Puma Just One-Upped Adidas, Seeks to Maintain “Competitive” Pricing – Sourcing Journal
Puma raised its full-year outlook on Wednesday amid rising recession fears and continued Covid lockdowns in China.
In a word: As companies like Walmart and Adidas scaled back their 2022 ambitions this week, Puma bucked the trend and raised its sales target. After previously projecting a revenue increase of “at least 10%” with “upside potential”, the German sportswear company is now forecasting growth in the mid-teens.
Although Puma boasted of the “strong” growth in sales and earnings before interest and tax (EBIT) it has seen so far this year, it also acknowledged the increase in uncertainties and geopolitical challenges and macroeconomics. Supply chain constraints and price increases in supply and freight have limited product availability and put pressure on margins, he said. The crisis in Ukraine, high inflation and the current Covid restrictions, meanwhile, are having a negative impact on consumer confidence and demand, he added.
In Greater China, the continuation of Covid-related lockdown measures coincided with a 43% drop in sales in the second quarter. Revenues in the world’s most populous country have fallen at an ever-increasing rate at Puma since the second quarter of last year, when consumers railed against Western brands for the public stances they had taken on the Xinjiang cotton. With the pandemic easing in the Americas and Europe, Puma has seen no further widespread shutdowns in either region.
Due to “increased uncertainties”, Puma reiterated its previous EBIT guidance of between €600 million ($609 million) and €700 million ($711 million). The evolution of its gross profit margin and OPEX ratio is “largely” dependent on the magnitude and duration of broader global trends, with inflationary pressures from rising freight rates and commodity prices. , and inefficiencies from Covid and the Ukraine crisis which are expected to dilute profitability this year.
“Despite rising costs, we will continue to focus on maintaining our competitive pricing and will prioritize sales growth and market share gains above short-term profitability,” the CEO said. CEO Bjørn Gulden.
As of June 30, Puma’s inventory stood at 1.98 billion euros ($2.02 billion), a jump of 42.9% from the year-ago period.
Net sales: Puma recorded 2 billion euros ($2.03 billion) in net sales during the second quarter, an increase of 26% compared to 1.59 billion euros a year earlier (1.61 billion dollars). On a currency-adjusted basis, revenue increased by 18.4%.
The Americas led the way with currency-adjusted sales up 25.6%. In Europe, the Middle East and Africa, revenue increased 21.5%, driven by strong growth in “all key markets” in Europe, Puma said.
Sales in the Asia-Pacific region, however, fell 1.8%. Excluding China, Puma’s APAC sales jumped 41% year-over-year in the second quarter.
All product divisions posted double-digit growth in the second quarter, with apparel up 20.2% on a currency-adjusted basis to €665.7 million ($676 million). Footwear followed closely with adjusted revenue up 19.7% to 1.01 billion euros ($1.02 billion). Accessories rose 11.2% to 329 million euros ($334 million). Similar to previous quarters, strong demand for performance categories such as running and training, team sports, golf and basketball drove growth, Puma said.
Year-to-date, accessories are up 20.9%, followed by footwear and apparel, which are up 18.9% and 18.1% respectively.
Its wholesale business easily outpaced direct-to-consumer, with the former improving 22.6% on a currency-adjusted basis to €1.56 billion ($1.59 billion), while the second rose 5.5% to 439 million euros ($446 million). Revenue from owned-and-operated retail stores rose 11.3%, while e-commerce fell 4.1%, “mainly due to lockdown measures in Greater China,” Puma said.
In the first half of the year, sales increased 24.7% on a reported basis – 19% on a currency-adjusted basis – to €3.91 billion (€3.97 billion). dollars).
Net earnings: Puma’s gross profit margin declined to 46.5% from 47.5% in the second quarter of 2021, “primarily due to an unfavorable geographic and channel mix as well as higher freight rates,” Gulden said.
Operating expenses rose 21.6% to €791 million ($803 million) due to higher marketing spend, more open retail stores and related distribution and warehousing costs to higher sales. Puma’s OPEX ratio in the second quarter, however, fell from 40.9% to 39.5% thanks to higher sales growth and “continued control of OPEX” and despite operational inefficiencies related to Covid, particularly in the supply chain, he said.
“Strong sales growth” compensated for increased investment in marketing and sales and higher warehousing costs, leading to an increase in EBIT of 34.4% to 146 million euros (148 million dollars), Gulden said. The EBIT margin climbed 40 basis points to 7.3%.
Net profit improved 73.2% in the second quarter to 84 million euros ($85 million), or 0.56 euros (57 cents) per share. Year-to-date, Puma’s net profit is up 30.3% to 206 million euros ($209 million).
Opinion of the CEO: “We are seeing an increased level of uncertainty around the world: Covid-19 is still around us, the crisis in Ukraine is worse than ever and there is strong inflationary pressure in almost all of our markets,” Gulden said in a statement. “The Puma family means more than short-term profitability. I remain optimistic for our sector in general and the Puma brand in particular.”