PUMA reported that second quarter consolidated sales increased by 17.1% to 352.3 million ($424.3 mm). The Apparel segment realized the strongest growth of 26.3% to 98.7 million ($118.9 mm). Footwear was up 13.3% to 229.0 million ($275.8 mm) and Accessories improved by 19.2% to 24.6 million ($29.6 mm). On a currency neutral basis, total sales in Q2 were up 18.3%. Second quarter marks the first quarter in which year-to-date comparisons reflect full consolidation of PUMA Japan, as the first-time consolidation took place April 1 of last year.
PUMAs branded sales, which include consolidated sales and licensee sales, reached 465 million ($560.1 mm) during Q2, marking a 20.4% (currency adjusted 20.9%) increase over last year. After the end of H1 Footwear accounted for 58.2% (PY 61.5%), Apparel for 34.4% (PY 32.1%) and Accessories for 7.4% (PY 6.4%) of global branded sales.
Overall, PUMAs licensed business showed very positive developments. In Q2, licensee sales increased by 32% to 112 million ($134.9 mm), driven by sales in Asia. During Q2 PUMA generated royalty and commission income of 11 million ($12.9 mm). Despite the consolidation effect of the Japanese business in Q1, royalty and commission income reached 22 million versus 21 million in the first half of 03. On a like-to-like basis, royalty and commission income increased by approximately 23%.
PUMA reported a 220 basis points increase in gross margin to 51% versus 48.8% in last years quarter. The margin increased from 48% to 51.4% during the first half year versus the same period last year. This corresponds to an increase of 340 basis points. The improvement was due to three factors, a favorable shift in product mix, a higher proportion of sales through PUMAs retail channels, as well as positive currency effects. The Footwear margin climbed from 48.6% to 52.8%, Apparel from 46.6% to 48.8% and Accessories from 45.7% to 46.9%.
Total SG&A expenses grew at a slower rate than sales, resulting in a further decline as a percentage of sales from 31.9% to 30.9% during Q2 and from 30.4% to 28.7% for the first six months.
Net earnings rose from 37 million ($42.1 mm) to 55 million ($66.1 mm) in Q2. Net return on sales was 15.6%. Diluted EPS were calculated at 3.33 ($4.01) versus 2.26 ($2.57).
In Europe the sales momentum continued as sales increased by 23.7% to 232 million ($279.4 mm) in Q2. All countries in the region reported double-digit growth rates in the first half. The European region represented 68.5% of consolidated sales. As expected, the strongest growth was achieved in the Apparel segment, which increased by 38.2% in H1 vs. last year. Footwear and Accessories recognized similar growth rates registering 18.1% each. The overall gross profit margin was extended from 52% to 54%. As a result of the favorable order intake during Q2, the future orders level remained high, totaling 503 million ($607.9 mm) at the end of June, translating to an increase of 20.4% against last years level.
The Americas realized sales of 72 million ($86.7 mm) in Q2, a gain of 16.1% in currency neutral terms and 9% in Euro currency. After the first six months, this region accounts for 18.2% of group sales. On a U.S. Dollar basis all product segments contributed with a double-digit increase: Footwear up 17.4%, Apparel up 24.8% and Accessories up 59.6%. The gross profit margin in this region improved by 300 basis points during the first six months and reached 46.6% compared with 43.6% last year. Primarily as a result of the rapid increase in order income during Q2, the order book as of end of June showed a currency neutral growth rate of 39.4%.
In Euros, orders were up by 25.4% to 119 million ($143.8 mm) as of June.
The U.S. market saw top-line growth of 13.9% in Q2 and 15.2% in H1. The order backlog accelerated since the beginning of the current year and reached a growth rate of 35.8%, which totaled US$131 million at the end of June.
The Asia/Pacific region reported sales of 41 million ($49.4 mm), slightly higher than last years quarter. As previously announced, the company streamlined its product range and distribution in Japan. This region accounts for 10.8% of Group sales at the end of H1. All product segments achieved favorable growth rates. The gross profit margin improved from 44% to 47.6%. A strong order intake, in particular in Japan, led to significant improvements in the order backlog. As of June 30, 2004 total orders in the region were up by 15% to 77 million ($93.1 mm).
Sales in the Africa/Middle East region improved by 9.5% to 7million ($8.4 mm) in Q2. All product segments reported double-digit growth rates in H1. Overall, the region contributed 2.5% to consolidated sales. A considerable improvement was realized in the gross profit margin, which jumped from 24% to 30%. Backlog was up 77.1% to 23 million ($27.8 mm).
Total future orders at the end of the quarter increased by 21.9% from 593 million ($678.8 mm) to 723 million ($873.8 mm), or a 23.8% increase in currency adjusted terms. By product segment, Footwear increased by 19.7% to 499 million ($603.0 mm), or 21.7% on a currency adjusted basis. Apparel 24.4%, or 26.3% currency adjusted, to 185 million ($223.6 mm) and Accessories by 41.9%, or 42.3% currency adjusted, to 39 million ($47.1 mm).
After a strong first half-year and the growth in order volume at the end of June, PUMA now expects growth in sales for H2 to be between 15% and 20%, leading to an annualized growth rate of approximately 20% for FY 2004 versus the previous expectations between 15% and 20%.