As Bjørn Gulden introduced the figures to reporters in Herzogenaurach earlier this month, he started by showing the medals table of the Sochi Olympics. The Norwegian chief executive was delighted that his country was number one at that point – only to add that the same could not be said for Puma's results.
However, Gulden reiterated his belief in the turnaround of the brand this year, based on the “Forever Faster” strategy outlined in November. This will become apparent to consumers with a major advertising campaign to be launched in the third quarter. Gulden said it would be Puma's largest in a decade but he declined to provide further details on the level of spending. The campaign is being prepared by Puma's new lead creative agency since December, JWT New York.
The company has since redefined its brand persona, around words such as liberated, bold, progressive, fearless, individual and independent. Gulden said that Puma wanted to be the rebel in the market, which suited the personalities of many former and current endorsees.
The entire effort is intended to increase Puma's brand appeal, through an updated brand statement as well as a more dynamic mindset throughout the company. The focus is meant to be firmly on sports assets, from Usain Bolt to Mario Balotelli and the Arsenal football club. As previously reported, Puma has signed a wide-ranging endorsement deal with Arsenal, to start from the beginning of July.
Balotelli is at the center of a new campaign launched by Puma around its latest football boot, the Evopower, which hit the market earlier this month. Puma claims it is “scientifically proven” to be the world's most powerful football boot. The long version of an ad showcasing the product has been downloaded more than one million times.
Apart from Balotelli, it will be worn on pitch by players such as Cesc Fàbregas, Marco Reus, Yaya Touré, Dante and others. The boot will carry Puma's product marketing efforts around the football World Cup, where the brand's shirts will be worn by eight teams – one out of four. Unlike other brands, Puma has not yet unveiled these shirts, and will do so in the first week of March.
Puma said its football sales should increase as its gets more retail exposure. Gulden claims that Puma has a much larger share of football sales online, where it has the opportunity to display its brand in a more appealing way. With the new ranges and assets on board, he said Puma should have a double-digit share in any football market.
Gulden was particularly bullish about the improvements in the brand's product range, which he attributed chiefly to Torsten Hochstetter, the company's new global creative director. He said the design of performance footwear had been simplified. On the lifestyle side, the team has smartly revamped old footwear technologies such as the Disc and the Trinomic.
The chief executive acknowledged that most of these product improvements would only hit the market in the first half of next year. As he spoke to reporters, key retail customers were in the building to order from the latest ranges. Gulden said the reactions had been very positive so far, partly due to the fact that the ranges had been developed after extensive talks with these retailers to check what they wanted from the Puma brand.
Restoring strong relationships with retailers is in fact one of the key points of the group's turnaround strategy. With the improved product range at hand, the company wants to pull out of lower-tier distribution and work more closely with key accounts. It will build dedicated product and marketing programs to help regain shelf space and push sell-through.
Such a partnership started with Foot Locker earlier this month, as the brand installed Puma Labs in two stores in Atlanta and prepared dedicated space for its lifestyle products in another 150 U.S. stores. Gulden mentioned Lillywhites in London, Kamo in Japan and Intersport in the Czech Republic as other examples of reinforced partnerships that have led to more prominent retail space.
Puma has decided not to appoint a chief marketing officer for the time being – leaving the marketing tasks in the hands of Gulden himself. On the other hand, the company has further reinforced its management to support its efforts to become faster in development and operations.
Lars Soerensen joined Puma at the end of last year in the new function of global director of business processes and intelligence, reporting to Andy Koehler, chief operating officer. The long title means he will be in charge of information technology. His career includes stints at Esprit, Adidas and Lego. Soerensen just switched from Bestseller, the Danish apparel company, where he was chief operating officer.
Meanwhile, Jürgen Wormser has become global director of footwear sourcing and development based in Ho Chi Minh City. His job will be key in fixing Puma's footwear issues and making sure the operations work faster. Wormser previously held several senior positions at Adidas. He succeeds Holger Rosemann, who left Puma at the end of October, and he reports to Shirley Justice, the general manager of global sourcing.
The first phase of the turnaround is meant to kick off with what Gulden described as a “Call to Arms,” with the advertising campaign starting in the third quarter. It will continue early next year with “The Challenge,” based on Puma's positioning as a rebel. The third part of that phase will unfold in the second half of 2015, in a plan called “The Pursuit,” which is marked as confidential. The second phase of the turnaround will start in 2016, dubbed “The Proof.”
Gulden said that sales were expected to decline in the first half of this year. But the reinforced partnerships with retailers, the big advertising campaign and the start of the Arsenal deal are expected to trigger an increase in sales in the second half, which should be sufficient to make up for the drop in the first half.
The company therefore expects its turnover to be flat this year but with an improved quality. Assuming stable currencies and small increases in input prices, the gross profit margin should rise slightly, owing to sourcing improvements and favorable changes in the product mix.
The investments in media spend and sports assets mean that the reduction in operating expenses will come to an end. They will increase in the second half, leading the management to predict an Ebit margin in the range of 5 percent of its turnover for this full year. Without the special items deducted in 2013, the net profit for this year should significantly increase anyway: Puma predicts that the net profit margin will land at about 3.0 percent, compared with 0.2 percent in 2013.
