Puma raises FY revenue outlook, maintains Ebit forecast

Puma, bolstered by its strong first-half sales despite persistent global headwinds, has increased its financial year 2022 revenue forecast to mid-teens currency-adjusted growth from a prior outlook of at least 10 percent sales expansion. Various factors, however, ranging from higher freight costs to rising raw material prices, will dilute the group’s profitability this year. The company is holding its annual Ebit forecast of €600 to €700 million, up 7.7 percent to 25.7 percent year-on-year, steady. Puma says it will continue to prioritize “sales growth and market share gains over short-term profitability.”

Group quarterly revenues exceeded the €2 billion mark for the first time ever in the second quarter, rising by 18.4 percent on a currency-adjusted basis (26.0% reported) to €2,002.0 million from €1,589.1 million for the period ended June 30. Sales growth in the performance categories of running, training, team sports, golf and basketball was described as strong. Ebit rose by 34.4 percent to €146.0 million from €109 million despite increased marketing and sales investments and higher warehousing costs. Net income jumped by an impressive 73 percent to €84 million from €49 million. Gross margin, under pressure due to an unfavorable geographical and channel mix and higher freight costs, declined 100 basis points to 46.5 percent. Gross margins are forecast to remain under pressure for the next 12 months, largely due to gradual increases in the costs of goods sold. European gross margins will be under pressure in 2023 because of currency impacts and higher raw material costs. Merchandise price increases of 5 to 10 percent will take effect in H2, with double-digit hikes likely on tap for all markets in 2023.

Period-end inventories of $1.98 billion included $753 million in transit on June 30. CEO Bjorn Gulden said Puma is not worried about its inventory levels currently because of market demand but confirmed that surplus merchandise destined for China or Russia has been re-allocated.

Second quarter wholesale revenues rose 22.6 percent on a currency-adjusted basis to €1,563.2 million, while DTC segment sales were 5.5 percent higher at €438.8 million. As owned and operated retail sales increased by 11.3 percent, e-commerce revenues declined by 4.1 percent, mainly due to Covid-19-related lockdowns in Greater China. They were 3 to 4 percent higher, excluding China. Puma’s current wholesale to direct sales ratio is 79 percent to 21 percent, a split the company would like to see closer to 70 to 30 percent.

“Many retailers are nervous right now (about inventory levels), especially on the apparel side,” commented Gulden, later adding that more retailers are currently canceling or delaying (apparel) orders with growing concern about sales prospects for the Back-To-School season.

Geographically, continued high brand demand pushed Americas’ sales up 25.6 percent currency adjusted (39.2% reported) to €940.6 million. Key market sales growth drove a 21.5 percent quarterly revenue gain in EMEA to €706.2 million. But the government restrictions in China offset strong growth in other major Asia-Pacific markets, pushing the region’s revenues down 1.8 percent (-4.1% reported) to €355.1 million. Brand sales in Greater China have been down double-digits every quarter since Q2/21, including a 43 percent drop in the most recent period and -40 percent for H1.

On a currency-adjusted basis, all segments posted double-digit sales gains. Footwear sales were 19.7 percent higher at €1,007.3 million; apparel revenues increased 20.2 percent to $665.7 million, and accessories sales rose 11.2 percent to €329.0 million.

During the second quarter, Puma expanded its distribution with the launch of Puma.com in both Saudi Arabia and the Philippines. Thailand and Norway are among the additional countries being added this year. Meanwhile, a shopping app for smartphones introduced in India that allows consumers to virtually try on select products via 3D animations will gradually be introduced in the U.S., Japan and some European countries by the end of the year.

Slated to celebrate its 75^th anniversary in 2023, Puma intends to bring its “Forever” and “Faster” marketing messages together that will simultaneously focus on the brand’s history, culture, performance, and design.

The brand is venturing into the outdoor footwear space but says it wants to remain a sports brand first. In basketball, the new MB02 shoe worn and endorsed by Lamelo Ball hits this fall before the MB03 in early 2023. The signature Stewie1 for the WNBA’s Breanna Stewart hits in four colorways over the coming months. On the soccer front, Puma says it will continue investing in the women’s game ahead of the 2023 Women’s World Cup and will have six or seven sponsored federations, including Switzerland, Morocco and Uruguay, participating in the World Cup in Qatar in November/December. In the U.S., meanwhile, Puma will participate in New York Fashion Week in September for the first time in five years with a scheduled “Futrograde” show slated for Sept. 13.