Puma AG again looked to a booming U.S. business to lead the way in the fourth quarter and also saw its order backlog get a boost from the addition of some Asia regions that have moved into the consolidated number for the company. The company beat their own as well as analysts’ estimates for the quarter and the year on their way to shifting the global business to a much more balanced portfolio across the regions.

Looking ahead, Puma is raising its outlook for 2006, now forecasting a 30% currency-neutral increase in consolidated sales for the year to reach approximately €2.30 billion. The company pointed to its stronger–than-expected-backlog position at year-end and the accelerated integration of six markets from licensed businesses to joint ventures as the primary drivers for the increased outlook.

Due to the shift of those former licensees, Asia/Pacific is expected to grow from 11% to 20% of consolidated revenue. Hong Kong, China, and Argentina will have minority partners, while Japan, Taiwan, and Canada are now company-owned businesses. America should continue to yield 27% of consolidated sales, while the EMEA region is expected to decline as planned from 62% to approximately 53%.

On the product side, Puma has now added denim to its mix, debuting a co-branded offering in its owned–retail stores this week as a test before rolling it out to its customer base. The product is expected to be priced “well above €100” at retail. Puma also introduced a new brown shoe line in Europe this past quarter and sell-through was said to be “very positive.”

Puma AG reported that consolidated net sales for the 2005 fourth quarter increased 22.0% on a currency-adjusted basis, or up 27.7% in Euro terms to €349.2 million ($415.2 mm), compared to €273.4 million ($354.6 mm) in Q4 last year. Footwear sales increased 25.8% to €221.3 million ($263 mm). Apparel climbed 31.8% to €101.0 million ($120 million). Accessories grew 28.9% to €26.9 million ($32 mm).

All regions contributed to the growth in the quarter. EMEA sales increased 6.0% in Q4 to €161.2 million ($191.8 mm), despite a decline in backlog at the end of the third quarter, while the Americas jumped 83.8% to €136.4 million ($162.3 mm). U.S. sales, measured in U.S. Dollars, surged 77.6% to $135.0 million from $76.0 million in Q4 last year. Asia/Pacific region sales rose 9.6% in the quarter to €51.6 million ($61.4 mm).

Gross margin declined 190 basis points to 50.0% of sales from 51.9% in the year-ago period, primarily due to a shift in sales to the U.S., which was offset a bit by improvements in the owned-retail business. Net income increased 14.8% to €44.1 million ($52.5 mm) in Q4 2004, compared to €38.4 million ($49.8 mm) in Q4 last year. Diluted earnings per share were €2.76 ($3.28), a 16.0% increase versus the €2.38 ($3.09) per share posted in Q4 last year.

The order backlog at year-end topped the billion Euro mark for the first time, thanks in large part to the inclusion of the newly consolidated markets in Asia and South America. Total backlog was up 30% to €1.07 billion at year-end from €823 million at year-end 2004. Currency-adjusted orders were up by 25.7% from the previous year and were up 13% to 14% when excluding the new subsidiaries. EMEA order backlog surprised many with the current state of the European economy, closing the year at €624 million ($739 mm), a 3.5% increase from last year. The Americas got a lift from both a strengthening U.S. business and the inclusion of the Argentina and Canada subsidiaries, surging 109% to €262 million ($310 mm). U.S. backlog continued to accelerate, increasing 63.6% to $262 million at year-end. In Asia, the Apparel business in Japan as well as the Puma business in China, Hong Kong and Taiwan will be consolidated for the first time, a new structure that helped push backlog up nearly 100% from the previous year’s level. Asia backlog was €159 million ($188 mm) at year-end.

Company Chairman and CEO Jochen Zeitz said the backlog increase for the 2006 second quarter was “significantly higher” than the first quarter. He said the Q1 backlog was up 20%, while Q2 was up “well over 30%.”

Puma opened a total of 20 concept stores worldwide in 2005, giving the company a total of 66 concept stores at year-end, including seven stores operated by licensees. Revenues from owned-retail were up 47.2% to €247 million ($294 mm), accounting for 13.9% of revenues, compared to 11.0% of revenues in 2004. Comps rose in the single-digits.

Puma, Inc.
Full-Year Results
(in $ millions) Full-Year Group Sales Backlog Change
2005 2004 € Change Neutral* Euros Neutral*
Group Sales $2,213 $1,904 16.2% 18.0% 30.0% 25.7%
EMEA $1,376 $1,302 5.6% – 3.5% –
Americas $593.2 $376.4 57.4% 55.9% 109% 85.7%
Asia/Pacific** $244.5 $225.1 8.5% 11.1% 100% n/a
Footwear $1,463 $1,258 16.2% n/a 23.0% n/a
Apparel $590.2 $517.4 13.9% n/a 50.1% n/a
Accessories $160.2 $128.0 25.0% n/a 31.5% n/a
Net Income  $355.9 $321.8 10.5%      
Diluted EPS   $22.02
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