BERLIN — Puma cut its full-year guidance Thursday, in view of anticipated one-off, mainly non-cash charges of about 130 million euros, or $174.3 million at current exchange, to be booked in the fourth quarter. The sportswear brand now expects net earnings for the year to be positive, but significantly below those of 2012, as opposed to its previous forecast of a net increase.
Due to the impact of special items in 2012, net earnings in the third quarter almost quadrupled, reaching 52.7 million euros, or $69.8 million, compared to 12.2 million euros, or $15.3 million, in the prior-year period.
Dollar figures are converted from euros at average exchange rates for the period in question.
Sales, operating results and gross margins, however, all took a hit in the quarter. Buffeted by currency fluctuations and weak performance in Western Europe and the Asia-Pacific region, third-quarter sales declined 8.9 percent to 813.1 million euros, or $1.08 billion. On a currency-adjusted basis, sales slipped 1.4 percent. The company said this was in line with full-year guidance.
The operating profit (EBIT) before special items was down 18.8 percent to 80.3 million euros, or $106.4 million, impacted by the current decline in sales and gross profit margin, which retreated to 47.1 percent compared to 48.2 percent over the same period last year. The margin was adversely affected by changes in the product mix, selective discounting and currency headwinds.
“Sales and profitability for the third quarter developed as expected,” said company chief executive officer Björn Gulden. “We know that our business is currently in a difficult position with challenging sell-through, sub-optimal distribution and low brand heat,” he acknowledged, but asserted that “the cat” will shine again.
Puma’s transformation and cost-reduction program is continuing apace, and management is now in the midst of creating seven distribution zones out of 23 countries to shorten delivery times. Puma has already closed two-thirds of its non-profitable stores, three warehouses have been shuttered to streamline its logistical set-up and collections have also been streamlined by 10 percent.
The performance and lifestyle brand platforms have been unified, and on Thursday, Puma announced its new manifesto, “Forever Faster.” To be launched to consumers in 2014, the strategy will involve new creative direction of the brand campaign, supported by a large-scale media push, but will also be reflected in logistical shifts to help speed and streamline all processes. Therefore, the company is divesting the Puma Village development center in Vietnam and plans to relocate its international product functions from the London office to company headquarters in Herzogenaurach, Germany.