The restructuring measures were unveiled as Puma reported weakening sales in Europe in the second quarter. They declined by 2.2 percent to €283.6 million, amounting to a decline of 3.0 percent in constant currencies.

Puma Consolidated Income Statement

(Million Euros, Quarter ended June 30)
 

2012

2011

%
Change

Footwear

370.9

352.6

5.2

Apparel

256.4

224.3

14.3

Accessories

125.6

96.7

29.9

NET SALES

752.9

673.6

11.8

Cost of Sales

383.1

342.9

11.7

Royalty/Commissions

4.7

4.6

2.2

Operating Expenses

327.4

279.9

17.0

Net Interest

(3.7)

(1.6)

131.3

Pre-Tax

43.3

53.8

-19.5

Tax

14.6

16.2

-9.9

Minority Interest

2.0

0.0

0.0

NET

26.7

37.6

-29.0

Euro/share (diluted)

1.8

2.51

-29.1

Franz Koch, the chief executive, said that Puma had held up well in Germany and in Spain, where it started operating by itself only two years ago. But the company has come under heavy pressure in France, Italy and Greece, and its performance has been affected in the U.K. and Scandinavia. The chief executive did not predict any significant improvements in these European markets for the remainder of the year.

The entire company's sales jumped by 11.8 percent to €752.9 million for the quarter, which was an increase of 6.0 percent in constant currencies. Global brand sales reached €795 million, amounting to a rise of 12.2 percent in euros and 6.4 percent in constant currencies.

While Europe weakened, sales increased by 23.6 percent to €278.7 million in the Americas, with outstanding performances in Argentina and Brazil, as well as a double-digit sales rise in North America. In constant currencies, Puma's sales in the Americas jumped by 15.0 percent.

The group's turnover in Asia-Pacific was up by 20.7 percent to €190.6 million, with an increase of 8.6 percent in constant currencies, driven by China, India and Japan. Despite the tight situation in the Chinese sports market, Puma achieved double-digit sales growth in the country for the quarter.

Footwear sales were sluggish, up by 5.2 percent to €370.9 million in reported terms, but down by 0.2 percent in constant currencies. Team sports and running footwear sales were on the rise, which nearly made up for a decline in motor sports and fitness shoes. On the other hand, apparel sales were stimulated by the European football championships, which contributed to raise them by 14.3 percent to €256.4 million, up by 7.9 percent in constant currencies. As for accessories, their sales climbed by 29.9 percent to €125.6 million, which was still a jump of 24.3 percent in constant currencies, driven by Cobra Golf's equipment and Puma socks.

Puma's own retail business lifted its sales by 22.3 percent to €150 million, amounting to 19.9 percent of the company's quarterly turnover, compared with about 17 percent for the same quarter last year. The expansion was due to 62 extra stores as well as an increase in comparable store sales and more online sales.

Meanwhile, Puma managed to stabilize its gross margin, which remained unchanged at 49.1 percent in the second quarter. The gross margin improved for footwear and apparel but declined in accessories, down by 2.1 percentage points to 51.1 percent, due to more sales of golf clubs, which generate relatively low margins.

However, the company's operating profit declined by 15.0 percent to €47.1 million for the quarter, due to the fact that expenses increased faster than sales. This was attributed to spending around the European championships as well as the Olympics, and investments in product development. The company ended the quarter with a net profit of €26.7 million, which was a drop of 29.2 percent compared with the same quarter last year.

Another issue is the rise of inventories, which went up by 32.3 percent in reported terms and by 26.1 percent in constant currencies. The company attributed this to the opening of more company-owned stores, as well as inflating average prices per unit on stock.

For the first half of the year, Puma's sales were up by 8.8 percent to €1,573.8 million, which was an increase of 5.1 percent in constant currencies. Due to the worsening situation in the second quarter, half-year sales in Europe were down by 1.9 percent to €651.6 million, off by 2.1 percent in constant currencies. Footwear sales were sluggish, down by 1.2 percent in constant currencies, compared with increases of 8.0 percent for apparel and 21.5 percent for accessories.

Puma's gross margin for the six month was down by 0.7 percentage points to 50.2 percent, but again due to higher spending, its operating profit fell by 10.4 percent to €149.1 million. The company ended the six months with net profit of €100.6 million, down by 12.8 percent.