The coronavirus pandemic has already dragged down Puma SE’s first-quarter earnings — but the worst could be yet to come for the German sportswear giant.
On Thursday, the company released its financial results for the three-month period ended March 31. It logged profits that declined nearly 62% to 36.2 million euros, or $39.2 million, with earnings per share that fell to 24 cents. Revenues also decreased by a currency-adjusted 1.3% to 1.3 billion euros despite growth in the first ten weeks of the quarter.
In a statement, Bjørn Gulden said that Q1 was “difficult,” but Q2 is expected to be “even worse with more than 50% of global sports and sport lifestyle space being closed.” In order to mitigate the impact on its business, Puma is directing its resources to e-commerce and the markets in which it is able to reopen stores and factories, as well as working with supply chain partners “to minimize the damage, assure timely deliveries, avoid excess stock as much as possible and to find fair solutions for all of us.”
According to the company, both wholesale and retail channels were “significantly” affected by COVID-19, which forced the closures of almost all of Puma’s owned and operated stores. In the first quarter, footwear was the only product division that showed gains, improving 1.9% on a constant currency basis, while apparel and accessories were down a respective 6.3% and 0.2%.
In China, the athletic footwear and apparel maker saw a “good start to the year,” with double-digit advancements in wholesale, brick-and-mortar and e-commerce. However, widespread shutdowns that went into effect in the last week of January meant that its business in the country — with the exception of online sales — had “basically disappeared.”
Although China began to show signs of recovery in mid-March, the pandemic had already spread around the world, temporarily shutting down about 80% of Puma’s doors. The Asia-Pacific region recorded a 12% slump in sales, while revenues in the Europe-Middle East-Africa area sank 3.5%. Meanwhile, in the Americas, sales dipped 3.1%.
Gulden outlined three phases as part of Puma’s plan: “Survive, recover, grow again,” he said. Puma’s markets are currently in different stages of the plan, with Asia-Pacific, including China and Korea, still in recovery; the EMEA “moving towards a recovery;” and the Americas “in the middle of the survive phase.”
“The goal is to get through this without any Puma employee losing their job,” Gulden added. “To survive this crisis in cooperation with all our partners such as retailers, suppliers, landlords, financial institutions, authorities, investors and customers is crucial.”
In late March, the company announced shorter workweeks for thousands of its employees. Although the employees at its headquarters in Herzogenaurach and in its own stores are working only half their usual hours, Puma said it was still paying their full salary thanks to its home country’s short-time work allowance. What’s more, its three of its top executives — Gulden, as well as finance chief Michael Laemmermann and sourcing chief Anne-Laure Descours — waived their salaries for April.
The brand also secured this month an additional 900-million-euro revolving credit facility. It has abandoned its guidance for the full year. “2020 is and will be a difficult year,” Gulden said, “but we do everything we can to recover and to get back to strong growth in 2021.”