Chairman Janez Sajovic, speaking in an interview with the STA, says the company generated a profit of EUR 744,000 last year, after a loss of EUR 11m in 2010, according to audited results.

This year, however, the state-owned company is facing 10% lower sales as the biggest problem. Half year loss amounted to EUR 2m, which is a slight deterioration on last year's figures but much below the target.

"Three is a crisis and people are scared, they don't even turn up for discount sales any more," Sajovic complains.

Another reason for lower sales is the freak weather without a proper interval between winter and summer, when people would buy closed-in shoes.

The company needs to spruce up its shops, make over its corporate image and improve its sales staff, according to the chairman.

Peko planned to invest in its sales chain the EUR 3m that the state should chip in in September in accordance with the programme of financial and operational consolidation.

However, the third phase of the injection will certainly not be implemented in the autumn after the second phase fell through as part of which the state should have secured EUR 3m in March for a production upgrade.

"We have done everything in our power to get 12 million euros in three phases under the programme," Sajovic says.

The government chipped in EUR 6m in January, but then postponed the deadline for the selection for a strategic partner who would recapitalise Peko with an in-kind contribution, and thus the second half of the bail-out by the state from March to the end of the year.

Being aware that Peko is not a strategic investment for the state, Sajovic has found two potential buyers for the company in the US.

His condition is for the new owner to preserve the brand and production and to invest at least five to ten million euros in production, information technology and development.

"Peko needs modernisation urgently. The machines that have been around for 30 years and more are not productive enough," the chairman explains.

At the moment the company is investing own funds to carry out the most urgent upgrades, including a half-a-million euros' worth new machine for the manufacturing of soles at the subsidiary PGP.

Peko launched a new plant for the production of upper parts of shoes in Serbia's Knjaževac in June in a bid to reduce the number of partners to which it outsources production, and thus bring down costs.

The Knjaževc plant puts out 500 pairs of shoes a day for now, between 300 and 350 pairs of higher-end models are sewn in Tržič, and the remaining 1,700 to 2000 pairs daily are still bought off from partner companies.

The chairman believes that the best logistic solution for Peko would be to move production and assembly for southern markets from Tržič to Serbia. Development and production for European markets would meanwhile remain in Slovenia.

First models from the new autumn-winter collection have already hit stores, with the whole collection of 200,000 pairs to be out of the factories by the end of September.

Peko products fall in the upper mid-price range, while the sale of cheap Chinese-made merchandise at the shops has been scrapped altogether.