Puma SE, as expected, reported a decline in third-quarter earnings due to currency headwinds and expenses to support its turnaround efforts but sales continued to improve.
Reported sales advanced 8.4 percent to €914 million ($993.5 million) and gained 3.1 percent on a currency-neutral basis. The revenue gains were led by Americas region, which saw revenues climb 10.8 percent on a currency-neutral basis to €325.1 million ($353.4 million). The U.S. market grew at double-digit rates.
In the EMEA region, sales on a currency-neutral basis declined 3.6 percent to €375.7 million ($408.4 million) The region faced tough comparisons against the Arsenal launch in last year’s third quarter. The year-ago quarter also included sales of Tretorn, which was sold in the second quarter of 2015. Excluding these impacts, sales would have been flat.
In Asia/Pacific (APAC), sales were up 5 percent on a currency-neutral basis to €213.6 million ($232.2 million). While China and India showed substantial growth within the region, sales in Korea declined.
By category, footwear increased for the fifth quarter in a row, adding 3.5 percent on a currency-adjusted basis, to €408.4 million ($443.5 million). Running and training with a good response to the Ignite and Descendant product platforms drove the gains.
Apparel’s revenues increased 2.5 percent on a currency-neutral basis, to €346.9 million ($377.1 million), mainly attributable to the success of training products. Accessories were up 3.7 percent on a currency-neutral basis, to €159.1 million ($172.9 million), supported by strong sales in Europe and North America.
Gross margins eroded 50 basis points to 45.8 percent, due to negative currency effects. Footwear gross profit margin decreased from 41.9 percent to 41.2 percent, apparel margin rose from 49.6 percent to 49.8 percent and the margin for accessories fell from 50.3 percent to 49.1 percent.
Operating expenses increased slightly as a percent of sales to 41.7 percent form 41.4 percent, in line with expectations. The 9.3 percent gain in reported terms again reflected negative currency effects and investments in its turnaround.
Operating earnings declined 11.2 percent to €41.1 million ($44.7 million) while net earnings slid 30.9 percent to €20.0 million ($21.7 million), or €1.34 ($1.46) a share.
“Our sales for the first nine months of this year and the very positive feedback from retailers around the world regarding our new products as well as a strong order book confirm that we are on the right track,” said Bjørn Gulden, CEO, in a statement.
He said Puma continues to gain visibility through its athlete ambassadors and teams. Usain Bolt stood out with wins in the 100m, 200m and 4x100m relays at the 2015 IAAF World Championships in Beijing. The overall Jamaican Team finished second in the medals table after Kenya, and the Bahamas, Cuba, Grenada, Cayman Islands, Switzerland and the Dominican Republic also did well.
The 2015 IAAF World Championships came shortly after the launch of its second major Forever Faster brand campaign, which has a dedicated focus on training. The campaign stars Bolt, Rihanna, Sergio Agüero, Arsenal Football Club, and the Cuban National Boxing team and supports the IGNITE XT shoe.
In the Teamsports category, evoPOWER and evoSPEED both sparked some attention with Duality football boots, which features two distinct colored boots in one pair. The Motorsports category benefited from Mercedes AMG Petronas’ Lewis Hamilton recent win of his third Formula 1 Drivers' World Championship while Cobra Puma Golf benefited from big wins for Rickie Fowler and Lexi Thompson and the success of the Titantour golf shoe.
Gulden said Puma continues to invest in improving its product offering for women and its communication approach to them. A key element of this strategy is its collaboration with Rihanna as brand ambassador and creative director. Her first TV commercial for Puma initially aired in September and the first in a series of Rihanna-inspired footwear and apparel styles, the “Creeper,” sold out in hours at most retailers
“We have generally seen a very positive development in our women's business and we will put even more focus on the female consumer going forward,” said Gulden.
Puma also is working to strengthen partnerships and increase collaboration with retailers. In North America, Puma has improved its presence with shop-in-shops, special wall units and permanent in-store communication at major sports accounts including Finish Line and Champs. Puma’s new Forever Faster store layout has been rolled out to eleven of Puma’s locations worldwide.
Looking ahead, Puma continues to expect an increase in the medium single-digit range for full-year currency-adjusted net sales and reiterated its expectation for a full-year EBIT in a range between €80 million and €100 million. Puma expects a slightly softer drop in the gross profit margin for the full year at the lower end of the range of minus 100 to 150 basis points versus last year but the improvement in gross margin is expected to come at the expense of a slight negative effect on net sales.
“The continued volatile currency trends in some markets and the weakness of the Euro, especially towards the US Dollar, continues to put pressure on gross profit margin, OPEX, and net earnings,” said Gulden. “We have taken and will continue to take countermeasures but, as already indicated in the last two quarters, we cannot fully offset these negative impacts on our earnings. Good feedback from retailers, better sell-out and a solid order book validate our outlook for the fourth quarter and allow us to confirm our full-year guidance.“
–Tom Ryan
