After years of double-digit growth, Puma AG came back down to earth in 2007, posting weaker growth for the year despite the continued consolidation of former distributors and a growing owned-retail business, thanks in large part to a decline in the U.S. and the Americas that came as a result of both lower sales and a strong euro currency. While reported sales were up just 0.2% for the year, currency-neutral revenues were up 4.7%, reflecting in part the weaker U.S. business and dollar. Sales in Europe were up in mid-single-digits and Asia got a boost from the addition of the South Korea distributor to the mix, but the Americas region took a hit from a U.S. business that was down nearly 10% for the year.
The company reported that fourth quarter consolidated sales increased 5.0% to 504.5 million ($731 mm) from 480.6 million ($620 mm) in the prior-year period. Currency fluctuations, primarily the weaker U.S. dollar, had a big impact on the results for the quarter as currency-neutral sales increased 10.3%. Excluding the U.S. business, total revenues would have been up 11.7% when measured in euros. Footwear sales rose 1.5% (7.0% c-n) to 277.2 million ($401 mm) from 273.2 million ($352 mm) in Q4 2006. Apparel was the major growth contributor for the quarter, growing 9.8% (14.8% c-n) to 194.7 million ($282 mm) from 177.4 million ($229 mm) in the prior-year period. Accessories revenues grew 9.0% (14.0% c-n) for the quarter to 32.6 million ($47 mm).
On a regional basis, the EMEA region, which includes Europe, the Middle East, and Africa, saw sales for the fourth quarter increase 19.3% (19.9% c-n) to 215.1 million ($312 mm) from 180.3 million ($233 mm) in the year-ago period. The Americas region posted an 11.6% decrease for the quarter to 154.8 million ($175 mm), compared to 175.2 million ($226 mm) in Q4 2006. Currency-neutral sales were up 3.3% for the period. The Americas saw less growth in 2007 in part from the anniversary of the integration of Mexico, Argentina, and Canada into the Puma Group in 2006, but the U.S. cut further into the gains. Sales in the U.S. declined 7.4% for the quarter when measured in U.S. dollars, posting sales of $131.3 million in Q4 versus $141.8 million in the 2006 quarter.
Excluding the U.S. business, the Americas would have been up 10.5% measured in U.S. dollars, or up 1.7% measured in euros. Sales in Asia Pacific, which got a boost from the integration of Japan and South Korea into the Group, increased 7.6% (+14.3% c-n) to 134.6 million ($195 mm) from 125.1 million ($161 mm) in the year-ago period.
While the U.S. business decline hurt the top-line, it had a positive impact on gross margins as the lower-margin, currency-impacted U.S. business, which was also affected by less business with Foot Locker, became a smaller piece of the overall pie. Overall gross margins improved 390 basis points to 51.6% of sales, compared to 47.7% of sales in the prior-year period. Net earnings were up 16.8% for the quarter to 38.3 million ($56 mm), or 2.39 per diluted share, compared to 32.8 million ($42 mm), or 2.03 per diluted share, in Q4 last year.
The EMEA region closed the year with backlog up 9.1% to 712.0 million ($1.05 bn). The Americas, which took a hit from the U.S. declines, saw backlog decline 11.0% to 241.3 million ($355 mm). Puma did not report U.S. backlog figures for the first time in recent memory even though those numbers would have presumably benefited in part from the year-ago “planned reduction of sales” with Foot Locker. In Asia, backlog was up 19.8% to 234.4 million ($345 mm) at year-end.
Overall footwear backlog was up only 0.6% to 716.8 million ($1.06 bn), or a 4.7% increase when measured in currency-neutral terms. Apparel orders were up 16.9% (+19.9% c-n) to 397.7 million ($586 mm) and Accessories rose by 9.9% to 68.9 million ($102 mm).
Puma opened a total of 25 concept stores worldwide again in 2007, matching their 2006 growth total, giving the company a total of 116 concept stores at year-end, including two stores operated by licensees. Even revenues from owned-retail slowed in 2007, growing at 18.0% — or roughly half the rate of 2006 — to 406.4 million ($557 mm), accounting for 17.1% of revenues, compared to 14.5% of revenues in 2006.
Excluding owned-retail, Puma AG saw revenues decline 2.9% for the year.
