Rihanna Helps Drive Puma Earnings Up 4% in Q1

Puma’s collaboration with Rihanna is proving more and more fruitful.

The singer, who signed on as brand ambassador and Puma’s women’s creative director in December 2014, has helped boost the sporting-goods maker’s first-quarter performance.

The Herzogenaurach, Germany-based firm, which is controlled by French group Kering, said net earnings rose 4 percent to 25.8 million euros, or $28.5 million, in the three months ended March 31.

Total sales were up 3.7 percent to 851.9 million euros, or $939.7 million, with footwear the main driver. On currency-adjusted terms, the gain stood at 7.3 percent, in line with analysts’ expectations.

Puma singled out the Creeper and the Fenty trainer as highlights, which both sold out within weeks or days. A new style introduced by Rihanna last week, the Fenty slide sandal with a furry interior, “blew out in minutes,” according to Bjørn Gulden, CEO of Puma SE.

Rihanna Puma Fur Slides Release
Puma by Rihanna faux fur slides in shell.
CREDIT: Courtesy of brand.

Speaking on a call with journalists on Friday, Gulden said: “For the first time, retailers are calling us asking to be our distributors again. These are high-end department stores and there are many. This is the first time at least since I’ve been here that this has happened.” He said the goal was to have fresh drops of the Fenty, the Creeper and the Slide delivered every month, but to keep the volumes tight in order not to overdistribute.

Gulden judged that the Fierce, a lightweight trainer advertised by the brand’s new face Kylie Jenner, “could be a big franchise for us,” as well.

On the performance side, the launch of the Ignite Disc running shoe also contributed to driving footwear sales up 3.7 percent, or 8.5 percent on currency-neutral terms in the quarter.

Puma Ignite Disc Sleeve
Puma Ignite Disc Sleeve lifestyle sneaker in white-and-black colorway.
CREDIT: Courtesy of brand.

Apparel and accessories rose 3.7 percent and 4 percent respectively.

The biggest challenge for Puma remains getting adequate space in retail to showcase its styles and innovations. Particularly in North America, the executive acknowledged “deficits against local brands on the performance side,” typically a men’s territory. “Under Armour is very strong there. But some 87 percent of their business is in the U.S. They have the space, so when the sell-through is good, they grow. Ironically, our women’s business [pushed by lifestyle and training products associated with Rihanna and Jenner] are helping to open doors for men’s,” he noted.

Puma’s Latin American region meanwhile was strongly impacted by the weakness of its currencies, most notably the Argentinian peso. Consequently, sales in the Americas were down 0.3 percent, but grew 5.4 percent when stripped of currency fluctuations.

Gulden said price adjustments have been implemented in Argentina, a very profitable market for Puma, but also in Russia and Turkey. He noted that although the price of raw materials along with the shipping costs from Asia improved on the back of falling oil prices, those advances were partly washed out by a stronger U.S. dollar in 2016.

Overall, the CEO commented “the first quarter developed as we expected. We saw organic growth in all segments and all regions. We are especially happy to see that our sell-through to consumers is improving — both in our own retail and with our retail partners. This is especially strong in our women’s business, where the launches of new products and new marketing concepts have started to show excellent results.”

Kylie Jenner; Puma
Kylie Jenner in the Puma Fierce ad campaign.
CREDIT: Courtesy of brand.

Puma’s Q1 report came on the heels of preliminary Q1 results released ad-hoc by rival Adidas, which logged a 22 percent gain in sales and 38 percent gain in net income, boosted by strong demand for its lifestyle sneakers.

Gulden gave credit to his neighbor. “It’s fair to say that Adidas has a lot of momentum in the lifestyle area, taking market share from other companies. Just look at people’s feet – you see Superstar and Stan Smith everywhere. That’s a huge growth vehicle for them. They did a good job,” he said, noting that business for Puma was heading in the right direction. “We are smaller. Our expectation is to grow high single digits in 2016, and we feel very good about that.”

The CEO added that the brand was looking forward to this year’s main sporting events: the Copa America, the UEFA Euro 2016 and the Olympic Games in Rio, which are expected to drive sales further.

“Despite the negative impact of currencies we confirm our outlook for the full year,” he asserted.

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