Puma SE CEO Arne Freundt ticked off several advancements made by the Puma brand in 2024, whether it was solid sales growth on a currency-adjusted basis, improved gross profit margin, progress with the company’s Brand Elevation Strategy, or posting strong growth in its performance categories. However, in the end, improvement in the bottom line continues to be elusive for the brand as net income declined for the full year.
“I am not satisfied with our stagnant profitability,” Freundt commented in a Wednesday morning, March 12, earnings release for the 2024 full year and fourth quarter. “We must address our current cost trend, and we have already been taking decisive actions to improve the situation with our next-level program.”
Freundt said the outlook for 2025 is below expectations the company set a year ago, both in terms of top and bottom lines. The company attempted to get the weak outlook out of the way before the earnings release, issuing a warning the day before earnings. That early guidance and the release of earnings on Wednesday combined to send Puma shares down 23 percent in early trading on March 12.
“We are fully aware of the root causes of our challenges and are addressing them with full focus and rigor,” the CEO said.
In a press conference Wednesday, Chief Financial Officer Markus Neubrand said the company plans to cut 500 jobs worldwide and close some unprofitable stores as part of a cost-cutting plan, based on early reporting from Reuters.
Fourth Quarter 2024
Puma’s fourth-quarter sales grew 9.8 percent currency-adjusted (ca) to €2.29 billion (+15.5 percent reported terms), revealing an improvement throughout the year. Year-over-year (y/y) sales growth reportedly came from all regions, product divisions, and distribution channels. As anticipated, currencies shifted from a headwind to a tailwind in the fourth quarter.
Region Sales
Sales in the EMEA region increased by 14.6 percent ca to €796.5 million, reportedly driven by double-digit growth in Europe and EEMEA.
In the Americas region, sales increased by 6.5 percent ca to €986.3 million, with both North America and Latin America contributing to the growth. However, the company reported that the backlog constraints from warehouse operations in the previous quarter impacted Latin America’s growth during the quarter.
The Asia/Pacific region recorded sales growth of 9.5 percent ca to €506.6 million, reflecting stronger growth when compared sequentially to the first nine months of 2024 despite an ongoing softness in Greater China.
Channel Sales
Wholesale business grew by 6.9 percent ca to €1.53 billion in Q4. The emphasis on sell-through in the first half of 2024 reportedly laid the foundation for increased sell-in during the second half of 2024.
The Direct-to-Consumer (DTC) business grew by 16.1 percent ca to €763.5 million in Q4, which was said to be in line with the year-to-date trend and reflects the continued brand momentum. Sales in owned & operated retail stores increased 12.8 percent ca, while e-commerce grew 22.0 percent ca. Consequently, the DTC share rose to 33.4 percent, up from 31.6 percent in Q4 2023.
Category Sales
Footwear sales increased 9.2 percent ca y/y to €1.21 billion in Q4, said to be driven by growth in Performance, primarily in the Running category, and in Sportstyle driven by Core and Kids’ business. Additionally, the elevated Sportstyle Select business also reportedly contributed to the growth.
Apparel sales increased by 8.8 percent ca y/y to €736.5 million in Q4 and Accessories sales grew by 14.5 percent ca y/y to €338.0 million in Q4.
Income Statement Summary
The fourth quarter gross profit margin improved 30 basis points to 47.3 percent of sales, compared to 47.0 percent in Q4 2023. Currency effects and sourcing were a tailwind in the quarter, although this was reportedly partially offset by a generally more promotional environment.
Operating expenses (OPEX) increased by 15.8 percent to €982.2 million in Q4 from €848.0 million in Q4 2023. The increase was primarily driven by a lower base resulting from the Argentine peso devaluation in the previous year’s quarter, an increased DTC share, and investments in infrastructure. The OPEX ratio increased by 10 basis points to 42.9 percent of sales in the quarter.
Operating profit (EBIT) increased 15.3 percent to €108.9 million, or 4.8 percent of sales, compared to €94.4 million, or 4.8 percent of sales, in Q4 2023, reportedly due to sales growth and gross profit margin improvement.
Financial position improved to a negative €43.5 million in Q4 from a negative €67.1 million in Q4 2023. This improvement was primarily driven by a lower base in the fourth quarter of 2023, which was impacted by negative conversion effects from valuation losses related to the devaluation of the Argentine peso.
Tax expenses increased to €20.7 million (Q4 2023: €4.9 million), and the tax rate was at 31.7 percent (Q4 2023: 18.0 percent), mainly due to a different regional profit mix and adjustments in tax rates.
Consequently, net income was €24.5 million in Q4, compared to €0.8 million in Q4 2023 and earnings per share amounted to €0.16 in Q4 2024, compared a €0.01 in Q4 2023.
2025 Outlook
Puma is reporting ahead of its 2024 earnings release that it anticipates ongoing geopolitical tensions and economic challenges in 2025, especially trade disputes and currency volatility. Against this backdrop, Puma said it now expects currency-adjusted sales to grow in the low- to mid-single-digit percentage range.
Due to its Nextlevel cost efficiency program, Puma expects to incur one-time costs of up to €75 million in 2025. In return, the company expects to generate additional EBIT of up to €100 million in 2025 compared to 2024. The net contribution from the Nextlevel cost efficiency program to EBIT in 2025 is projected to be up to €25 million.
To provide a reliable outlook for the business’s underlying performance, the company provided an adjusted EBIT outlook for 2025, excluding one-time costs, from €520 million to €600 million for the financial year 2025. Including one-time costs of up to €75 million from the Nextlevel program, EBIT in 2025 is expected to range between €445 million and €525 million against EBIT of €622 million in 2024.
For the first quarter, Puma said it anticipates currency-adjusted sales growth to be down in low-single-digits versus the 2024 Q1 level, primarily due to a soft performance in the U.S. and China. Due to inventory valuation effects in 2024, a higher OPEX run rate, and a different phasing of marketing expenses, adjusted EBIT is projected to be around €70 million for the quarter. Including one-time costs, first quarter EBIT is expected to be significantly below the Q1 2024 level at €159.0 million.
For the financial year 2024, with a net income of €281.6 million and considering the executed share buyback of €50 million, the Management Board and the Supervisory Board of Puma SE are expected to propose a dividend distribution of €0.61 at the Annual General Meeting on May 21, 2025.
Image courtesy Puma
