After a tough third quarter, Puma is expecting to end the year with a low to mid-single-digit sales decline in constant currencies. However, the company is still confident that it will report a profit for the last quarter, which will enable it to remain profitable for the year.
This implies that Puma is anticipating another small sales drop for the last quarter, after ending up the first nine months of the year with a sales decline of 2.0 percent in constant currencies. In reported terms, Puma’s sales for the three quarters crept up by 0.4 percent to €1,971.1 million.
Puma executives said that price pressure had not worsened in the quarter but there were still uncertainties about the attitude that consumers will adopt during the festive season. On the upside, the company expects that the last quarter will enjoy some benefits of the upcoming football World Cup in South Africa, for which five Puma-clad teams have already qualified, including Italy, the reigning world champions.
As already reported by Pinault Printemps Redoute (PPR), the French conglomerate that controls Puma, the German company’s consolidated sales declined by 5.5 percent to €673.4 million for the quarter, a decline of 6.3 percent in constant currencies. Yet this performance was somewhat distorted by a shift in the timing of deliveries, which added about €18 million worth of sales to the second quarter and reduced third quarter sales by the same amount.
Without repeating all the details reported in our last issue, it could be pointed out that sales in Europe, the Middle East and Africa were off by 5.6 percent to €366.4 million for the quarter, or by 3.1 percent in constant currencies – albeit with wide divergences between weak markets in Western Europe and the Middle East, and more resilient business in Africa and Eastern Europe, Puma being far less exposed to the Russian market than its larger peers.
African sales consist almost entirely of its business in South Africa, which stands to benefit from the World Cup. However, Puma is also gearing up for the African Cup of Nations, taking place in Angola in January, with eight out of 12 teams sporting jerseys with wildcats. Puma will be the African Cup of Nations’ official supplier for the first time, and it has planned dedicated shops for the event.
In the Americas, Puma saw its sales decline by 10.4 percent to €165.4 million, which would have been a drop of 11.2 percent in constant currencies. The brand was battered in the United States, where its sales decreased by 11.3 percent to $129.5 million, with a disappointing back-to-school period. Meanwhile, import restrictions and the swine flu affected sales on the rest of the continent.
As for the Asia-Pacific region, it showed a sales increase of 1.2 percent to €141.6 million for the quarter, but in constant currencies sales fell by 8.3 percent. Jochen Zeitz, the company’s chief executive, described Puma’s performance in China as respectable, while it suffered from sluggish economies in other countries.
Adding sales under licenses, Puma’s brand sales slid by 7.6 percent to €719.6 million for the quarter, off by 8.3 percent in constant currencies.
In terms of product categories, footwear was worst affected with a sales drop of 13.1 percent for the quarter, while apparel sales fell by only 3.0 percent. The company’s turnover in accessories jumped by 40.4 percent, but this was due to the consolidation of its socks business.
The company’s gross margin shrank to 51.9 percent, compared with 53.6 percent for the same quarter last year, but it was still much better than in the second quarter. The annual decline was chiefly blamed on higher discounts to reduce inventories. This mostly applied to the EMEA region, where Puma’s gross margin contracted from 56.4 percent to 52.8 percent. Still, Puma executives were eager to point out that its gross margin remained at an industry-leading height.
Puma’s operating profit for the quarter fell to €98 million, compared with €125 million for the same quarter last year. Its net result took a comparable hit, down by 23.6 percent to €67.9 million.
Meanwhile, the tightened discipline imposed at Puma in the last months has contributed to a significant reduction in its inventory, down by 17.5 percent to €356.4 million. Furthermore, its focus on cash management has enabled it to lift its cash position to €376.9 million at the end of September, up by nearly 28 percent.
Assiduous readers might have noticed that the comparable sales figures reported by Puma differ markedly from those reported by PPR for Puma last month. This is due to the fact that Puma only adjusts for currencies, whereas PPR further takes into account other factors, such as the consolidation of Puma’s socks business.
