Puma AG reported that consolidated net sales grew 12.3% in to 395 million ($499 mm) from $425 mm) in the year-ago period. Currency-neutral sales were up 13.2% for the period. Footwear sales rose 16.7% currency-neutral (in Euro 15.7%), Apparel increased 1.7% (1.6% in Euros) and Accessories jumped 23% (22.5% in Euros). Worldwide branded sales, including consolidated and license sales, totaled 529 million ($668 mm) in the 2005 second quarter, a 14.3% increase on a currency-neutral basis or 13.9% in Euro terms.
The licensed business grew a strong 19.1% to 134 million ($169 mm) in Q2. A particularly strong performance in the Asian region contributed to the high double-digit growth. As a consequence, royalty and commission income was up 28.7% to 13.8 million ($17.4 mm) in the second quarter.
Gross profit margin increased 220 basis points to 53.2% of sales compared to 51.0% in Q2 last year. Total SG&A expenses increased in the second quarter from 112 million ($135 mm) to 137 million ($173 mm) or from 31.7% to 34.5% of sales. The increase was mainly due to the extension of the owned-retail business. As a result, net earnings rose from 52 million ($63 mm) to 59 million ($74 mm) in Q1. This yields in a net margin of 14.9% similar to last years second quarter and to 16.8% versus 16.6% after six months. Earnings per share jumped 11% to 3.64 ($4.59) or 3.61 ($4.55) diluted.
From a regional perspective sales in the EMEA region, which includes Europe, Middle East, & Africa, reached 240 million ($302 mm) in Q2, a slight increase versus last year but significantly better than the order books at end of Q1. The gross profit margin increased further by 250 basis points to 54.9% of sales, compared to 52.4% last year. Orders on hand at the end of June accounted for 486 million ($586 mm), a decline of 7.9% compared with last year, which can be attributed to higher than expected sales in Q2 as well as a delayed order income due to Spring/Summer sales meetings in some key countries taking place one month later than last year. Adjusted by these effects, the order book would have decreased about 3% at quarter-end.
The Americas reported sales of 108 million ($137 mm) in Q2, a currency-neutral growth of 55.1% (in Euro 51.2%). The region now accounts for 23% of consolidated sales. The gross profit margin in this region improved by 160 basis points to 50.1% compared with 48.5% last year. Orders on hand increased significantly and reached 205 million ($247 mm) with a currency-neutral growth of 63.1% or 66.3% in Euro terms.
The U.S. market, which is part of the Americas, achieved strong sales growth in the second quarter with sales increasing 42.4% to $109.8 million from $77.1 million in the year-ago quarter. The U.S. order backlog improved significantly by the end of June, reaching $211 million or a growth rate of 60.8% at quarter-end.
The Asia/Pacific region increased sales 16.2% in currency-neutral terms and by 14.3% in Euro terms to 47 million ($60 mm). The gross profit margin improved significantly from 47.3% to 51.7%. Like-for-like, orders on hand were up 3.9% (in Euro 1.6%) totaling 81 million $98 mm).
Total orders on hand as of June 30, 2005 increased currency-neutral by 6.2% marking the 38th consecutive quarter of order increase. In Euro terms, total orders were up by 6.7% to 772 million ($932 mm). The orders are mainly for delivery in the second half of 2005.
By segment, Footwear orders were up by 6.9% currency-neutral (in Euro 7.4%) to 536 million $647 mm). Apparel orders increased 5.1% to 195 million ($235 mm), an increase of 4.6% in currency-neutral terms. Accessories backlog increased 4.8% to 40 million ($48 mm), with currency-neutral growth of 5.0% for the period.
Based on the strong results achieved so far this year as well as the order outlook, Puma AG management raised sales guidance from previously mid- to high-single-digit growth to up to 10%. Gross profit margin is also expected to reach the higher end of the guidance between 51% and 52%, or even possibly above. SG&A expenses are forecasted slightly above 31% on sales and EBIT margin should be clearly above 20%. With a tax rate of approximately 29%, management expects net earnings to come in between 264 million and 274 million. This translates to significantly above 16 per share or a mid- to high-single-digit increase on a like-for-like basis.
Due to the expected results for 2005, PUMA will close Phase III one year ahead of the original plan as all set targets should be significantly surpassed. Since the beginning of the long-term oriented business phases in 1993 this would add up to sales growing eleven years in a row as well as nine years delivering double digit growth and record earnings.
Jochen Zeitz, CEO: “We are very pleased with the first half of 2005. PUMA continues to record strong growth and shows an acceleration in our order book versus last quarter, while our expanding gross margins reflect the strong desirability of the PUMA brand. With this momentum we are now able to successfully conclude our current Phase III one year ahead of schedule and turn our focus to Phase IV of the company development.
