Puma’s Lifestyle Push Is Paying Off, But Tariffs Could Put a Damper on the Holidays

Puma delivered a strong third quarter as sales surged across all regions and product categories — but the German sportswear company warned that U.S.-China tariffs could slow its momentum going into the final months of the year.

“The fourth quarter will be the first quarter where the U.S. tariffs on China will have an impact,” Puma CEO Bjorn Gulden said in a statement. “Currently, without price increases, this is putting pressure on EBIT, at least in the short term.” Like its competitors, Puma has kept its prices steady, though many executives have conceded that this could change if the additional import costs continue.

“So far everybody is eating the tariffs in their margins,” Gulden said on a conference call Thursday, per Reuters. He added he expects Puma’s market-leading U.S. competitors to be the first to increase prices.

Puma’s sales rose 17% on a currency-adjusted basis to 1.48 million euros (about $1.64 million), while earnings before interest and taxes hit 162.2 million euros, up 24.8% from last year’s 129.9 million euros. Both were record quarterly highs for the company.

Puma has focused its efforts on expanding its offerings of athleisure, a category that market research firm The NPD Group forecasts will surpass “fashion” footwear as the top-performing shoe category in 2020. To help aid this push, the brand has tapped pop culture stars such as Selena Gomez and Cara Delevingne (the latter in a collaboration with Balmain).

It also reentered the basketball category last year for the first time in two decades, setting out to connect with American sports fans. “Basketball is a massive market and a tremendous opportunity,” Ryan Cross, GM of basketball for Puma, told FN last August. “Very few sports have the global appeal that basketball does.”

Footwear was a highlight for the third quarter, accelerating 16.9%, which Gulden said “shows the strong performance of the new styles.”

“Puma has seen a successful comeback driven by improved merchandise, relevant marketing and product collaborations and fashion trends supportive of the brand’s positioning,” Wedbush Securities analyst Christopher Svezia wrote in a note to clients.

He also pointed to the brand’s “material runway for sales growth and margin enhancement” — an advantage of Puma’s relatively small size compared with rivals Nike and Adidas.

Puma’s 2018 sales were $5.1 billion, well behind Adidas at $22 billion and Nike at more than $30 billion, but its growth has made it one to watch.

And while tariffs could eat into Puma’s U.S. margins, it is seeing impressive momentum in Asia, where sales grew 28.5% in the quarter; and the EMEA region, where they were up 9.7%. The Americas — which includes the U.S. along with the rest of North and South America — accounts for about a third of Puma’s revenue, and sales in the region increased 17.9% in the quarter.

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