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Peko Boss Says Footwear Industry Hampered by Crisis (interview)

Ljubljana, 19 October (STA) - The economic crisis has hit the shoe industry hard, but the CEO of footwear manufacturer Peko, Marta Gorjup Brejc, is confident that the state-owned company will survive, although she believes the state should reduce the tax wedge.

The global shoe industry saw a significant drop in sales last year, and the trend continues this year, the official has told an interview with the STA, adding that a number of European companies from the sector has gone bust. She expects the situation to improve in 2011.

As an example of how the industry has been impacted, Gorjup quoted Italy, where the number of shoe-making companies went down from 8,000 nine years ago to 6,000 last year. Several leading companies in the industry saw their sales drop by up to 20%, including Clarks, Geox and Ecco.

The fact that Chinese footwear is getting more expensive implies repositioning and equalisation among among continents. "In the future, those European producers which will be strong enough will keep or increase their market shares."

Last year Peko posted a loss in the Bosnian and Serbian subsidiaries, without which the company would end the year with EUR 400,000 in the black. The plan for 2010 envisages a loss, as this will be the year for adjustments, while the 2011 plan is being prepared, Gorjup Brejc said.

Peko has sold off some real estate to decrease the loss and fund investments in its shops, but the company has also invested in production and development. "We never sold real estate just to make the balance sheets look better."

Asked what kind of owner Peko would like to have in the future, Gorjup Brejc said that the best owner would be the one which would keep production in Trzic. "It is important that know-how, which is very precious and presents great intangible value for the company, is preserved here."

The core company has about 330 employees, a sheltered workshop as part of the Peko group, which produces soles, employs an additional 100 people, while the whole group has more than 900 workers.

The increasing costs of living and unemployment and the consequent drop in the purchasing power forced Peko to reduce the annual production this year to around 280,000 pairs of shoes. In the pre-crisis times, Peko produced around 400,000 pairs a year.

In order to be profitable, Peko would have to produce about 400,000 pairs a year. But Gorjup Brejc emphasised that "Peko is a stable company, which is not over-indebted".

Asked whether Peko was setting or following trends, Gorjup Brejc said that the company had made a number of surprises in recent years and was planning to present a number of new exclusive models at the end of the year. Peko has positioned itself as a trend-setter.

Peko's market share in Slovenia ranges from 10% to 15%. "With the arrival of strong, mainly German chains on our market, Peko's share decreased and Peko is not anymore a leading brand it used to be in the times of former Yugoslavia."

On the markets of former Yugoslav republics, Peko is a renowned brand and has a well-developed network of shops. It has managed to slightly boost sales in the UK this year, and Germany also remains an important market.

Asked about how the government could help Peko, Gorjup Brejc said she would like the government to disburden the economy to make it more competitive, but "not by cutting net wages for employees, but by reducing taxes and contributions which increase labour costs".

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