The global economic slowdown sent fourth-quarter profits at Puma AG down 78.8 percent.
The Herzogenaurach, Germany-based company, which marked its 60th anniversary last year, on Wednesday reported net earnings of 8.1 million euros, or $10.7 million, for the three months ended Dec. 31. Boosted by a 26 percent jump in sales of bags, balls and other sporting accessories, fourth-quarter consolidated sales grew 7 percent on a currency-adjusted basis in the quarter, to 561.3 million euros, or $739.9 million. Dollar figures have been converted from euros at average exchange rates.
Europe’s second-largest activewear firm, which is majority-owned by PPR, said net earnings for 2008 declined 13.5 percent to 232.8 million euros, or $342.5 million, below analysts’ estimates. Heavy brand investments in a highly charged sporting year, including the African Cup of Nations, the Olympic Games and the Volvo Ocean Race sailing competition, in which Puma’s entry “Il mostro” is battling for the lead, helped boost sales but weighed on profits. Parent PPR is to unveil its results today.
“Despite a very difficult market situation and a weak consumer sentiment, Puma managed to post new sales records in the last financial year,” stated chairman and chief executive officer Jochen Zeitz. “We have implemented measures in the fourth quarter to prepare us properly for the coming year and will react flexibly to further changes in the market environment.”
Those measures include depreciation of inventories, organizational expenses resulting from closing unprofitable stores, plus potential losses from endorsement agreements with athletes that have been canceled or renegotiated. The total cost of these steps was 25 million euros, or $32.9 million, in the fourth quarter.
Full-year consolidated sales grew 8.5 percent on a currency-adjusted basis, to 2.5 billion euros, or $3.68 billion. Business in the Europe, Middle East and Africa regions grew 7 percent to 1.29 billion euros, or $1.89 billion.
A 4 percent decline in the U.S., where mall business was particularly difficult, was offset by a double-digit jump in sales across Latin America to bring total business in the Americas up 8 percent to 651 million euros, or $957.8 million. Meanwhile, sales in the Asia-Pacific region grew 13 percent to 573.6 million euros, or $843.9 million, boosted by the consolidation of Puma’s South Korean subsidiary.
Puma continued to expand its own retail doors last year, maintaining jobs that would have been lost in its closed stores and growing that business by 15 percent to 460 million euros, or $676.8 million.
Given the current climate, Puma declined to forecast 2009 performance. Order backlogs, used as an indication of future sales, however, had declined 5.4 percent at yearend.
Puma has reduced its investments for 2009, with plans to spend between 65 million and 75 million euros, or $82.2 million and $94.8 million, including a 20 million euro, or $25.3 million, investment in a new company headquarters, dubbed Puma Plaza.
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