Puma Feels Pressure on Full Year as Q2 Results Lag

Puma Sky Wedges

Puma Sky Wedges

Frankfort—While Puma still expects an increase in full-year net income compared to 2012, the athletic footwear maker today posted a drop in sales and product in its second quarter earnings report.

Puma, which is 83% controlled by Kering, remains a distant No. 3 behind Nike and Adidas especially in athetlicwear sales. Its second quarter profit before interest and taxes fell to 31 million euros (about $40.9 million) from 47 million euros a year ago. The results also missed analysts’ average estimate for 36.1 million euros.

“Southern Europe and the Far East remain challenging,” Puma said. Revenue fell 4% to 692 million euros on a currency adjusted basis, missing the 709 million-euro average analysts estimated.

Those misses sent shares of the company down in trading earlier today and brought renewed hope that the new CEO Bjorn Gulden, a former Adidas executive and professional athlete, could bring back credibility to Puma as a sports brand rather than just a fashion brand.

Gross Margin Pressure

“I think we have the worst behind us, but if we look at the economic environment and what we’re getting from the markets, then we see that the second half will be quite challenging,” Michael Laemmermann, chief financial officer, said.

Besides cutting jobs and product ranges in footwear, Puma has closed stores and hopes to improve its performance-wear offerings.

Poor sales in France, Italy and China, and Japan—its second largest market with about 10% of total sales—and increased discounts narrowed Puma’s gross margin to 46% from 49.1%.

Sales in Asia-Pacific declined by 7.2%. Laemmermann said China remained tough, with an excess of stock on the market.

Footwear sales, which account for nearly 50% of total revenue, fell 7.3% in the quarter as the group had to discount its products more than last year to get them off the shelves. Puma’s footwear sales fell by 7.8% in the first quarter (Adidas increased its by 3 %.)

Puma had cut its fiscal full year forecast in May and reiterated it today: a low-to-mid single-digit decline in currency-adjusted sales as well as gross profit margin pressure during the second half. Total sales are expected to be up between 1% to 5%.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com