PUMA AG reported that net sales for the second quarter dipped 0.7% to €542.8 million ($732 mm) compared to €546.6 million ($412 mm) in the year-ago quarter.  Consolidated sales grew 3.1% currency adjusted.  Global brand sales, which include consolidated sales and license sales, inched up 0.4% to €621.9 million ($839 mm) during Q2, or an increase of 4.2% in currency-adjusted terms.  EBITDA was down by 7.6% to €71.7 million ($97 mm) and net earnings decreased 9.9% to €45.2 million ($61 mm). Diluted earnings per share were calculated at €2.81 ($3.79), compared with €3.03 ($3.81) in Q2 last year. The net return amounts to 8.3% versus 9.2% in second quarter 2006.


 


Footwear was down 2.1% (+1.1% currency-neutral) to €320.9 million ($433 mm), Apparel improved 2.2% (+6.8% currency-neutral) to €185.6 million ($250 mm), and Accessories by declined 2.2% (+2.7% currency-neutral) to €36.3 million ($49 mm) for the period.  Puma said Q2 sales were “positively affected by early shipments in June.”


 


Due to the continued weakness of the U.S. Dollar versus the Euro and a better hedge than last year, gross profit margin was positively affected by approximately 100 basis points.  GM improved 120 basis points to 52.2% of sales.  SG&A expenses, as a percentage of sales, rose 200 basis points to 40.6% of sales.


 


EMEA region sales increased 8.3% to €282.9 million ($381 mm) in Q2, or a currency-adjusted increase of 9.4% for the period.  The EMEA region was positively affected by early shipments in June as previously mentioned. Gross profit margin declined 60 basis points to 54.1% of sales for Q2.  Orders on hand were slightly up 0.6% to €568.1 million ($766 mm). Puma said that it should be considered that “end of June orders already include a higher share of next year shipments versus last year.”


 


In the Americas, sales fell 15.4% (-11.1% currency adjusted) to €145.3 million ($196           mm). Gross margins were up 160 basis points to 49.5% of sales.  The order backlog was down by 11.8% to €241.1 million ($325 mm).  Due to the already announced business related adjustment with one key account that had seen a significant sales increase in the prior years, presumably Foot Locker, Inc., as well as a continuous moderating environment in the U.S. mall business sales in the U.S., sales were down significantly for the quarter.


 


U.S. sales were down 20.3% to $127.8 million in Q2.  Order backlog for the U.S. decreased 16.2% to $211.1 million at the end of June.


 


The Asia/Pacific-region improved 0.6% (+9.1% currency-neutral) to €114.5 million ($154 mm). Gross profit margin was up by 70 basis points to 51.0% of sales.  Orders backlog was up 20.4% and totaled €191.9 million ($259 mm) with a strong increase in the Chinese market.


 


Total order backlog were up 0.5% currency-adjusted, but decreased 1.8% in Euro terms, to totaled €1.0 billion ($1.35 bn).  However, management said a higher share of orders for deliveries in the following year is already included. Orders for the second half of 2007 show a decline of approximately 2% currency-neutral.   In terms of product segments, Footwear orders were down by 6.3% currency-adjusted to €616.0 million ($830 mm).  Apparel orders increased 16.2% to €328.8 million ($443 mm) and Accessories 1.0% to €56.3 million ($76 mm).  


 


Management confirmed sales and earnings growth in the low-single-digits for FY 2007 with an estimated gross profit margin between 50% and 51%. Royalty and commission income should only be slightly above last year which is mainly due to the expiration of the license contract in Korea. The total cost ratio is expected to be around or above 35% of sales mainly due to already announced investments in relation to the Volvo Ocean Race participation as well as other planned SG&A initiatives. As a result, EBIT should almost develop in line with sales providing an EBIT margin nearly on last year’s level. Tax rate is estimated at or around 29%.


 


Jochen Zeitz, CEO: “We are encouraged by our Q2 results, which show continued growth despite difficult comps due to last year’s World Cup. Even if the year 2007 remains challenging we will continue to invest in brand initiatives in order to tap into the significant long-term brand potential.”