Puma basked in the glory of a winning team at the 2006 FIFA World Cup and saw a nice boost in apparel sales as a result of their efforts, but heavy investments in the event, coupled with continued investments in the companys Phase IV initiatives led to a mid-teens decline in the bottom line for the second quarter. The company saw its revenue line benefit from a surging Americas business, led by the U.S., and very strong growth in Asia/Pacific. Continued efforts to bring licensed and distributor businesses in-house contributed the majority of the overall growth for the period, but also cut into licensing revenues.
Second quarter consolidated sales increased a strong 38.2%, or 38.7% on a currency-adjusted basis, to 547 million ($687 mm). The addition of revenues from the consolidation of six licensed markets represented 22.0% of the top-line growth. As a result in the shift, royalty and commission revenues fell 47.1% to 7.3 million ($9.2 mm) for the period. Sales from the remaining licensed markets rose 30.9% on a like-for-like basis. Total worldwide brand sales were up 15.3% to 619.6 million ($779 mm) for the second quarter.
Gross margins took a hit from a change in product mix, but saw continued erosion from the surging business outside Europe and a soft European environment. GM declined 180 basis points to 51.4% of sales. Europe, where margins were off 20 basis points to 54.7% of sales, only represented 47.8% of sales in the second quarter compared to 60.6% of sales in Q2 last year. GM in the Americas was down 220 basis points to 47.9% of sales and Asia/Pacific saw GM decline 240 basis points to 49.3% of sales.
The U.S. made up 29.3% of sales in the second quarter, compared to 27.8% in the year-ago period.
Margin declines, along with a 62% increase in marketing/retail expenses in the first half, a 41% increase in product development and design expenses, and a 39.5% increase in other SG&A expenses associated with the Phase IV plan helped push EBIT down 15.4% to 69 million. Resulting net income declined 14.9% to 50.1 million.
| Puma AG | ||||||
| Second Quarter Results | ||||||
| (in $ millions) | Group Sales | Backlog Change | ||||
| 2006 | 2005 | Change | Neutral* | Chg | Neutral* | |
| Group Sales | $686.8 | $498.6 | 38.2% | 38.7% | 32.2% | 34.5% |
| EMEA | $328.1 | $302.2 | 8.9% | n/a | 16.1% | n/a |
| Americas | $215.7 | $136.8 | 58.2% | 57.6% | 39.0% | 44.0% |
| U.S.** | $160.4 | $109.8 | n/a | 46.1% | n/a | 20.0% |
| Asia/Pacific | $143.0 | $59.6 | 141% | 144% | 111% | 118% |
| Footwear | $412.0 | $334.2 | 23.7% | 24.3% | 25.6% | 28.0% |
| Apparel | $228.2 | $126.3 | 81.2% | 81.5% | 48.4% | 50.1% |
| Accessories | $46.6 | $38.1 | 22.8% | 25.3% | 41.3% | 45.8% |
| Net Income | $62.9 | $74.2 | -14.9% | *Currency-Neutral Changes | ||
| Diluted EPS | ||||||
