Puma Outlook Murky

Analysts were disappointed that Puma SE cut its revenue and profit forecasts for the year on Tuesday after a tough first quarter. But they are looking forward to new leadership at the company.

“Today’s [operating income] miss at Puma was a clear disappointment despite previously conservative guidance,” said Citigroup analyst Thomas Chauvet. “On a positive note, the appointment of Bjorn Gulden as Puma CEO [on July 1] should hopefully support the execution of a strategy focused on cost reduction and brand repositioning with a particular attention to product development in footwear and segmentation of the offering and communication.”

Susquehanna Financial analyst Christopher Svezia noted that a turnaround for the Herzogenaurach, Germany-based firm remains a work in progress and further out than anticipated.

“The first half will prove more difficult as the company works to realign and tighten its product assortment with a focus on elevating the brand and keeping inventory clean,” he said. “The second half could provide some opportunity, but visibility is limited.”

Puma’s first-quarter footwear sales declined 7.8 percent on a currency-adjusted basis, to 373 million euros, or $483.95 million.

The decline was caused, in part, by the Teamsport category, which did not perform as well in a non-event year, the firm said, as well as shrinking demand for toning items. But Puma’s lifestyle products, such as the Suede and Archive Lite Models, resonated well with consumers in the Asia-Pacific region.

Meanwhile, apparel sales declined modestly in the first quarter by 1.1 percent currency-adjusted, to 256 million euros, or $332.16 million. The accessories category was a bright spot, rising 11.9 percent currency-adjusted, to 152 million euros, or $197.19 million.

By region, Puma’s Americas business improved by 1.8 percent on a currency-adjusted basis, to 260 million euros, or $337.25 million, buoyed by strong performances in Mexico and Brazil.

The EMEA region fell 4.8 percent currency-adjusted, to 348 million euros, or $451.32, hurt by the soft consumer spending and high unemployment, with performance especially weak in Italy and France.
The Asia-Pacific region declined 2.9 percent currency-adjusted, to 173 million euros, or $224.34. India and Australia delivered positive performances, while Japan and China were drags on regional sales.

Puma’s first-quarter net earnings slumped 32 percent to 50 million euros, or $66 million. Sales for the period ended March 31 slipped 2.3 percent on a currency-adjusted basis to 782 million euros, or $1.03 billion.

Management now expects a low- to mid-single-digit decline in currency-adjusted, full-year net sales. Continued pressure on gross profit margin means the company is unlikely to meet its original guidance of low- to mid-single-digit growth in operating profit, it said.

Michael Laemmermann, Puma’s CFO, said in a statement, “In the current challenging business climate, especially in Europe and in Asia, we are continuing to implement our transformation and cost-reduction program aimed at improving efficiencies and our cost base. This will increase Puma’s profitability in the long-term.”

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