The €4 billion in sales and sharply improved profit margin achieved by Puma last year validates the Forever Faster turnaround strategy led by Bjørn Gulden for the last four years, as the brand is preparing to start another chapter under independent ownership.
Puma's CEO opted for a two-step strategy to get the brand back on track. It started with a few quick fixes to become more commercial and to get the organization streamlined. Meanwhile, the company embarked on more long-term investments in marketing assets, to improve its supply chain and its relationships with retailers. As Gulden put it in a conference call around the group's annual results, the idea was to be a more appealing brand for consumers and “the nice guy in the industry.”
Gulden acknowledged that the turning point was probably the brand's decision to focus on women, and the resulting partnership with Rihanna. It supported a marketing approach shifting to social media engagement and story-telling, to appeal to what Gulden described as the Generation Hustle.
The renewed appetite for the brand in the last years has been fueled by footwear such as the Creeper and the Basket Heart, with plenty of help from female influencers from Kylie Jenner to Cara Delevingne and more recently Selena Gomez. Complementary partnerships were sealed with more local influencers, particularly in China.
As part of the investments, Puma has become more influential in terms of sports marketing, and particularly in European football. While it already had partnerships with the football clubs of Arsenal and Borussia Dortmund, the company added three more clubs in the last year, from Mönchengladbach to Olympique Marseille and AC Milan. Starting from the beginning of July and taking over from Adidas, the long-term partnership with the Italian team was announced just before Puma published its results.
Puma will be outfitting at least three teams at the football World Cup this year. Switzerland and Uruguay have qualified as well as Senegal, which Puma added to its portfolio earlier this year (see the news brief in this issue). Gulden said that the brand was preparing to get a fourth national team on board. Italy's failure to qualify was painful for Puma, which had already organized production lines for Italian football replicas.
Just as importantly, the product range has been re-engineered in a more commercial way. Gulden explained that the brand was working with a three-tier price architecture, but the change compared with previous years is that it no longer waits two or three years to produce take-downs of popular items. It has sold millions of pairs of the Platform, Heart and Limitless footwear ranges, among others.
Puma's ability to make and market footwear with the right pricing structure, contributing to sharply increased footwear margins, almost certainly has to do with one of Gulden's strengths: When he joined Puma, lore has it that some of the company's managers were astonished to watch the former Deichmann executive pick shoes apart and accurately estimate their price.
The next big things for Puma in terms of visible footwear innovation include the recently launched Jamming outsole, featuring airbags with e-TPU beads in it – making each design individual, since the beads are never distributed in the sole in the same way. Another outsole technology that will be developed across performance and street ranges is Hybrid foam, which merges Puma's Ignite technology with e-TPU.
Another platform for footwear innovation is football, where Puma is working with its Puma One boot in kangaroo leather as well as the more aggressive Future boot supported by Antoine Griezmann. It was launched in London at an event combining music with football. Gulden predicts that, with the package it has in store for the World Cup and the positive reviews for its boots, 2018 could be a turnaround year for Puma in football.
The urban fashion range is expanding with Futro, which Gulden described as re-invented Classics, merging uppers from old models with new looks. The company will also mark the 50 years of the Suede classic.
Just as anticipated three years ago, vastly improved sell-through has helped Puma to intensify partnerships with retailers, including Intersport and JD as well as Zalando and Asos, for which it makes dedicated ranges. As detailed above, Puma has started to open stores again, and the company is rolling out a new mobile-driven online platform.
As part of the five-year strategy put together by Gulden and Kering, 2017 was meant to be the year when Puma started gaining from the investments of the previous years, and 2018 is the year when the company is meant to drive its brand legacy in sport and beyond.
The plan is to build on the momentum of the women's business, while accelerating the growth in the men's business, and then spark expansion in team sports. Lewis Hamilton will be a key part of the drive to expand in the men's market, particularly in training. With regard to team sports, Gulden indicated that Puma was studying sports marketing investments in the U.S. market as well, probably around basketball.
The growth is accompanied with physical change at the Puma head office, where the company has been expanding with a second large office building. This is across the street from the current head office and linked with a bridge over the road. The company is preparing to construct another building on what is now the Puma Plaza, at the center of the existing complex.
Gulden said that the strategy would remain unchanged after the proposed changes in shareholding, as described above. However, he added that the increased free float would require more communication with shareholders, starting with a capital markets day in London on March 20.