By and  on May 8, 2007

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.

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