Puma AG posted flat consolidated net sales growth in second quarter on a currency-adjusted basis, but revenues rose 4.1% to €600.3 million ($818 mm) when measured in the reported euro terms.  Total worldwide sales under the Puma brand, which includes both consolidated and license sales, inched up 1.2% to €636.5 million ($867 mm) during the 2009 second quarter, reflecting a currency-adjusted decrease of 2.6% for the period. 


The licensed business decreased in the second quarter by 30.5% (32.2% currency-adjusted) to €36.2 million ($49 mm) for the quarter and the related royalty and commission income declined 18.8% to €5.2 million due to the move of more distributor business in-house.
On a currency-neutral basis, Footwear revenues were down 2.0% to €330.0 million ($449 mm) for the quarter and Apparel sales decreased 5.7% to €203.8 million ($278 mm).  Accessories sales jumped 41.2% to €66.4 million ($90 mm), which the company said was due primarily to first time consolidations.

Puma consolidated sales in the EMEA region declined 3.8% in euro terms to €288.3 million ($393 mm) in the second quarter, a currency-adjusted decrease of 1.4%. Gross margin declined 260 basis points to 51.5% of regional sales compared to 54.1% of sales in Q2 last year. 

Second quarter sales in the Americas were up 6.9%, currency-adjusted, to €168.6 million ($230 mm), reflecting a 14.9% increase in sales in euro terms. The region accounted for 28.1% of consolidated sales in Q2 compared to 25.4% in Q2 last year. Gross margin in the Americas was 47.6% of net regional sales in the quarter, flat to Q2 last year’s margin. In the U.S. market, sales increased 4.8% in U.S. dollar terms to $132.7 million in the second quarter, reversing the year-ago trend when it dipped about one percent in the second quarter.  The U.S., which saw a benefit from an expanding mall business after a pull-back in sales to the channel in spring last year, represented 16.2% of Puma consolidated sales in the period, compared to 14.0% in the year-ago period. 

Sales in the Asia/Pacific region decreased in the second quarter by 4.5% currency-adjusted to €143.4 million ($195 mm). The total region accounted for 23.9% of sales. Gross profit margin reached 49.9% of sales in the second quarter versus 54.2% in Q2 last year.

Puma said in a release the overall market environment, paired with a change in the regional sales mix, resulted in a 250 basis point decline in gross margin to 50.0% of net sales from last year’s 52.5% of net sales.  Footwear margins shrank 460 basis points in the quarter to 48.7% of sales, while apparel margins narrowed 80 basis points to 50.7% of sales, offset a bit by accessories margins, which expanded 370 basis points to 54.2% of sales from 50.5% of sales in Q2 last year.

Puma operating profit declined 9.2% in euro terms to €63.1 million ($86 mm) in the second quarter, or a 30 basis point dip in operating margin to 10.5% of sales in Q2 this year.  The company’s pre-tax profit was €61.0 million ($83 mm) in the second quarter versus €62.4 million ($98 mm) last year.  Net income totaled €38.5 million ($52 mm) versus €45.6 million ($71 mm) in Q2 2008, a decline of 15.6% year-on-year.  EPS was €2.55 ($3.47) compared to €2.98 ($4.66) in Q2 2008.

Inventories at quarter-end rose 3.0% to €432.1 million ($607 mm).
Management went on to say that a solid first half performance and a pro-active restructuring and reengineering program, which has achieved “improvements in operating expenses, working capital and free cash flow,” have enabled Puma to “protect its industry leading key-financial parameters.”  Management said that further improvements are expected to be realized over the next 18 months as the program continues to “yield additional efficiencies and cost savings.” However, management said they remain highly cautious and anticipate a “continued challenging and volatile retail industry due to the decline of private consumption as a result of the weakness in the global economy, which may negatively impact sales in second half.”

In its interim report, the company suggested that the first positive signs [in the business] are not expected before 2010, which will be highlighted by the upcoming Football World Cup in South Africa, where Puma plans to be one of the “most dominant brands.”  Puma, which made moves during the last World Cup to sign African teams, currently outfits eleven African Football Federations including Egypt, the African Cup of Nations winner 2008, as well as the reigning World Champ, Italy.