Italy we only have 350 stores in the shoe business, and this year, generally speaking is flat, but fortunately we do well in Italy.
SS: So you sound modestly optimistic about what's going on in Europe. We've got our Swaggerometer, do you think Europe is going full speed ahead? Is it at a standstill? Is it losing steam? Where would you put the arrow if you had to say where you think Europe is performing? Better than where it is at the moment or just about right?
MP: Oh, little full speed, little.
SS: You're going to go for about there?
MP: Okay, yes.
GC: Very bold.
SS: Very modest-, a very good performance, yes, that's one of the highest we've had, as well. So we're going to leave it there, thank you very much indeed for joining us.
MP: Thank you, thank you.
SS: Very nice to see you today, that was Mario Moretti Polegato, who is the Founder and President of Geox.