Puma AG reported that brand sales in the third quarter, which include consolidated and license sales, decreased by 7.6% in euro terms, or by 8.3% currency-adjusted, to €719.6 million ($1.03 bn).
Consolidated sales in the third quarter decreased by 6.3% currency-neutral, or by 5.5% in euro terms, to €673.4 million ($962 mm). On a currency-neutral basis, Footwear sales were down by 13.0% at €358.7 million ($513 mm), and Apparel sales decreased by 5.2% to €238.1 million ($340 mm). Due to first time consolidations, Accessories sales improved significantly by 38.5% to €76.6 million ($109 mm).
Third quarter gross margin decreased from 53.6% of sales in Q3 last year to 51.9% of sales this year. This decline mainly derives from further inventory reduction programs and changes in the product and regional mix, as well as higher raw material costs.
Operating expenses decreased by 2.5% to €256.9 million ($367 mm) in the third quarter.
Amid lower sales combined with the softened margin in the quarter, the operating result came in at €98.0 million ($140 mm) in the quarter versus €125.0 million ($188 mm) last year. As a percentage of sales, it fell to 14.5% from 17.5% last year.
Special Items Reengineering and Restructuring Program
The reengineering and restructuring program, which resulted in a one-time charge of €110 million in the first quarter, will continue as planned and should be largely finalized by the end of 2009. The program will provide for a more efficient, leaner and faster business platform to adjust to the current market conditions.
The company’s pre-tax profit (EBT) was €96.0 million ($137 mm) in the third quarter versus €124.5 million ($188 mm) last year. Net earnings totaled €67.9 million ($97 mm) versus €89.0 million ($134 mm), a decline of 23.6%. This translated into earnings per share of €4.50 ($6.43) compared to €5.81 ($8.75).
In the EMEA region, third quarter sales decreased by 3.1% currency-neutral and totaled €366.4 million ($524 mm) in the third quarter. While the sales performance in Western Europe was impacted by promotional sales due to the current market situation, the EEMEA region managed to stay on prior year level. Gross profit margin was at 52.8% compared to 56.4% last year.
Sales in the Americas were down by 11.2% currency-adjusted at €165.4 million ($236 mm) in the third quarter. Gross profit margin was at 49.4% compared to 48.9% last year.
In the U.S. market, sales decreased by 11.3% to $129.5 million in the third quarter.
For the Latin American region this quarter was characterized by the convergence of increased import restrictions and other conditions which had negative impacts on sales performance.
In the Asia/Pacific region, sales fell by 8.3% in the third quarter currency-neutral, but increased in euro terms by 1.2% to €141.6 million ($202 mm). Gross profit margin reached 52.5% versus 52.0% last year.
PUMA adhered to its plan to significantly reduce inventory, which improved by 17.5% to €356.4 million ($520 mm). Accounts receivable were slightly below last year’s level at €530.7 million ($774 mm). Working capital improved to €523.3 million (ex acquisition €507.6 million) from €599.6 million last year showing again a significant enhancement compared to previous quarters and thus underpinning our strong focus on managing working capital.
In the first nine months, the company invested €40.8 million versus €79.1 million last year. The reduction in capital expenditure together with a solid improvement in working capital led to a strong increase in PUMA’s free cashflow of €145.1 million from €17.2 million, showing a strong enhancement compared to last year. An outflow of €75.8 million versus €24.9 million last year is related to acquisitions. Taking these acquisitions into account, the free cashflow amounted to €69.4 million versus an outflow of €7.7 million last year.
Given the strong focus on cash management, total cash at the end of September rose from €297.3 million to € 376.9 million and bank debts declined from €61.1 million to €37.4 million this year. As a result, net cash was up from €236.2 million to €339.5 million this year, a respectable increase of 43.7%.
The market and consumer environment is expected to remain challenging. The reengineering and restructuring program is planned to be finalized by the end of the year and will generate improvements in efficiency and cost savings in the future.