By Thomas J. Ryan
Puma SE slightly raised its earnings guidance for the year after reporting third-quarter earnings almost doubled. Sales in the period came in higher than expected, boosted by the success of lifestyle shoes promoted by pop-star Rihanna and British model Cara Delevingne.
“Fashion and sports are merging into a big business,” Puma CEO Bjørn Gulden said in an interview with Bloomberg Television. “You can’t do one or the other — you have to do both.”
Sales in the quarter climbed 10.7 percent on a currency-neutral basis to €990.2 million ($1.08 billion) and grew 8.3 percent on a reported basis. Sales results had already been reported in late October by its parent Kering, which owns 86 percent of Puma. Earnings in the period surged 98 percent to €39.5 million ($43.1 million).
By region, the Americas led the way with a 12.2-percent currency-neutral gain to €342.9 million ($373.8 million). Impacted by the strong dollar, sales rose 5.5 percent on a reported basis. Solid growth was found in both North and Latin America. However, the weakness of Latin America’s currencies, notably the Argentine Peso, continued to impact the sales development in Euro terms.
In the EMEA region, sales rose 11.9 percent currency adjusted to €408.6 million ($445.4 million) while gaining 8.7 percent on a reported basis. France and Germany were particularly strong. Footwear drove the region’s gains. The Asia/Pacific (APAC) region achieved sales of €238.7 million ($260.2 million), representing a rise of 6.9 percent currency adjusted and a gain of 11.7 percent on a reported basis. China and India delivered double-digit growth.
By category, footwear continued to drive the strongest growth, showing an improvement of sales for the ninth quarter in a row. Footwear sales were up 16.4 percent currency adjusted (+12.3 percent reported) and amounted to €458.8 million ($500.1 million), with success coming from the Ignite franchise as well as Fierce and Fenty products within the running, training and sportstyle categories.
Apparel sales jumped 10.3 percent to €377.4 million ($411.4 million) and advanced 8.8 percent on a reported basis. Major gains were achieved in the sportstyle category, supported by its women’s business. An underperformer was accessories, which decreased 2.4 percent currency adjusted to €154 million ($157.9 million). Sales were down 3.2 percent on a reported basis. The category was impacted by a weaker performance in Puma’s accessories business in the U.S.
Despite the ongoing negative currency impact from a stronger U.S. dollar, Puma maintained its gross profit margin at 45.8 percent. Margins benefited from sourcing improvements, selective price adjustments and an improved footwear product mix. The footwear category margin increased 190 basis points from 41.2 percent, apparel decreased from 49.8 percent to 48.2 percent and accessories fell from 49.1 percent to 48.4 percent.
Operating expenses rose moderately by 4.1 percent to €397.4 million ($433.2 million). Additional marketing costs associated with the Olympic Games in Rio, as well as costs to expand its retail store network, were partly offset by strict cost controls. As a percent of sales, however, operating expenses were reduced to 40.1 percent from 41.8 percent.
In a statement, Gulden said sales came in “a little better than expected” while gross margin was in line with plan. Said Gulden, “This combined with a strong discipline on the cost side resulted in a nice improvement in our earnings.” On the top line, Gulden said Puma saw “solid improvement in the sell-through of our products at retail in the period. New product lines like the Fierce, the Platform, the Ignite Dual and the Fenty lines have shown to be ‘right’ for the consumers and our marketing with personalities like Rihanna, Kylie Jenner, Cara Delevingne and, of course, the unbelievable performance of Usain Bolt have increased our brand heat,” Gulden said.
“More consumers are buying our new products at full price and retailers are therefore more satisfied with us,” Gulden added. “It is now our job to use this momentum to get more of the right Puma products on their shelves.”
Highlights for Puma in the period included the September launch of the first Fenty Puma by Rihanna collection. In its women’s category, the “Do You” campaign, designed to inspire confidence in women, was introduced and was the first campaign featuring model, actress and activist Cara Delevingne. The campaign showcased Puma’s cross-category range from Puma’s running and training and sportstyle collections. Most recently, Puma signed Abel Tesfaye, also known as The Weeknd, as a brand ambassador and creative collaborator. The Grammy-winning artist headlined Puma’s latest sportstyle campaign, “Run The Streets,” which launched at the beginning of this month.
On the performance side, the highlight was Usain Bolt’s “Triple Triple” at the Rio Olympics with the win of a gold medal in each of the three sprinting events. In total, ten gold, five silver and nine bronze medals were the yield of the Puma-equipped Olympic teams of Jamaica, Bahamas, Cuba and Grenada alongside the track & field teams of Switzerland, the Dominican Republic and Barbados.
Looking ahead, Puma said it continues to expect a currency-adjusted high-single-digit increase of net sales, a gross profit margin on the previous year’s level (45.5 percent) and an increase of currency-adjusted operating expenses in a mid- to high-single-digit range for the full year. Due to the above-plan third quarter, full-year EBIT is now projected to be within the upper half of its range of €115 million to €125 million.
Photo courtesy Puma
