Puma sales in the Americas region returned to growth in the first quarter due to gains in Latin America and overall strength in performance and retro footwear styles. North America delivered sequential improvement and remains on track to resume growth in the second half, Puma officials said on a media call.

Guidance was reiterated for the full year.

Overall, sales and earnings were down in the first quarter ended March 31 but in line with expectations despite currency headwinds and “the volatile market environment,” Puma officials said on a media call.

“We knew that Q1 was the most challenging quarter of this year, and we expected this Q1 to be flattish and then see sequential improvement quarter over quarter. This is exactly what we have seen so far,” said Arne Freundt, Puma’s CEO, on the call.

Freundt said Puma was able to deliver growth and gross profit margin improvement in the quarter despite significant currency headwinds and high prior year comparisons. “Our retail partners are still working through elevated stock levels, but as our sell-through was higher than our sell-ins, we jointly improved the inventory levels in the wholesale channel.”

He said Puma expects improved sell-in in the second quarter. He pointed to double-digit growth in DTC with fewer discounts as a sign of continued strong demand for the brand. Freundt said, “We started in Q2 with acceleration versus Q1. I’m very confident that we are well on track to achieve our currency-adjusted growth of mid-single digit this year as well as an EBIT between €620 and €700 million.”

In the quarter, sales inched up 0.5 percent on a currency-neutral basis to €2.1 billion ($2.3 bn), with the modest growth partly reflecting a strong quarter in the previous year. In the year-ago quarter, revenues jumped 14.4 percent on a currency-neutral basis. Excluding the impact of currency fluctuations, sales were down 3.9 percent on a reported basis.

Regional Performance
By region, sales in the Americas grew 1.0 percent to €790.0 million, marking the region’s first positive performance in four quarters. An 8 percent gain in Latin America offset continued declines in North America.

Freundt said on the media call, “On the North American side, we saw a further sequential improvement versus Q4 last year, and we are on a very good trajectory to return back to growth in H2,” led by the U.S.

In reporting fourth-quarter results in February, Freundt had said U.S. sales were “soft” in January with “high promotions, traffic down and less units being sold.” At the time, he forecasted a return to growth in the U.S. in the second half.

Latin America sales grew 8 percent in the first quarter and continued a robust growth which the company has seen over the last two years. Warehouse moves in two of its five countries in Latin America to support future growth will create some “operational challenges” in the near term. However, double-digit growth currently being seen in DTC operations provides confidence that Puma “can continue to deliver over proportionate growth” in Latin America, said Freundt.

In the EMEA region, sales were flat on a currency-neutral basis at €855.7 million, with Europe coming in better than expected. High-single-digit DTC growth in Europe and Q2 EMEA growth overall is expected to improve sequentially based on quarter-to-date performance.

In the Asia/Pacific region, sales increased 0.6 percent on a currency-neutral basis to €456.6 million. The gains were driven by continued strength in Greater China, with gains in Mainland China offsetting a “softer” Taiwanese business, according to Freundt.

Channel Performance
Wholesale sales declined 2.9 percent on a currency-neutral basis in the quarter to €1.61 billion as the brand continues to focus on “strong sell-through and prudent sell-in” to improve inventory levels and reduce promotional pressures. Freundt said, “We anticipate and already see now in April that the sell-in is starting to improve; this is exactly the sequence we already anticipated at the beginning of the year.”

Companywide, inventories decreased by 16.8 percent year-over-year.

DTC sales grew 13.5 percent on a currency-neutral basis to €494.2 million, driven by “ongoing brand demand and the very strong sell-through.” Freundt noted that the gains came despite efforts to reduce promotions typically used during the first quarter.

Product Performance
By product category, the gains were led by footwear, up 3.1 percent on a currency-neutral basis to $1.18 billion, primarily driven by continued strong demand for its global football (soccer) and other performance categories. Sales in apparel were down 2.4 percent on a currency-neutral basis to $608.1 million, while accessories sales gave back 3.2 percent on a currency-neutral basis to $312.7 million.

Regarding the apparel weakness, Freundt said the “competitive dynamic in apparel is different than in footwear,” with more competitors in the space and apparel inventories remaining more elevated than other categories. Still, he noted that “some competitors are getting a better performance” in apparel than Puma. As a result, the brand is overhauling its product architecture in training apparel with a planned relaunch of the category in the second half of 2025.

By month, Freundt said Puma had a “very soft January, a better February and a very strong March.” With a shift in Easter affecting comparisons, March and April combined delivered a healthy high-single-digit growth rate. Said Freundt, “We are off to a good start to Q2 and, also, when you look at the trajectory of China and the U.S., I’m very happy with the progress fully in line with our strategy.”

Margin Performance
Gross margin improved 100 basis points to 47.5 percent, slightly better than expected. The negative impact from currency fluctuations of more than 300 basis points was offset by improvements in sourcing and freight costs and stable promotions overall, as reduced promotional pressures in EMEA and APAC offset elevated promotions in the Americas. On the call, Hubert Hinterseher, CFO, said that Puma could sell more product at higher price points, reflecting a healthy product mix and progress in its “brand elevation” efforts.

Operating expenses (OPEX) decreased 0.4 percent to €845.3 million, or flat as a percent of sales versus the year-ago quarter. Results were in line with expectations as continued cost discipline offset warehouse ramp-up costs, investments in digital infrastructure, and inflationary pressures.

EBIT decreased 9.4 percent to €159.0 million while EBIT margin declined 50 basis points to 7.6 percent. Net income declined further, down 25.5 percent to €87.3 million, as last year’s gains benefited from hedging that did not repeat this year, as well as higher interest rates in the current period.

Brand and Product Updates
Commenting on the brand and product side, Freundt said Puma is “building up traction in sports” on the performance side with the benefit of strong response to launches.

In soccer, the boot Future 7 continues to show the highest market share gains in Q1 across all competitive footwear franchises, while the fourth kits for Manchester City and AC Milan sold out in record time. In the lead up to the Copa América and Euro 2024, Puma signed Théo Hernandez, who plays for AC Milan and the France national team, and Weston McKennie, who plays for Juventus and the U.S. national team. With his U.S. teammates Christian Pulisic and Yunus Musah, whom Puma also endorsed, Freundt said Puma would have “a great presence during Copa America in the U.S.”

In basketball, Puma’s signature shoe for LaMelo Ball continues “to drive heat and strong sell-throughs in the market.” On May 17, Puma will launch its first signature lifestyle shoe LaFrancé for LaMelo Ball. Said Freundt, “We have very high expectations this will perform very well and bring the heat also to off-court.”

Puma’s All-Pro Nitro also, during the quarter, became the official shoe of NXTPro Hoops, a leading basketball circuit in the U.S., and will support both “visibility and credibility“ in basketball for the brand.

In running, a category Puma returned to in 2021, the Fast-R Nitro Elite 2 was recently awarded the Spanish CORREDOR award for the best new shoe of 2024. Runners in the pre-released Deviate Elite Nitro 3 running shoes recently placed in marathons in Boston, Paris and Houston, marking the first time elite runners wearing Puma earned podium finishes in a major marathon in more than two decades. Freundt said, “It’s a great step forward, underlying the strong performance of our running shoes.”

The Sportstyle category is going through a “transition year“ in 2024, although sales are starting to improve. Freundt said, “We already see that sales of our trending terrace and skate styles Palermo and Suede XL are accelerating month over month, and we are very excited to launch our vintage running franchise Easy Rider and low-profile shoes Mostro, Speedcat and Inhale this year. With our good order book for the year’s second half and the great start of our brand campaign, I feel very confident about our sequential quarter-over-quarter improvement in 2024.“

In marketing, launching Puma’s first brand campaign in a decade has delivered record KPIs (key performance indicators) for the brand, including views, impressions and engagement. The new campaign, featuring a consistent creative direction across all performance categories, was rolled out to take advantage of what Freundt called “2024 Year in Sport“ marked by the Paris Olympics and Copa América and Euro 2024.

Look Ahead
Puma reiterated its outlook, calling for mid-single-digit currency-adjusted sales growth and an operating result (EBIT) in the range of €620 million to €700 million this year, up from €621.6 million in 2023.

“We’re making further progress in brand elevation and, step by step, we’re becoming more of a sports brand,“ said Freundt. “So, if you take together the first chapter, you see we are having an ongoing momentum performance. We’re starting to build up traction with our sports and the newness we bring to the market, and we are making progress in brand elevation.“

Image courtesy Puma