Puma maintains FY outlook as Q3 gross margin improves

Citing a significantly improved aged inventory issue in Greater China but also ongoing weakness in the U.S. market, Puma reported a second consecutive period of 6 percent currency-adjusted growth to €2.31 billion in the third quarter. Wholesale revenues rose by 3.1 percent currency-adjusted to €1.79 billion, and direct-to-consumer sales increased by 17.4 percent to €524.9 million as DTC’s share of the quarterly business improved to 22.7 percent from 20.8 percent in Q3/22. The group also realized a 30-basis-point increase in gross margin to 47.1 percent, its first such quarterly improvement since 2022.

With the results, which included an 8.5 percent Ebit decline to €236 million and a 9.6 percent drop in net income to €132 million, Puma maintained its FY23 outlook. The year-over-year inventory level was down by more than 20 percent to €1,874.1 million.

Despite ongoing geopolitical risks, muted consumer sentiment, macroeconomic headwinds, and the speed of recovery in the U.S. and Greater China markets, Puma says it’s continuing to gain market share worldwide and will concentrate on the soccer, performance running (where it re-entered the segment two years ago), basketball, and golf categories going forward as it continues to cope with numerous negative impacts that include geopolitical risks, muted consumer sentiment, and currency volatility.

Additionally, Puma is promising to “shake up” the Formula1 soft goods business with its new category creative director, A$AP Rocky, and make some noise in the “Terrace” footwear trend with its new Palermo style. The company is maintaining its full-year outlook that calls for currency-adjusted sales growth in the high single digits and income before interest and taxes (Ebit) in the range of €590 million to €670 million.

In Q3, currency-adjusted sales were strongest in the home EMEA market, rising by 9.9 percent to €1.02 billion. Asia/Pacific revenues were up by 4.6 percent to €435.9 million, helped by ongoing growth in Japan and India and a recovery trend in Greater China, where the company is vowing to be in a better market position as 2024 commences. Up 10 percent year-to-date, Puma’s Greater China sales are forecast to be up by approximately 20 percent in FY23. 

In the Americas, sales on a currency-adjusted basis rose by 2.5 percent to approximately $907.4 million on strong growth in Latin America. North American sales fell by an unspecified percentage due to macroeconomic headwinds and the brand’s dependency on the off-price wholesale business. DTC sales rose by high-single digits, but wholesale revenues declined by 12 percent. Year-to-date North American sales were off by 12.4 percent for the nine months ended Sept. 30. Puma senior management confirmed that the US athletic shoe market will sell fewer overall units in 2023 than it did in 2022. But intent on amplifying “brand noise” in the market and making a bigger play in the retail-run specialty segment, the company recently named Andrew Rudolph as its new SVP US Sales. Senior management told analysts that the brand will return to growth in the US in 2024.

Third quarter results by product category were led by footwear, which generated 11.3 percent currency-adjusted growth to €1.22 billion. Apparel sales were down by 0.5 percent to €794.6 million, and accessories revenues jumped by 4.2 percent to €301.6 million.