Puma reported a profit against a loss in the second quarter. Sales grew 96 percent in the second quarter with the best performances coming in footwear and in North America. The Germany-based company raised its guidance for the year although it warned about supply chain challenges.

Results were in line with a pre-announcement issued on July 16.

Bjørn Gulden, CEO, Puma SE, said, “The second quarter was a very good quarter for us. Despite a lot of operational issues, we saw very strong growth both in sales and profitability. Supply has been difficult with a shortage in freight capacity, harbor congestion and COVID-19 restrictions in certain sourcing countries. I am very proud of how our organization has maneuvered through all of these issues and how we managed to achieve these results in the second quarter. Demand for our products in performance, comfort and lifestyle has been strong. The cooperation with our sourcing and retail partners has become even stronger during the COVID-19 pandemic and this continued to help us in the second quarter.

“We are, of course, still worried about the impact COVID-19 will continue to have on our business in the short-term, now especially in the supply chain, but we continue to be very positive for the mid-term outlook for our sector in general and specifically for Puma. We are very proud of Italy having won the European Championship in football, playing in our products, and we look forward to great Olympic Games in Tokyo.”

Second Quarter 2021

  • Sales increased by 95.8 percent (ca) to €1,589.1 million (+91.2 percent reported). All regions and product divisions contributed with at least double-digit sales increases (ca). Americas reported the strongest growth of 181.8 percent (ca), driven by demand for the Puma brand in the North American market, followed by EMEA, which improved 85.4 percent (ca) and Asia/Pacific being up 29.6 percent (ca). Footwear was the growth driver (+114.0 percent ca), based on continued strong performance of its Running and Training and Sportstyle categories. Apparel (+85.5 percent ca) and Accessories (+72.2 percent ca) showed strong growth in the second quarter of 2021. Compared to the second quarter of 2019, sales were up 36.3 percent (ca) with all regions and product divisions delivering double-digit increases.
  • Puma’s Wholesale business grew by 114.2 percent (ca) to €1,200.0 million. Its Direct to Consumer business (DTC) increased by 54.7 percent (ca) to €389.1 million with growth in owned and operated retail stores (+107.0 percent ca) and e-commerce (+8.5 percent ca). After stores gradually reopened in the second quarter, demand shifted partially from the e-commerce channel to retail stores, while the overall underlying demand for the Puma brand was strong.
  • The gross profit margin in the second quarter improved by 360 basis points to 47.5 percent (Q2 2020: 43.9 percent / Q2 2019: 49.3 percent). The improvement in gross profit margin was driven by better sell through and less promotional activity, while inefficiencies in its supply chain, including inbound freight, had a negative impact.
  • Operating expenses (OPEX) increased by 34.5 percent to €650.4 million (Q2 2020: €483.5 million/Q2 2019: €531.6 million) due to higher marketing expenses and sales-related distribution and warehousing costs. As a result of COVID-19, it continued to face operating inefficiencies in its business. The OPEX ratio, in percent of total sales, decreased from 58.2 percent in the second quarter of 2020 to 40.9 percent in the second quarter of 2021 (Q2 2019: 43.3 percent).
  • The operating result (EBIT) in the second quarter increased to €108.9 million (Q2 2020: €-114.8 million/Q2 2019 (€80.3 million) due to strong sales growth, higher gross profit margin and continued OPEX control. This resulted in an improved EBIT margin of 6.9 percent in the second quarter of 2021 (Q2 2020: -13.8 percent/Q2 2019: 6.5 percent).
  • Net earnings increased from €-95.6 million to €48.7 million and earnings per share improved from €-0.64 in the second quarter of 2020 to €0.33 in the second quarter of 2021.

First Half-Year 2021

  • Sales increased by 53.6 percent (ca) to €3,137.9 million (+47.3 percent reported). The strong sales development was driven by double-digit growth rates in all regions and product divisions. Compared to the first half of 2019, Puma’s sales grew 30.0 percent (ca).
  • The Wholesale business was up 57.3 percent (ca) to €2,402.0 million while its DTC increased by 42.7 percent (ca) to €735.9 million with growth in owned and operated retails stores (+49.2 percent ca) and e-commerce (+33.5 percent ca).
  • The gross profit margin in the first half of 2021 improved by 180 basis points to 48.0 percent (H1 2020: 46.2 percent/H1 2019: 49.2 percent). The improvement in gross profit margin was driven by better sell-through, less promotional activity and a low base in 2020 due to the negative impact of the pandemic.
  • Operating expenses (OPEX) increased by 20.7 percent to €1,251.5 million (H1 2020: €1,036.8 million/H1 2019: €1,042.3 million) due to higher marketing expenses, sales-related distribution and warehousing costs as well as operating inefficiencies due to COVID-19. The respective OPEX ratio, in percent of total sales, decreased from 48.7 percent in the first half of 2020 to 39.9 percent in the first half of 2021 (H1 2019: 40.9 percent).
  • The operating result (EBIT) in the first half of 2021 increased significantly to €263.2 million (H1 2020: €-43.6 million/H1 2019: €222.8 million) due to strong sales growth, higher gross profit margin and continued OPEX control. This resulted in an improved EBIT margin of 8.4 percent in the first half of 2021 (H1 2020: -2.0 percent/H1 2019: 8.8 percent).
  • Net earnings increased from €-59.4 million to €157.8 million and earnings per share were up from €-0.40 in the first half of 2020 to €1.06 in the first half of 2021.

Working Capital
The working capital increased by 6.1 percent to €691.9 million (June 30, 2020: 652.1 million). Inventories were up by 7.7 percent at €1,388.7 million despite the supply chain constraints due to container shortages and port congestion. As a result of the strong sales development in the second quarter, trade receivables rose by 62.6 percent to €931.1 million and on the liabilities side, trade payables were up by 39.9 percent to €1,270.6 million.

Cash Flow and Liquidity Situation
The free cash flow in the first half of 2021 improved significantly to €24.6 million (H1 2020: €-206.0 million). This development was a result of the strong increase of earnings before taxes (EBT), while cash outflows for working capital and capital expenditures increased. Puma’s cash and cash equivalents as of June 30, 2021 amounted to €755.2 million (June 30, 2020: €437.0 million). In addition, at the end of the second quarter, Puma had unutilized credit facilities amounting to a total of €934 million (June 30, 2020: €1,263 million).

Outlook 2021
Puma said, “2021 started with an all-time high of COVID-19 cases globally and continued restrictions for our operations in numerous markets as well as supply chain constraints due to container shortages and port congestion. In addition to the implications from the COVID-19 pandemic, political tensions in some of our key markets also had a significant impact on our business. Despite the uncertainty, Puma has maneuvered well throughout the first half of the year based on continued brand momentum, successful product launches with high sell-through and a strong focus on flexibility in our operations.

“In light of the sales and profitability growth, especially in the second quarter, Puma now expects the currency-adjusted sales to increase at least 20 percent (previous outlook: mid-teens currency-adjusted sales growth) in the financial year 2021. The outlook for the operating result (EBIT) has been further specified and is now anticipated to come in between €400 million and €500 million (previous outlook: significant improvement). In line with the previous outlook, we do not provide a detailed outlook on our gross profit margin and OPEX-ratio.

“Our net earnings are still expected to improve significantly in 2021. As COVID-19 cases are rapidly growing in key sourcing countries in Asia, securing the supply of our products remains a high priority for us. The recent lockdown measures taken by the government in Vietnam result in suspended production at some of our suppliers in South Vietnam. As the duration, intensity and potential extension of the lockdown measures to other countries remains uncertain, the achievement of our outlook will be subject to continued manufacturing without further major interruptions due to the COVID-19 pandemic.

“Puma will continue to mitigate the negative short-term implications of the COVID-19 pandemic by building on its brand momentum and the strong relationships which it gained from being a reliable partner, especially throughout 2020. Our strong and profitable growth in the first half of 2021, a strong product line-up for the rest of the year and very good feedback from retail partners and consumers make us confident for the mid-term success and growth of Puma.”

Illustration courtesy Puma