Plot Twist: Chinese Consumers Are Driving Puma’s Growth Amid Trade War

Puma kicked off the year with its strongest quarter ever, and China was largely to thank for the surge in sales.

The German athleticwear brand said on Friday that sales in the Asia/Pacific region increased 28.6% to €401 million (about $447.7 million) for the three months ended Mar. 31, with Chinese consumers driving most of the growth. Its overall sales were €1.32 billion ($1.47 billion), an increase of 15.3% over the same period in 2018.

The company was able to meet the increased demand in China in part because it has moved some of its footwear production to countries like Vietnam and Indonesia (and apparel to Bangladesh and Cambodia), freeing up capacity in its local factories. As of last year, Puma said it sourced a third of its products from China, but ongoing trade tensions between the U.S. and that country have encouraged it to look elsewhere, a process that was already underway due to rising labor costs.

Because of this, Puma CEO Bjorn Gulden told reporters the threat of U.S.-China tariffs was “a little bit of a gift,” and the company has increased its inventories by 19% to account for ongoing demand. Competitor Adidas, meanwhile, warned investors last month that it would miss its 2019 growth target because supply chain delays will limit North American stock.

“We carried a little bit more of the inventory to actually make sure we don’t run into capacity issues that will hurt our sales,” said Gulden.

Companies across the sector have been shifting manufacturing away from China toward Vietnam and other parts of Southeast Asia. Last year, for instance, Adidas said that Vietnam had overtaken China as its top supplier for footwear, with the former producing 44% of its shoes by volume in 2017, up from 31% in 2012.

Footwear remains Puma’s largest category, accounting for almost half of all sales at €639.3 million ($714 million), but for the past three quarters, apparel has been its top growth driver. Sales for the category grew by 26.9% to $468.4 million, while footwear sales grew by 9.3%.

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