PUMA finished the first year of Phase IV of its long-term corporate development better than expected. In Q4, consolidated sales increased 37.6%, or currency neutral 43.3% to 480.6 million ($620 mm). Footwear rose by 30.3% to 273.2 million ($352 mm), Apparel by 79.4% to 177.4 million ($229 mm) and Accessories by 16.9% to 29.9 million ($39 mm). The gross profit margin was at 47.7% 230 basis points below last year as expected. SG&A increased from 36.7% to 39.0% of sales. Pre-tax profit amounts to 43.3 million ($56 mm) versus 56.5 million ($67 mm) in last years quarter. Earnings per share were at 2.03 ($2.62) compared to 2.76 ($3.28).
All regions contributed to the growth in Q4: EMEA sales increased 12.8%, America was up by 37.2% and Asia/Pacific significantly by 151.7%.
Overall, the previous financial year saw the integration of seven license markets into the PUMA Group – Japan (Apparel), Taiwan, China, Hong Kong, Argentina, Mexico and Canada – and three of the announced seven new product categories have already been launched successfully.
Worldwide brand sales climbed by over 16% to 2.8 billion ($3.5 bn) in financial year 2006. Consolidated sales jumped over the 2 billion hurdle for the first time, growing currency adjusted by 34% to just under 2.4 billion ($2.98 bn). At 50.6%, the gross profit margin remained at a very high level. Operating profit reached 366 million ($422.1 mm) and significantly exceeded original expectations. Earnings per share were 16.39 ($20.59), compared to 17.79 ($22.16) in the previous year.
The worldwide PUMA brand sales, comprised of consolidated and license sales, rose significantly by 15.4% to 2.8 billion. This corresponds to currency adjusted growth of 16.1%. In terms of segments, Footwear sales improved by 14.8% to 1,512.9 million, Apparel by 18.9% to 981.9 million and Accessories by 13.5% to 260.3 million.
PUMA succeeded in significantly increasing its annual consolidated sales for the twelfth consecutive year, and for the first time in its company history exceeded the 2-billion mark. Sales rose currency neutral by 34.0% to a new record of 2,369.2 million. Excluding new consolidation, currency adjusted sales rose by 12.9%. The Footwear segment posted a 21.6% sales increase to 1,420.0 million, Apparel contributed to growth with a significant increase of 68.1% to 795.4 million and Accessories posted an increase of 21.5% to 153.8 million.
Due to takeovers in a number of license markets which were part of the Phase IV strategy, reported license sales in 2006 decreased to 385.9 million. On a comparative basis, the remaining license business posted an increase of 16.8%.
Overall, royalty and commission income from license sales amounted to 37.0 million.
Expansion of the Groups own retailing activities progressed sharply during the 2006 financial year. Overall, the financial year saw the opening of a further twenty-five concept stores. At the year-end, PUMA had ninety-one Concept Stores. Sales from the companys own retail operations again saw an above-average increase of 39.5% in 2006. Sales grew to 344.3 million, rising from 13.9% to 14.5% of consolidated sales.
Changes in the regional and product mix led to a planned reduction of the gross profit margin from 52.3% to 50.6%. Thus, the gross profit margin remains at the upper end of the sporting goods industry.
By product segments, the Footwear margin decreased from 52.7% to 50.3% and Apparel from 51.8% to 50.7%. Accessories improved from 50.4% to 53.3%.
At 263.2 million, net earnings were only 7.9% below the previous years level of 285.8 million, and thus significantly above original expectations. The net return expressed as a percentage of sales was 11.1%, compared to 16.1%. Earnings per share came to 16.39, compared to 17.79, and the diluted earnings per share were 16.31, compared to 17.68.
Like-for-like, sales in EMEA were up by 5.1% to 1,158.7 million. Although the difficult economic environment continued in some markets, the region developed better than expected, supported by the World Cup. As planned, due to regional expansion, the EMEA region share in consolidated sales declined from 62.2% to 48.9%.
According to product segments, Footwear posted a minor 1.6% decrease, Apparel climbed by 17.4%, and Accessories were up by 7.9%.
The gross profit margin was slightly down from 54.3% to 53.8%. The operating margin (EBIT) accounted for 22.0% of sales, after 27.4% in the previous year.
Sales in Americas saw a significant increase to 724.1 million, which corresponds to a currency neutral growth of 51.8%. Excluding the initial consolidation of Argentina, Canada and Mexico, sales grew by 33.1% on a comparable basis. The share in consolidated sales rose from 26.8% to 30.6 %.
Classified by product segments, the strongest growth was posted in Accessories at 61.0%. Footwear was up by 54.3%, and Apparel by 41.8%. Due to the regional expansion and increased key customer business, the gross profit margin decreased from 48.9% to 46.1%. The operating margin was 17.4%, compared to 19.6% in the previous year. The US-market contributed substantially to the overall performance in this region with sales growth of 31.3%. Sales improved significantly from USD 472.4 million to USD 620.2 million.
Asia/Pacific sales reached 486.5 million; this corresponds to an increase of 154.5% after currency adjustments. Regional expansion in Japan (Apparel), China, Hong Kong, and Taiwan made a particular contribution to the growth. Excluding initial consolidation, the growth on a comparative basis was 9.3%. Overall, the share of consolidated sales grew from 11.0% to 20.5%. According to product segment, Footwear sales jumped by 58.1%. The strongest growth of 765.4% was achieved in Apparel, due mainly to the initial consolidation of PUMA Apparel Japan. Accessories posted growth of 24.8%.
The gross profit margin increased from 49.5% to 49.8%, and the operating margin climbed to 21.9%, from 21.0% in the previous year.
At the 2006 year-end, orders on hand increased for the eleventh consecutive time. Like-for-like, orders rose on a comparative basis by 10.2%, or in Euro by 4.7% to 1,119.7 million, compared to 1,069.1 million in the previous year.
In terms of segments, currency adjusted orders for Footwear were up by 6.1% to 716.8 million, Apparel orders climbed by 20.3% to 340.2 million, and Accessories rose by 9.0% to 62.7 million.
Development in the regions as of year-end was as follows: Currency adjusted, orders in EMEA region were up by 6.2% to 652.7 million, despite last years World Cup effect. The Americas region posted currency adjusted growth of 4.6% to 271.2 million. Orders on hand for the US-market totaled USD 245.8 million, compared to USD 261.9 million in the previous year. The decline in last years comparison is mainly due to the higher basis effect and to a planned reduction of sales with a customer. In the Asia/Pacific region, orders increased to 195.7 million, which corresponds to a currency adjusted increase of 35.8%.
As announced with Phase IV of the long term oriented business plan, Management expects new record results in sales and earnings for 2007.
After the strong sales growth of 34% in the past financial year, a currency neutral growth in the medium to higher single-digit range is expected for 2007.
The gross profit margin is expected to move at the previous years range of 50% – 51%. Selling, general and administrative expenses, expressed as a percentage of sales, are expected to decrease to approximately 34%. This should lead to an improvement in the EBIT margin to about 16% of sales, and thus to a new record high. Given the unchanged tax rate of approximately 29%, double-digit growth in consolidated net earnings and thus an increase of at least 10% is expected.
Jochen Zeitz, CEO: “Overall, we are very pleased with 2006 and our start to Phase IV, as we set some ambitious targets and are on track or ahead on all accounts. But more important than the past is the future, and weve put ourselves in a solid early position to deliver on our Phase IV objectives.
