Puma AG saw their third quarter “develop better than expected,” as worldwide branded sales increased in the mid-teens, total group sales jumped more than 30%, and the company turned in a bottom-line decline that was less severe than the planned and forecasted high-single-digit downturn. The continued investments in the companys Phase IV initiatives led to a mid-singles decline in the bottom line for the third quarter, but EBIT margin still came in at a very healthy 17% of sales.
The company again saw its revenue line benefit from a surging Americas business, but this time around the U.S. was not leading the charge. Asia/Pacific was very strong growth as well. Continued efforts to bring licensed and distributor businesses in-house contributed the majority of the overall growth for the period, but also cut licensing revenues nearly in half.
Third quarter consolidated sales increased 30.4%, or 32.2% on a currency-adjusted basis, to 699.2 million ($892 mm). The consolidation of six licensed markets again represented a large piece of the top-line growth. As a result, royalty and commission revenues fell 36.7% to 8.8 million ($11 mm) for the period. On a comparable base, the licensed business increased by 3.2% in the third quarter.
Total worldwide brand sales were up 13.7% to 786 million ($1.0 bn) for the third quarter, or an increase of 12.5% on a currency-neutral basis.
Gross margins took another hit from a change in product mix and also saw continued erosion from the surging business outside Europe and a softer European market, but management said results were still “in-line or slightly better than expected.” GM declined 170 basis points to 50.4% of sales. Europe, where margins declined 100 basis points to 53.1% of sales, only represented 54.1% of sales in the third quarter compared to 64.4% of sales in Q3 last year. GM in the Americas was down 180 basis points to 45.1% of sales and Asia/Pacific saw GM decline 200 basis points to 50.5% of sales. Footwear margin declined 210 basis points to 50.1%, apparel GM decreased 140 basis points to 50.1% of sales, but the accessories margin improved 130 basis points to 54.9% of sales.
The U.S. made up 23.1% of sales in the third quarter, compared to 24.4% in the year-ago period, the first decline against the total in some time. The main reason here is that the balance of the Americas saw sales jump more than 350% for the period, but Asia/Pacific growth outpaced the U.S. by a five-to-one margin.
Net income was 87.1 million ($111 mm), or 5.39 ($6.87) per diluted share, compared to 91.9 million ($112 mm), or 5.68 ($6.93) per diluted share, in the year-ago period.
Most of the concerns from analysts came from the moderating trend in the order backlog, particularly in the U.S., which grew only slightly over the same period last year. The market has gotten used to strong double-digit gains, but management attributed the slowdown to very strong backlog growth at the end of Q3 last year, which was up 78%, and the fact that the company has moved to quarterly futures bookings from their historical twice a year cadence. The EMEA region order book at the end of September was up just 1.6% in Euro terms and amounted to 518 million ($657 mm) compared with 510 million ($614 mm) in Q3 last year. The slower backlog growth in Europe was attributed to the shift in the booking schedule as well as the stronger bookings last year related to the World Cup.
The company said the 58.8% growth in inventory at quarter-end was due to an expanding owned-retail business, as well as a strong fourth quarter futures business and the consolidation of former distributors and licensees to direct businesses.
Puma Beats Q3 Forecast and Confirms Full Year Even as Backlog Growth Slows…
Puma AG saw their third quarter “develop better than expected,” as worldwide branded sales increased in the mid-teens, total group sales jumped more than 30%, and the company turned in a bottom-line decline that was less severe than the planned and forecasted high-single-digit downturn. The continued investments in the companys Phase IV initiatives led to a mid-singles decline in the bottom line for the third quarter, but EBIT margin still came in at a very healthy 17% of sales.
The company again saw its revenue line benefit from a surging Americas business, but this time around the U.S. was not leading the charge. Asia/Pacific was very strong growth as well. Continued efforts to bring licensed and distributor businesses in-house contributed the majority of the overall growth for the period, but also cut licensing revenues nearly in half.
Third quarter consolidated sales increased 30.4%, or 32.2% on a currency-adjusted basis, to 699.2 million ($892 mm). The consolidation of six licensed markets again represented a large piece of the top-line growth. As a result, royalty and commission revenues fell 36.7% to 8.8 million ($11 mm) for the period. On a comparable base, the licensed business increased by 3.2% in the third quarter.
Total worldwide brand sales were up 13.7% to 786 million ($1.0 bn) for the third quarter, or an increase of 12.5% on a currency-neutral basis.
Gross margins took another hit from a change in product mix and also saw continued erosion from the surging business outside Europe and a softer European market, but management said results were still “in-line or slightly better than expected.” GM declined 170 basis points to 50.4% of sales. Europe, where margins declined 100 basis points to 53.1% of sales, only represented 54.1% of sales in the third quarter compared to 64.4% of sales in Q3 last year. GM in the Americas was down 180 basis points to 45.1% of sales and Asia/Pacific saw GM decline 200 basis points to 50.5% of sales. Footwear margin declined 210 basis points to 50.1%, apparel GM decreased 140 basis points to 50.1% of sales, but the accessories margin improved 130 basis points to 54.9% of sales.
The U.S. made up 23.1% of sales in the third quarter, compared to 24.4% in the year-ago period, the first decline against the total in some time. The main reason here is that the balance of the Americas saw sales jump more than 350% for the period, but Asia/Pacific growth outpaced the U.S. by a five-to-one margin.
Net income was 87.1 million ($111 mm), or 5.39 ($6.87) per diluted share, compared to 91.9 million ($112 mm), or 5.68 ($6.93) per diluted share, in the year-ago period.
Most of the concerns from analysts came from the moderating trend in the order backlog, particularly in the U.S., which grew only slightly over the same period last year. The market has gotten used to strong double-digit gains, but management attributed the slowdown to very strong backlog growth at the end of Q3 last year, which was up 78%, and the fact that the company has moved to quarterly futures bookings from their historical twice a year cadence. The EMEA region order book at the end of September was up just 1.6% in Euro terms and amounted to 518 million ($657 mm) compared with 510 million ($614 mm) in Q3 last year. The slower backlog growth in Europe was attributed to the shift in the booking schedule as well as the stronger bookings last year related to the World Cup.
The company said the 58.8% growth in inventory at quarter-end was due to an expanding owned-retail business, as well as a strong fourth quarter futures business and the consolidation of former distributors and licensees to direct businesses.
| Puma AG | ||||||
| Third Quarter Results | ||||||
| (in $ millions) | Group Sales | Backlog Change | ||||
| 2006 | 2005 | Change | Neutral* | Chg | Neutral* | |
| Group Sales | $892 | $655 | +30.4% | +32.2% | +35.0% | +25.5% |
| EMEA | $482 | $422 | +9.4% | n/a | +1.6% | +3.0% |
| Americas | $249 | $168 | +42.3% | +45.7% | +26.0% | +29.7% |
| U.S.** | $206 | $160 | +28.6% | n/a | n/a | n/a |
| Asia/Pacific | $161 | $65.4 | +135% | +146% | +128% | +136% |
| Footwear | $535 | $428 | +19.8% | +21.5% | +12.8% | +15.6% |
| Apparel | $299 | $182 | +57.4% | +58.5% | +53.8% | +55.3% |
| Accessories | $57.0 | $44.9 | +21.5% | +23.9% | +23.1% | +28.7% |
| Net Income | $111 | $112 | -5.2% | |||
