Puma AG has run into a snag in its plans to reach $4 billion in sales by the end of its Phase IV initiative, but the company apparently sees the current situation as more of a bump along the road than a shift in direction for the brand. The company is taking a major hit in the U.S., due primarily if not completely to a cut in business from one of its major customers, presumably Foot Locker, Inc., and the Europe business is under pressure from the challenges of comping against a strong year last year when the World Cup was held in Germany.
Puma reported that first quarter consolidated sales grew 2.0% to 655.8 million from 642.8 million in Q1 2006, representing a growth rate of 7.4% in currency-neutral terms. Sales in Footwear were up 3.6% (+9.0% c-n) to 413.5 million from 399.1 million in the year-ago period, while Apparel sales dipped 0.4% (+4.8% c-n) to 200.7 million from 201.6 million last year and Accessories sales declined 1.2% (+4.7% c-n) to 41.7 million from 42.2 million in the prior-year quarter. PUMAs worldwide branded sales, which include consolidated and license sales, rose 3.5% (+8.9% c-n) to 762.1 million ($999 mm).
Worldwide owned-retail revenues increased roughly 21% to approximately 81 million ($106 mm), or about 12.3% of total revenues in Q1, from approximately 67 million (80 mm), or 10.4% of total revenues, in the first quarter last year. Excluding the owned-retail contribution, worldwide wholesale sales would have apparently dipped a bit for the period to 575 million ($754 mm) from 576 million ($693 mm) in Q1 last year.
The EMEA region, which includes Europe, the Middle East, and Africa, saw revenues increase 6.4% to 360.9 million. The currency-neutral sales gain was pegged at 8.0% for the period. EMEA increased its overall contribution to 55.0% of total sales in Q1, compared to 52.8% in the year-ago period, despite the absence of any major sporting event this year. The sales growth came at a price though, as gross margins dipped 150 basis points to 53.7% of sales. Looking ahead, order backlog for the region was down 0.8% at quarter-end to 595.3 million ($794 mm), or a 0.8% increase in currency-neutral terms.
The Americas experienced a 4.2% sales decline for the quarter to 174.3 million, but revenues were actually up 4.5% when accounting for fluctuations in currency.
The Americas region accounted for 26.6% of sales in Q1, compared to 28.3% of sales in the year-ago period. However, gross margins jumped 220 basis points to 49.7% of sales. Order backlog at quarter-end was down 16.0% (-8.6% c-n) to 260.6 million ($348 mm).
First quarter sales in the U.S. were roughly flat to last year when measured in U.S. Dollars, coming in at $156.2 million for the quarter, but the order backlog at quarter-end declined 17.6%, which Puma said was due primarily to a “business related adjustment” with the one key account that had “seen a significant sales increase in the prior years,” as well as a “generally moderating environment in the U.S. mall business.” Mr. Zeitz also said that “more technical product, hence more bulky looks” may have increased shelf space in the U.S.
Asia/Pacific region revenues declined 0.9% (+8.6% c-n) to 120.6 million for the Q1, with a strong double-digit currency-neutral increase coming from China. The total region accounts for 18.4% of sales versus 18.9% last year. Gross profit margin was down 50 basis points to 51.4% of sales. The order book at the end of the quarter was up 10.9% to 206.9 million ($276 mm), or a 20.0% increase when accounting for currency.
Total futures backlog was down 3.1% at quarter-end to 1.06 billion ($1.42 bn), but showed a 1.4% increase on a currency-adjusted basis. Second quarter backlog was said to be down in low double-digits, reflecting in part the World Cup challenge from last year. Footwear backlog fell 9.1% (-4.5% c-n) to 654.5 million ($873 mm), while Apparel was up 11.1% (15.4% c-n) to 343.2 million ($458 mm), and Accessories dipped 4.3% (+0.1% c-n) to 65.1 million ($87 mm).
Puma management said they now expect sales and earnings growth in the low-single-digits for the full year. EBIT is expected to develop “in line with sales,” while the tax rate should come in at last years level.
>>> There also appears to be some pricing pressure for the brand that once owned a space that has now become a bit crowded — and some suggest, over-hyped and distributed — in the U.S
| Puma AG | ||||||
| First Quarter Results | ||||||
| (in $ millions) | Group Sales | Backlog Change | ||||
| 2007 | 2006 | Change | Neutral* | Change | Neutral* | |
| Group Sales | $859.4 | $773.0 | +2.0% | +7.4% | -3.1% | +1.4% |
| EMEA | $472.9 | $408.0 | +6.4% | +8.0% | -0.8% | +0.8% |
| Americas | $228.4 | $218.7 | -4.2% | +4.5% | -16.0% | -8.6% |
| U.S.** | $204.7 | $188.3 | n/a | +8.7% | n/a | -17.6% |
| Asia/Pacific | $158.0 | $146.4 | -0.9% | +8.6% | +10.9% | +20.0% |
| Footwear | $541.9 | $479.9 | +3.6% | +9.0% | -9.1% | -4.5% |
| Apparel | $263.0 | $242.4 | -0.4% | +4.8% | +11.1% | +15.4% |
| Accessories | $54.6 | $50.7 | -1.2% | +4.7% | -4.3% | +0.1% |
| Net Income | $126.6 | |||||
