Puma AG reported that third quarter consolidated sales were 670 million, down 4.1% from 699 million ($892 mm) in the 2006 third quarter when measured in Euro terms, or down 0.5% when measured on a currency-neutral basis. By segments, footwear decreased 10.4% (-6.9% currency-neutral) to 376.3 million ($523.7 mm), apparel sales rose 5.0% for the quarter (+8.7% c-n) to 246.3 million ($342.8 mm) and accessories sales increased 7.0% (+10.6% c-n) to 47.8 million ($66.5 mm).
Total branded sales, which include consolidated sales and license sales were 753.4 million ($1.049 bn), a slight decline of 0.6% on a currency neutral basis.
The licensed business decreased slightly in Q3 by 1.1% currency adjusted to 83.0 million ($114.1 mm), mainly due to the announced expiration of the Korean license at year-end 2007. Due to the early shipments in June (as reported with the Q2 release), consolidated sales were slightly down at 0.5% currency adjusted totaling 670.4 million ($921.1 mm) in Q3.
The EMEA region reported sales of 376.5 million ($517.2 mm) in Q3, a currency adjusted increase of 1.1%. Taking the early shipments of June into account, sales would have been up in mid single digits for the quarter. Year-to-date, sales increased 5.5% and totaled 1.02 billion ($1.37 bn). Gross profit margin year-to-date reached 54.5% compared to 54.2% last year. The order book end of September was up 12.4% to 580.5 million ($828.5 mm). This reflects a significant improvement versus existing orders end of June 2007.
Sales in the Americas were down 8.8% currency adjusted reaching 166.7 million ($229.1 mm) in Q3. During the nine months period sales declined by 4.7% to 486.4 million ($654.0 mm), while the gross profit margin improved 290 basis points reaching 49.7%. Orders on hand end of September were down 8.4% to 237.8 million ($339.4 mm). Sales in the U.S. market were down 9.7% in Q3 and 10.1% after nine months. Puma suggested that the decline was caused by “a continuous moderating environment in the US mall-based business.” Due to the decline of the key-account ratio the gross profit margin increased significantly by more than 500 basis points. At quaqrter-end orders for the U.S. decreased 23.5% to $187.5 million, mainly due to the mall-based retailers.
In the Asia/Pacific region, sales improved 7.1% to 127.2 million ($174.8 mm) in Q3 and by 8.6% to 362.4 million ($487.3 mm) year-to-date. The gross profit margin reached 50.7% versus 50.6% last year. Orders on hand were up 19.1% and totaled 247.2 million ($352.8 mm).
Total orders on hand as of September increased 8.3% currency adjusted totaling 1.07 billion (1.53 bn), “representing significant improvements versus end of June 2007.” The orders are mainly for deliveries scheduled for Q4 2007 as well as Q1 2008. In terms of product segments, Footwear orders are up by 3.2% (currency adjusted) to 659.7 million ($941.5 mm), Apparel by 19.6% to 345.4 million ($493.0 mm) and Accessories by 8.5% to 60.4 million ($86.2 mm).
During the nine months period ending September, global brand sales increased 3.8% to 2.14 billion ($2.88 bn). Like-for-like, Footwear sales increased 1.5% to 1.18 billion ($1.59 bn), Apparel rose by 5.9% to 759.2 million ($1.02 bn) and Accessories improved by 10.1% to 200.5 million ($269.6 mm).
Year-to-date, licensed sales increased by 7.7% to 268.3 million ($360.7 mm). Based on the licensed turnover a royalty and commission income of 7.6 million ($10.4 mm) or 26.1 million ($35.1 mm) respectively was realized, representing a gross yield of 9.2% on licensed sales in the quarter and 9.7% year-to-date.
Sales after nine months were up 3.2% currency adjusted to 1.87 billion ($2.51 bn). In total, Footwear improved 1.0% to 1.11 billion ($1.49 bn), Apparel 6.8% to 632.6 million ($850.6 mm) and Accessories 6.3% to 125.7 million ($169.0 mm).
In Q3, gross profit margin increased by strong 270 basis points reaching 53.0% compared to 50.4% last year. For the nine months period gross profit margin was a favorable 52.5% compared to 51.4%. Footwear margin increased from 51.2% to 52.3%, Apparel margin from 51.2% to 52.5%, and Accessories stood with 53.9% almost flat on last years level.
In absolute amounts, SG&A expenses were flat in Q3 but increased 1.8% after nine months totaling 228.1 million ($313.4 mm) and 656.0 million ($ 882.0 mm), respectively. As a percentage of sales, the cost ratio increased from 32.6% to 34.0% during Q3 and from 34.1% to 35.1% after nine months.
For the nine months period, marketing/retail expenses increased 0.7% and accounted for 314.8 million ($423.3 mm) or 16.8% of sales versus 312.6 million ($389.2 mm) or 16.6% last year. Product development and design expenses grew 8.1% to 43.0 million ($57.8 mm) representing 2.3% of sales, a slight increase of 20 basis points. Other selling, general and administrative expenses were up 2.2% to 298.2 million ($400.9 mm), or from 15.5% to 16.0% of sales.
EBIT in Q3 developed stronger than sales leading the EBIT margin up from 17.6% to 18.5%. In absolute terms, EBIT increased 0.6% to 123.8 million ($170.1 mm). EBIT accumulated over the nine months period, amounts to 319.7 million ($429.8 mm) versus 324.6 million ($404.1 mm), representing an almost flat operational margin of 17.1%.
Taking into account an interest result of 3.7 million ($5.1 mm) in Q3 and 8.5 million ($11.4 mm) after nine months, pre-tax profit was up by 1.8% to 127.5 million ($175.2 mm) in the quarter and down by 0.8% to 328.2 million ($441.4 mm) year-to-date. The tax ratio after nine months was 29.0% therefore on last year level.
Earnings per share
Net earnings in Q3 reached 89.1 million ($124.0 mm) versus 87.1 million ($110.8 mm) Hence, the net return improved from 12.5% to 13.3%. Net earnings were 230.8 million ($310.3 mm) compared to 230.3 million ($286.7 mm) after nine months and the net return was 12.2% to 12.3% respectively.
Earnings per share increased by 2.7% to 5.56 ($7.73) in Q3. Year-to-date earnings per share totaled to 14.40 ($19.36) compared to 14.36. Diluted earnings per share were calculated at 5.57 ($7.65) compared to 5.39 ($6.87) in the year-ago quarter; and 14.39 ($19.35) compared to 14.27 ($17.77) in the year-ago YTD period.
Puma management confirmed sales and earnings guidance for FY 2007. In terms of sales, growth is expected to be in the low-single-digits on a currency neutral basis. However, gross profit margin should come in better-than-anticipated but compensated by a higher cost ratio. Hence, EBIT should almost develop in-line with sales providing an EBIT margin nearly on last years level. Tax rate is estimated at or around 29%.
“Based on the positive momentum in our order backlog, we anticipate a solid finish to 2007 to achieve our full-year guidance,” said Puma CEO Jochen Zeitz in a release.
