As the Puma brand is regaining resonance, the group's sales jumped by 8.3 percent to €990.2 million for the third quarter and its managers are confident that the growing level of full-price sell-out in the last two months will drive continued expansion and underlying margin improvement.

The sales increase amounted to 10.7 percent in constant currencies, which was lower than Adidas and several other rivals. But Bjørn Gulden, the group's chief executive, said in a conference call with analysts that Puma was comfortable with the pace of growth, allowing it to ensure steady sell-out and thus regain shelf space at retail level. He referred to retailers from Dick's Sporting Goods to Intersport and Snipes as customers who would surely back up the statement of more abundant and profitable sell-out.

The growth chiefly pertained to footwear, with a sales increase of 12.3 percent to €458.8 million. That was a sales rise of 16.4 percent in constant currencies, due to brisk sales of the Ignite range as well as the Fierce and Fenty products in running, training and sports fashion. This compares with sales increase of 10.3 percent for apparel and a decline of 2.4 percent for accessories in constant currencies.

The demand for Puma shoes was fueled by fashion-oriented products such as the Fierce, the Platform and Fenty ranges. It was pushed by Rihanna as well as Kylie Jenner and Cara Delevingne, an actress and activist who launched the “Do You” communication platform for Puma.  

However, Gulden insisted that Puma would not make the same mistake again, as he put it: Instead of just cashing in on the demand for these lifestyle products, the company wants to capitalize on the uptick to invest more in the performance side. Puma is already reaping some benefits in terms of growing demand for women's training products. Gulden acknowledged that it would take longer to build that up on the men's side – despite the feats of Usain Bolt, who achieved his Triple Triple at the Rio Olympics in the quarter.

Puma Consolidated Income Statement(Million Euros, Quarter ended Sept. 30)

2016

2015

%

Change

NET SALES

990.2

914.4

8.3

Cost of Sales

536.4

495.3

8.3

Royalty/Commissions

3.9

3.8

2.6

Operating Expenses

397.4

381.9

4.1

Net Interest Expense

1.3

5.1

-

Pre-Tax

59.0

35.9

64.3

Tax

17.3

12.2

41.8

NET

39.5

20.0

97.5

Euro/Share (Diluted)

2.64

1.34

97.0

Sales were up by 8.7 percent to €408.6 million in Europe, the Middle East and Africa, equivalent to a rise of 11.9 percent in constant currencies. France and Germany were identified as two of the most buoyant European markets.

The strongest underlying growth for the quarter came from the Americas, with sales up by 5.5 percent in reported terms to €342.9 million, but up by 12.2 percent in constant currencies. The most significant currency impact came from the Argentine peso and other currencies in Latin America.

Sales advanced by 11.7 percent to €238.7 million in Asia-Pacific, which was a rise of 6.9 percent in constant currencies. While China and India delivered a double-digit sales hike, the regional sales increase was reduced by weaker demand in Japan. Gulden said the market had been over-merchandised and some of the products that have been driving sales in Europe and the Americas have yet to reach Japan.

While the South Korean market has been an issue, the group indicated that it somewhat improved in the quarter. Oliver Lorans, Puma's former general manager in South Korea, has left the company to become vice president for Deckers Brands in China. Puma's general manager in the country since the start of July is Rasmus Holm, formerly head of sales in Asia-Pacific.

Puma managed a flat gross profit margin of 45.8 percent, with an increase of 1.9 percentage points to 43.1 percent for footwear. Puma said that its gross margin would have been about 3.0 percentage points higher at constant currency and hedging rates for the quarter, and the impact would probably amount to about 4.0 percentage points for the full year. Le company compensated for this pressure on the gross margin in the quarter with sourcing improvements and selective price increases. Thanks to the improved leverage, the group's operating profit was up by 46.7 percent to €60.3 million for the quarter and net earnings nearly doubled to €39.5 million.

For the first nine months of the year, Puma's sales climbed by 6.4 percent to €2,668.5 million, up by 10.2 percent in constant currencies. EMEA brought in sales of €1,084.3 million, amounting to increases of 9.8 percent in euros and 13.2 percent in constant currencies. The rise was driven by double-digit sales increases in France and the German-speaking countries, while Russia and South Africa were strong performers in the Eastern Europe, Middle East and Africa region. The group's turnover jumped by 7.6 percent in constant currencies in the Americas and by 9.3 percent in Asia-Pacific.

The footwear category delivered a sales increase of 11.0 percent in constant currencies for the nine months. But the uptick was even stronger in apparel, with a sales increase of 12 percent in constant currencies. It was a broad-based increase, albeit aided by the European football championships.

The group's gross profit margin dropped by 0.3 percentage points to 46.1 percent, on account of the stronger dollar. Again due to improved leverage, Puma's operating profit was up 32.9 percent to €113.5 million. The operating margin thus improved by 0.9 percentage points but it amounted to a paltry 4.3 percent.

Gulden said that the sales increase had been a little firmer than expected, while the gross margin was as anticipated. He added that the group should fulfill its guidance of a high single-digit sales increase in constant currencies for the full year and a stable gross margin of about 45.5 percent. The operating profit for 2016 should be in the upper half of the range that was previously indicated, from €115 million to €125 million.