Analysts: Challenges Ahead for Puma

NEW YORK — Puma SE has some work to do.

Susquehanna Financial analyst Christopher Svezia said, “They’re trying to do the right things, but there are a lot of things at work in that company right now. It just needs time to figure out when all these things can come together so that there’s growth again and the margin structure stabilizes.”

He added, “Sales trends also continue to decelerate as Europe remains very difficult and China has become more challenging.”

According to Barclays luxury research analyst Julian Easthope, the firm’s previously announced “Back on the Attack” plan to reach 4 billion euros in revenue by 2015 may be taking a back seat.

“They’re currently investing more into research and development to better compete in an industry that is increasingly innovative.

The newly appointed chairman, Jean-François Palus, [also group managing director of PPR SA] will oversee the transformation and his focus will be on getting margin and profitability right. [The firm now considers the revenue plan] ambitious but achievable,” said Easthope.

Among the changes Puma is going through is the optimization of its retail portfolio as it closes 80 unprofitable stores, mainly in mature markets, while opening selected profitable locations primarily in emerging markets.

By the end of December 2013, Puma aims to operate around 540 stores worldwide, compared with its current 590 stores.

The firm also is divesting unprofitable collaborations and endorsement contracts in line with the consolidation of its product portfolio and downsizing its collections by 30 percent by the end of 2015.

In the three months ended Sept. 30, the firm’s profit for the period plunged 85.1 percent to $12.2 million euros, or $15.3 million at current exchange, on the back of one-time costs of 80 million euros, or $103.7 million, that were booked in the third quarter.

Revenue inched up 0.5 percent currency-neutral. Apparel sales increased by 5.6 percent, while accessories saw the strongest growth of 20.1 percent.

Footwear sales rose 2.5 percent, supported by continuing demand for the lightweight running footwear range Puma Faas and for Heritage styles such as the evergreen Suede Classics and Archive Lite Mid and Low. The positive performance in running was dampened by declines in the fitness-and-training and motorsport categories in mature markets, the firm said.

Separately, this month also saw the departure of Jochen Zeitz. He resigned as member and chairman of the company’s administrative board, effective Nov. 30., but will remain on the board of Puma parent PPR as chairman of its sustainability committee.

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