Puma AG reported that consolidated net sales for the 2004 fourth quarter increased 23.8% on a currency-adjusted basis, or up 19.9% in Euro terms to €273 million ($354.1 mm). Footwear sales increased 29.1% on a currency-neutral basis to €175.9 million ($228.2 mm), or a 25.2% increase in Euros. Apparel climbed 14.4% in currency-neutral terms to €76.6 million ($99.4 million), an 11.4% increase in Euro terms. Accessories grew 16.1%, or 12.6% in Euros, to €20.9 million ($27.1 mm).

All regions contributed a double-digit growth in the quarter. Europe sales increased 12.4% in Q4 to €143.1 million ($185.6mm), while the Americas jumped 44.4% to €74.2 million ($96.3 mm). U.S. sales, measured in U.S. Dollars, were up 16.0% to $76.0 million from $54.4 million in Q4 last year. Asia/Pacific region sales rose 11.3% in the quarter to €47.1 million ($61.1 mm) and AME, which includes Africa and the Middle East, saw sales increase 34.3% to €9.0 million ($11.7 mm).

Gross margin improved 440 basis points to 51.9%, Puma’s highest level in a fourth quarter.

Net income increased 51.4% to €37.1 million ($48.1 mm) in Q4 2004, compared to €24.5 million ($29.2 mm) in Q4 last year. Diluted earnings per share were €2.30 ($2.98), a 78.3% jump versus the €1.29 ($1.54) per share posted in last year’s quarter.

For the year, the combination of Group sales and License sales drove worldwide Puma brand sales up 19.2% to €2.02 billion ($2.51 bn), compared to €1.69 billion ($1.91 bn) in fiscal 2003. Currency neutral sales were up 21.3% for the year. License sales in 2004 rose 16.5% to €486 million ($604.5 mm), up 17.2% in currency neutral terms. The royalty and commission income rose by 8.3% to € 44 million ($54.7 mm). For the year, global Puma brand Footwear sales increased 14.8% (17.4% currency-adjusted) to €1.13 billion ($1.40 bn), Apparel grew 22.4% (25% currency adjusted) to €710 million ($883.1 mm), and Accessories sales increased 38.4% to €179 million ($222.7 mm), a 40.6% increase in currency-adjusted terms.

Puma’s owned-retail operations showed the highest growth rate in the company, increasing approximately 52% for the year to roughly €168 million ($210 mm), or 11.0% of total consolidated sales, from approximately €111 million ($125 mm), or 8.7% of sales, in 2003. Puma had 46 Sport Boutiques concept stores at year-end, including nine stores operated by licensees, in addition to sports stores and factory outlet stores.

Europe sales increased 17.6% for the full year, surpassing the billion Euro mark for the first time. Apparel led category growth, increasing 26.6%, followed by Footwear with a 14.8% gain, and Accessories with a 6.4% increase. Gross margin in Europe improved 280 basis points to 54.1% of sales, netting a 28.7% operating margin, versus 25.2% in the prior year.

Europe backlog reached a new all-time high of €567 million ($774 mm) at the end of 2004, a 9.4% increase over the previous year.

The Americas also achieved a significant increase in profitability, with a 470 basis point improvement in gross margin contributing to an increase in operating margin to 19.8% of sales, compared to 16.6% of sales in 2003. Currency-adjusted Footwear sales were up by 30.3% for the year, and Apparel grew 21.8%. Accessories sales jumped 86.1% in the region.

Order backlog for the U.S. market was up 34.2% to $160 million at year-end.

Asia/Pacific sales for 2004 benefited from the initial consolidation of Puma Japan in April 2003. Excluding the effects of the Japan changes, sales rose 11.8% in the region in 2004. Footwear sales increased 26.9%, Apparel grew 15%, and Accessories 70.3% for 2004.
The operating margin in A/P rose from 17.7% in 2003 to 21.9% in 2004. Backlog was up 23.0% to €83 million ($113 mm) at year-end.

The Africa/Middle East region also contributed to company profits with a significant increase in operating margin to 8.6% of sales versus a sluggish 3.1% in the previous year. Accessories sales grew by 114.6% for the year, while Apparel sales increased 92.9%, and Footwear sales grew 41.5% for the year. Orders on hand at year-end grew 65.5% to €35 million ($48 mm).

Inventory at year-end was up just 2.5% to €201.1 million ($274.4 mm) from €196.2 million ($246.4 mm) at year-end last year. Cash on hand and cash equivalents increased 93.8% at year-end to €369.3 million ($503.9 mm), a nice war chest for the coming year.

For 2005, Puma sees currency-neutral consolidated sales growth in the mid- to high-single-digit range. Due to the available hedging rates for 2005, the gross profit margin should move in the 50% to 52% range. Earnings are also seen increasing in the mid- to high-single-digit range for the year.

Management said the company should exceed the original goals set for Phase III of its corporate plan — which was expected to run through 2006 — in 2005. Puma will accelerate execution of Phase IV, which was initially planned for the 2006 to 2010 time frame, and will announce the strategy for the phase in the back half of 2005, a year ahead of schedule.

>>> The solid growth in the U.S. market in 2004 was about half the growth rate of the previous two years. An expansion of channel penetration in 2005 is expected to fuel larger gains here…