In Q4, consolidated sales increased significantly by 10.3% to 504.5 million ($730.8 mm) on a currency-adjusted basis. Footwear rose by 7.0% to 277.2 million ($401.5 mm), Apparel by 14.8% to 194.7 million ($282.0 mm) and Accessories by 14.0% to 32.6 million ($47.2 mm). By regions, EMEA sales increased by 19.9% and Asia/Pacific went up by 14.3% whereas sales in the Americas decreased by 3.3% as expected.
The gross profit margin was at 51.6% 390 basis points up from last years quarter. SG&A increased from 38.7% to 40.3% of sales. EBIT rose significantly by 20.7% to 52.4 million ($75.9 mm) and earnings per share from 2.03 ($2.62) to 2.40 ($3.48).
Highlights January December 2007
Licensed business
License sales declined by 3.8% to 365.3 million ($500.7 mm) on a currency neutral basis. The decrease is attributable to expired licence agreements. On a comparative basis, licence sales rose by approximately 4%. As of 2008, the Korean market will be serviced through the fully-owned subsidiary and will therefore be converted from a licence business into a consolidated business.
Overall, royalty and commission income from license sales amounted to 35.6 million ($48.8 mm). This corresponds to 9.7% of license sales compared to 9.6% in the previous year.
Consolidated sales up almost 5%
PUMA succeeded in increasing its consolidated sales for the thirteenth consecutive year, including ten years of double-digit growth. In the 2007 financial year, currency adjusted sales rose by 4.7% to a total of 2.37 billion ($3.25 bn). Currency effects impacted negatively in Euro terms. The currency adjusted sales in the Footwear segment posted a 2.1% increase to 1.39 billion ($1.90 bn). The Apparel segment grew by 8.6% to 827.3 million ($1.13 bn). In the Accessories segment sales were up by 7.8% to 158.3 million ($217.0 bn).
Regional Development
In spite of the fewer events in 2007 compared to the previous year, solid growth was achieved in the EMEA region. The currency adjusted sales rose by 7.8% to 1.24 billion ($1.69 bn). Nearly all countries in this region contributed to the growth. The EMEA regions share in consolidated sales rose to 52.0%, compared to 48.9% in the previous year. By product segments, Footwear sales increased by 5.6%, Apparel by 11.6%, and Accessories by 7.4%, on a comparative basis. The gross profit margin reached 53.9% after 53.8% in the previous year. The operating margin (EBIT) accounted for 21.2% of sales, compared to 22.0% in the previous year.
Currency adjusted sales in America declined by 4.3% and amounted to 641.2 million ($878.9 mm). The share in consolidated sales decreased from 30.6% to 27.0%. This is largely related to adaptation of the business with a key account customer in the USA, who in the past years had recorded strong growth in sales, and a constant moderate environment in U.S. shopping centers (malls). As a result of these developments, the U.S. market, which is the largest in the region, declined after several years of double-digit growth; in 2007 currency-adjusted sales decreased by 9.5% to a total of $561.1 million.
According to product segments in the region, Footwear posted a 5.7% decrease and Apparel declined by 2.6%. Sales in Accessories were up by 11.4%. The gross profit margin grew from 46.1% to 50.7% owing to a significant improvement in the USA. Realization of the announced streamlining of the distribution structure thus impacted very positively on the gross profit margin. The operating margin was 17.6%, compared to 17.4% in the previous year.
In the Asia/Pacific region, currency adjusted sales grew significantly by 10.1% to 497.0 million ($681.2 mm). China, in particular, contributed to this positive result. Total region increased its share in consolidated sales from 20.5% to 20.9%. According to product segments, Footwear showed a currency adjusted increase by 11.3%, Apparel by 10.0%, and Accessories by 6.1%. The gross profit margin increased from 49.8% in the previous year to 50.6%. The operating margin was 20.4%, compared to 21.9% in the previous year.
Expansion of the Groups own retailing activities progressed as planned during the 2007 financial year. An additional 25 PUMA concept stores were opened worldwide in 2007, resulting in 116 concept stores at the end of 2007, including two stores operated by licensee. Sales from the Companys own retail operations grew by 18.0% to 406.4 million ($557.1 mm) in 2007. The share in consolidated sales rose from 14.5% to 17.1%.
Significant increase in gross profit margin
The desirability of the brand is reflected, in particular, in the gross profit margin. In FY2007, the gross profit margin grew strongly by 170 basis points to 52.3%. According to product segments, the Footwear gross profit margin increased from 50.3% to 52.3% and Apparel from 50.7% to 52.2%. Accessories reached a gross profit margin of 52.8% versus 53.3%.
Investments in the brand continue as planned
Operating expenses rose by 3.5% to 859.2 million ($1.12 bn) in the 2007 financial year. The cost ratio increased from 35.0% to 36.2% of sales owing to continued scheduled brand investments and infrastructure investments.
Investments in Marketing/Retail totalled 424.9 million ($625.8 mm). The cost ratio rose from 17.7% to 17.9% of sales, whereby marketing expenses declined in comparison with the previous year while expenses incurred for retail operations saw a scheduled increase. Product development and design expenses climbed to 57.5 million, and at 2.4% of sales, remained constant in comparison with the previous year. Other selling, general and administrative expenses rose to 376.7 million ($554.8 mm) or from 14.9% to 15.9% of sales. The total includes one-off expenses and start-up costs for the new subsidiary in Korea.
EBIT above last year
Operating profit (EBIT) climbed to 372.0 million from 368.0 million in 2006. As a percentage of sales, this corresponds to an operating margin of 15.7%, compared to 15.5%.
Like-for-like, the financial result increased strongly from 6.0 million to 10.5 million. The financial result includes interest income of 21.2 million and interest expenses of 5.3 million. The net interest result corresponds to an average rate of return of 3.9%, compared to 3.1% in the previous year.
Earnings before taxes (EBT) reached 382.6 million ($524.4 mm) versus 374.0 million ($469.8 mm) in the previous year. As a percentage of sales this corresponds to a return of 16.1%, compared to 15.8%.
Net Earnings
Net earnings improved by 2.2% to 269.0 million ($368.7 mm). This corresponds to a net return of 11.3%, compared to 11.1% in the previous year. Earnings per share amounted to 16.80 ($23.03), compared to 16.39 ($20.59), and the diluted earnings per share were 16.78 ($23.00), compared to 16.31 ($20.49).
Net Assets and Financial Position
Equity ratio at 62%
As of December 31, 2007 shareholders equity rose by 10.1% to 1.15 billion ($1.70 bn). The equity ratio reached 62.0% after 61.2% in the previous year. The balance sheet total climbed by 8.6% from 1.71 billion ($2.26 bn) to 1.86 billion ($2.74 bn).
Working Capital
Trade receivables grew by 4.2% to 389.6 million ($573.8 mm) due to the sales increase in the fourth quarter (+5.0%). Inventories increased by 2.6% to 373.6 million ($550.3 mm). The increase is attributable to the order position for deliveries in the first months of the 2008 financial year. The inventory structure was improved significantly in the course of the year, as previously announced. Taking short-term liabilities into account, working capital was 406.5 million ($598.7 mm) and accounted for 17.1% of sales, after 16.9% in the previous year.
Capex/Cashflow
Cash used for investing activity dropped significantly to 93.5 million ($137.7 mm). The decrease is due mostly to the cash used for regional expansion recorded in the previous year. The expansion of PUMAs own retail operations and current investments account for 103.4 million ($152.3 mm), according to plan.
The free cashflow (before acquisition) grew strongly by 138.3% to 218.3 million ($321.5 mm). As a percentage of sales, the free cashflow more than doubled from 3.9% to 9.2%.
