Latin America Fuels Double-Digit Q4 Growth for Puma

Puma reported earnings more than doubled in the fourth quarter as currency-neutral sales grew 15.8 percent. For the full year, Puma, controlled by French luxury goods group PPR, accomplished its goal of reaching €3 billion ($3.96 bn) in revenues. Earnings for 2011 grew 13.8 percent, exceeding its forecast given when it released third-quarter results that called for a mid-single digit earnings gain.

“Our sales and earnings performance in the financial year 2011 bear testament to the fact that Puma is 'Back on The Attack,' and that our 5-year growth plan is already having a positive impact,” said Franz Koch, CEO of Puma SE. “We managed to surpass our sales target this year, eclipsing €3 billion in sales for the first time, while Puma’s net earnings also beat management’s expectations. With the support of a strong sports marketing portfolio we are well on track to explore the opportunities of the sports year 2012 as well as achieve our 2015 goal of €4 billion in sales. We expect a sales increase in the high single digits for this year.”

In the quarter, sales for Puma, which also includes the Cobra Golf and Tretorn, totaled €720.5 million ($951.1 mm), up 15.6 percent in Euro terms. Puma officials said the performance was driven across regions and came “despite the continued economic uncertainty stemming from the Euro-zone debt crisis, which continued unabated during the last three months of 2011.”

In the Americas, sales grew 27.8 percent currency neutral (CN) to €271 million ($357.7 mm), driven by Latin America. Latin American “continued to be a significant growth driver for Puma, and Motorsport remains the top performing category in the region.” Puma also indicated that the U.S. bounced back. Puma said, “The situation in the US improved, and sales accelerated during the fourth quarter, while Puma’s lifestyle products in particular resonated well with consumers.”

EMEA sales rose by 8.3 percent CN to €237 million ($312.8 mm). The UK and France performed well, while Russia led the improved performance in Eastern Europe. Puma said of the region, “Lifestyle products in particular continued to perform well, while our participation in the Volvo Ocean Race boosted sales in Puma’s Sailing category. Fitness also posted significant growth rates.”

Sales in Asia/Pacific improved by 11 percent CN to €212 million ($279.8 mm). Puma’s football shoes and lightweight running products, especially its FAAS range, continued to stand out in the region, while growing demand came from outdoor products in the region. Results in Japan, India and Korea remained “very strong” while China grew in line with expectations.

By product category, Footwear sales came in at €339 million ($447.5 mm), an increase of 11.4 percent CN. Apparel grew by 12.7 percent CN to €275 million ($363.0 mm). Accessories, including the consolidation of Cobra Golf, jumped 43.6 percent CN to €107 million ($141.2 mm).

Gross profit margin in the quarter improved to 46.7 percent from 45.4 percent despite continuing input price pressure. The gross profit margin for footwear increased from 43.4 percent to 46.6 percent. Apparel retreated from 47.0 percent to 45.9 percent, whereas Accessories rose to 49.0 percent from 48.4 percent. This increase stems from the overall product mix and an acceptance of the selective price rises indicated previously by Puma and implemented in the fourth quarter of 2011.

Operating expenses increased 18.4 percent to €292.3 million ($385.8 mm) but only expanded slightly as a percent of sales to 40.6 percent from 39.6 percent due to the sales leverage. The spending increase derives from the further investments as part of its “Back on the Attack” strategic growth plan. Additional funding in IT, the supply chain, marketing and product drove the increase.

EBIT in the quarter rose 72.6 percent to €48.1 million ($63.3 mm). Net earnings vaulted 136.9 percent to €33.1 million ($43.7 mm.)

For the full year, Puma's revenues grew 12.1 percent CN to €3 billion ($3.96 bn). Sales in EMEA rose 7.7 percent CN to €1.31 billion ($1.72 bn), Americas increased 17.7 percent CN to €967 million ($1.28 bn), and Asia/ Pacific increased 13.3 percent CN to €730 million ($963.6 mm.)

By category, Footwear grew 9.9 percent CN to €1.54 billion ($2.03 bn). Apparel rose at the same rate, reaching $1.04 billion ($1.36 bn) and surpassed the €1 billion mark for the first time. Accessories posted a 27.3 percent currency adjusted increase, up to €434 million ($572.9 mm), after Cobra Golf had been integrated for a full year for the first time in the financial year 2011.

Gross profit margin was stable in the year at 49.6 percent versus 49.7 percent in 2010 despite higher wage pressures and increasingly volatile commodity price movements. The Footwear margin rose slightly from 48.9 percent to 49.1 percent, Apparel dropped a percentage point to 49.6 percent and Accessories moved up one percentage point, to 51.6 percent.

Full year operating expenses were up 14.8 percent to €1.18 billion ($1.56 bn), in line with the “Back on the Attack” growth strategy. Marketing & Retail expense rose 9.8 percent to €550.7 million ($726.9 mm), but dropped slightly as a percentage of sales to 18.3 percent. EBIT rose by 8.6 percent to €333.2 million ($438.5 mm). For the full year of 2011, net earnings jumped 13.8 percent to €230.1 million ($303.7 mm).

Looking ahead, Puma said it expect sales to rise in the upper single-digit range in each of the next two years, driven by further investments into marketing, product design and development, structure in emerging markets as well as the optimization of processes, organization and systems. Earnings are expected to improve in the mid-single digit range for both years.