WWD.com/business-news/financial/puma-reports-flat-profits-but-raises-guidance-1848210/
government-trade
government-trade

Puma Reports Flat Profits, But Raises Guidance

Activewear firm said bump in orders came despite "sluggish" environment.

German sportswear firm Puma AG reported flat third-quarter net profits Friday, but defied the sluggish economy to raise its full-year sales forecast from single-digit to mid- to high-single-digit growth, buoyed by a 5 percent increase in the order books.

The Herzogenaurach-based company said net profits for the third quarter were 89 million euros, or $134 million, no change year-over-year, due to brand investments that increased at a double-digit rate, as in the previous two quarters. Earnings before interest and taxes, meanwhile, rose 1 percent to 125 million euros, or $188.3 million. Dollar figures are converted from euros at average exchange rates.

For the nine months ended Sept. 30, net profits dipped 2.7 percent to 224.7 million euros, or $342.1 million. Citing the general environment and uncertainties about consumption, Puma’s chief executive officer Jochen Zeitz declined to give a full-year profit forecast.

As PPR, Puma’s majority owner, reported on Oct. 23, sales at the athletic brand gained 6.3 percent in the third quarter to 712.8 million euros, or $1.07 billion, with strong growth in accessories and footwear across most regions. Highlights included Puma’s sponsorship of the world’s fastest runner, Usain Bolt, at the Summer Olympics.

Sales in the Americas grew 18.7 percent to 184.7 million euros, or $278.3 million. Though the company didn’t break out U.S. sales, it said business there increased slightly, outperforming the order books reported in June. In the Europe, Middle East and Africa regions, business grew 4.2 percent to 388.1 million euros, or $584.8 million. In Asia, sales jumped 11.9 percent to 139.9 million euros, or $210.8 million.

That third-quarter performance helped nine-month sales rise 3.8 percent to 2.15 billion euros, or $3.27 billion. Sales of footwear increased 2.4 percent to 1.16 billion euros, or $1.76 billion, while accessories jumped 28.2 percent to 252.6 million euros, or $384.6 million. Sales of apparel, meanwhile, declined 0.4 percent to 737.9 million, or $1.12 billion.

“We are confident that Puma will achieve another year of solid growth in 2008 despite the global financial crisis,” Zeitz told analysts during a conference call Friday, adding it would be the 14th consecutive year of annual sales growth. “Due to the year-to-date performance and our order books, we raise our sales guidance for our full-year outlook from a single-digit to a mid- to high-single-digit currency adjusted sales growth.”

The company’s orders, an indication of future business, were up 4.7 percent to 1.16 billion euros, or $1.67 billion, in September, their second-highest level ever. Footwear orders increased 6.8 percent to 703.5 million, or $1.01 billion, while accessories grew 8.4 percent to 66.7 million euros, or $96 million. Apparel orders inched up 1 percent to 393 million euros, or $565.8 million.

Going forward, Puma — which underscored its foray into the sailing category this year by competing in the Volvo Ocean Race, a ninemonth round-the-world sailing marathon to finish next July — is continuing to reinforce its fashion lifestyle positioning. Following collections with designers Alexander McQueen and Yasuhiro Mihara, Puma has teamed up with fellow PPR-owned Italian luxury brand Sergio Rossi for a capsule women’s footwear collection that reinterprets the brand’s iconic Clyde sneaker, introduced in 1973. The first designs by Hussein Chalayan, meanwhile, the firm’s creative director and in whose brand Puma acquired a majority stake in February, will be released in 2009.

Puma’s stock closed up 2.74 percent on Friday at 131.50 euros, or $171.67, on the Frankfurt Bourse.

Separately on Friday, Puma named Andreas Schmocker as general manager of Puma Switzerland. Schmocker replaces Stefan Kropf, who has left the company. Schmocker joins Puma from outdoor company Salewa Sport AG Switzerland, where he was general manager.