Puma, the German activewear firm that France's PPR is trying to buy, on Monday warned a drop in orders in the U.S. would rein in full-year sales and earnings.
As Puma reported a 3.7 gain in first-quarter profits, the firm forecast that weak order-writing at the end of the quarter would result in "low single-digit" growth through the end of the year instead of the double-digit profit hike forecast earlier.
HSBC analyst Antoine Belge, in a note to investors, speculated the profit warning "might explain why the Herz family [which controlled Puma before the PPR deal] agreed to sell its 27.1 percent controlling stake at 330 euros [$448.40 at current exchange] per share [instead of a higher multiple]."
PPR, the French retailer that controls Gucci Group, last month said it would buy a controlling stake in Puma and would offer 330 euros, or $448.80, a share for the rest of the company's outstanding publicly held capital.
Puma shares spiked above 340 euros ($462.33) in the wake of the deal before sliding to close last Friday just below 335 euros ($455.53).
Belge said the profit warning represented a "mixed bag" for PPR in that it "increases the likelihood of Puma shares being tendered" at the proposed price of 330 euros — a fact some analysts doubted after the share price spiked — while "decreasing the value of the acquired business."
PPR shares fell 0.24 percent, to 127 euros, or $172.72, in trading on the Paris Bourse. In Frankfurt, Puma shares gained 0.06 percent, to 335.13 euros, or $455.78.
Puma said net earnings in the three months through April improved to 96.6 million euros, or $128.2 million, from 93.1 million euros, or $112.4 million, on net sales that gained 2 percent, to 655.8 million euros, or $1.33 billion, from 642.8 million euros, or $776.3 million. Currency conversions were made at average exchange rates for the respective periods.
The U.S. was the blight on the numbers. Sales there slumped 4.1 percent, to 174.3 million euros, or $231.4 million, due to a negative currency affect, and order writing dropped 17.6 percent at the end of the quarter.Puma said the decrease occurred because of "a business-related adjustment with one key account that had seen a significant sales increase in the prior years, as well as a generally moderating environment in the U.S. mall business."
In dollar terms, sales in the U.S. dampened slightly, to $156.2 million from $156.6 million.
Sales in Asia-Pacific declined 0.9 percent, to 120.6 million euros, or $160.1 million, despite double-digit gains in China, while sales in Europe gained 6.4 percent, to 360.9 million euros, or $479.1 million, Puma said.
By category, footwear sales improved 3.6 percent, to 413.5 million euros, or $548.9 million. Apparel sales slid 0.5 percent, to 200.7 million euros, or $266.4 million, and accessories sales eased 1.2 percent, to 41.7 million euros, or $55.3 million.
Puma chief executive Jochen Zeitz acknowledged the quarter's results meant the rest of the year would be tough.
"While the remainder of the off-year in terms of major sports events will certainly be challenging, given our current order book, we continue to be fully focused on our long-term objectives," he said in a statement.
Last Friday, Zeitz was in Boston at the helm of a 70-foot, Puma-sponsored racing sailboat zooming around Boston Harbor at 16 knots. During the visit, Zeitz said Puma would evaluate PPR's next bid, expected in mid-May, and give shareholders a recommendation on whether to accept it. Puma's share price surged after reports of a buyout by the French luxury conglomerate, which also owns Gucci. PPR chairman and ceo Francois-Henri Pinault said in mid-April he had no plan to sweeten his original offer of 330 euros.
Zeitz expressed optimism about a potential fit with PPR. "We will be looking for know-how and qualitative synergies," he said. "This doesn't have to be about finding cost savings to work."
Puma could gain insight into high-end sourcing, retail expansion and multibrand management from PPR, he suggested.
There are signs that the deal is, at some level, progressing.
Antonio Bertone, Puma's global brand manager and one of the talents credited for building the U.S. business, met Pinault for the first time last week. "I think this could be a fantastic new chapter for us," he said. "We get along as people…Pinault] gets it."Puma is sponsoring a Newport, R.I., sailing team and its boat in the Volvo Ocean Race, a 39,000-mile, around-the-world race Puma hopes will be its ticket into the sport. Insiders term the event, which kicks off next October, the "Everest of sailing."
Zeitz sees spending what he characterized as "double-digit millions" [he would not specify, but said the amount was comparable to a World Cup soccer outlay] as a suitable investment, given that the race is underexposed in the media. Sailing's other major race, the America's Cup, has become a high-profile forum for luxury brands.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over the top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty