If small is the new big, Puma could be well on its way to being huge.
The Germany-based brand managed to put up stellar earnings this week, with second-quarter profits up nearly 60% on sales of 1.2 billion euros (or $1.3 billion), although with seemingly less fanfare than competitors like Nike, Under Armour and Adidas.
To be fair, the brand, which made its triumphant return to basketball last year and is seeing promising results on sales of the Ralph Sampson heritage basketball style, isn’t scoring the same level of multibillion-dollar sales as the athletic industry’s top players.
In comparison, Puma’s 2018 sales were 4.6 million euros ($5.1 billion), Adidas’s were 19.9 billion euros ($22 billion) and Nike’s reached more than $30 billion. Baltimore-based Under Armour’s 2018 revenues were comparable to those of Puma at $5.2 billion.
However, it’s growth — if it continues at the current pace — should make the brand worthy of more conversation, according to Matt Powell, VP and senior industry advisor for The NPD Group. Or as Wedbush Securities analyst Christopher Svezia put it, Puma’s gains are “outperforming [the] industry.
“The brand is much smaller than the big names but definitely getting some traction,” Powell said, noting that he’s heard “good buzz” about Puma from retailers.
In Q2, Puma saw sales in the all-important American market shoot up 22.7% to 462.8 million euros ($512 million), success that has even challenged athletic front-runner Nike amid heightened competition with Adidas and retro labels like Champion and Fila.
Puma’s apparel and footwear divisions also showed solid gains, advancing doubled digits, by 23% and 14.5% respectively, while accessories climbed moderately at 6.3%.
Where footwear is concerned, B. Riley FBR analyst Jeff Van Sinderen said the brand has “always [been] about product first” and the shoe category is “no exception.”
“That said, [Puma] has linked up with FIFA athletes and is gaining mindshare in soccer, which one might argue is creating a halo,” he added. “[The brand also] has heritage in soccer and is still relevant there. At the end of the day, it’s better product, marketing and authenticity rooted in performance athletics.”
Both Powell and Van Sinderen agree that Puma’s relatively moderate size — it’s dwarfed by Nike and Adidas — is likely the reason it’s not seeing as many headlines, despite its progress.
“It comes down to scale,” Powell said. “They’re a small brand — and I’m not sure that you can directly equate market share with conversation — but certainly, a smaller brand isn’t going to get as much noise out there as a bigger [label].”
Still, as the company continues to make a bigger play for basketball, it could find new avenues to boost market share. Powell, meanwhile, says he sees little potential for a resurgence in basketball sneakers in the near future.
“They’re playing a longer game: [Puma] thinks basketball is going to come back into fashion and when it does, they want to have a presence,” Powell said. “There’s certainly no sign that basketball is coming back into fashion anytime soon, but when it does come back, there’s an opportunity for them to get some share.”
Meanwhile, Van Sinderen said he doesn’t expect the brand to approach the level of Adidas and Nike, which currently dominate the sport.
“Basketball is fiercely competitive, but Puma can still be a niche player in basketball,” he added.
In parallel, as athleisure trends remaining strong in the U.S., boosted by the increasing tilt toward comfort and casual in American culture, Powell said he sees further potential for the brand to gain ground.
“The biggest thing [holding Puma back] was that for a long time we were in cycles where performance footwear was really driving the market and, in the United States, Puma has never been known for having a strong performance presence,” said Powell. “Now, as we move into this athleisure cycle, Puma is benefiting from it, with tremendous growth in the last quarter. It’s not hard to scale if you’re on trend, and they’re on trend right now.”
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