PARIS — Puma AG is preparing to go after a greater share of the global sports market.
The company on Wednesday unveiled its strategy for 2006 to 2010, which includes new product categories such as golf, subsidiaries in India and Dubai, and possible acquisitions.
Bolstered by growth in the U.S. and solid footwear and accessories sales, Puma said profits in the three-month period ended June 30 grew to 58.9 million euros, or $70.8 million, from 52.3 million euros, or $62.8 million, compared with the previous year. Puma sales increased 12.3 percent to 395.5 million euros, or $475.3 million, from 352.3 million euros, or $423.4 million, a year ago.
The sports and lifestyle company, based in Herzogenaurach, Germany, anticipates double-digit annual sales gains each year through 2010. As part of its strategy, the group will invest 500 million euros, or $601 million at current exchange rates, in its core business expansion and seek to capitalize on strong sales growth and future cash flow generation.
“We now turn our focus to Phase IV of our strategic plan in which we are targeting to firmly establish Puma as one of the top-three brands in the global sporting-goods market with the long-term mission of becoming the most desirable sport lifestyle company,” Jochen Zeitz, chief executive officer, said in a statement.
Puma, which has benefited from its lifestyle fashion merchandise, is likely to explore new brand positioning with a return to its performance heritage.
“Lifestyle is what the group is all about,” said New York-based John Shanley, senior athletic and footwear analyst with Susquehanna Financial Group. “Now, they are trying to backpedal and get more sports-oriented by finding a balance between fashion and true performance.”
Shanley said Puma’s goal of being among the top-three global brands in sporting goods is a “bit of a reach.”
Company executives said during a conference call with financial analysts on Wednesday that the strategy will include expansion into numerous sports categories.
“We are going to launch five new categories of products in the next five years,” Zeitz said on the call.
The company disclosed two of them. The first is a golf line that will include shoes, apparel and bags for men and women that is to hit stores for spring. The second will be motocross footwear.
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The group also plans to expand its core categories, such as men’s and women’s soccer accessories and apparel, to coincide with the 2006 Soccer World Cup in Germany. Running is another area of focus, as is Black Station, the company’s high-end fashion lines created in collaboration with designers such as Alexander McQueen and Philippe Starck. Zeitz also noted that Puma will invest in women’s apparel, without giving further detail.
Puma will seek to develop its regional reach in existing markets by setting up subsidiaries in areas such as India and Dubai. The expansion will be through joint ventures and repurchasing of licenses in countries where it operates through retailers.
“I suspect the acquisition to be substantially greater than Tretorn,” said Shanley, referring to Puma’s 2001 purchase of the Tretorn-Gullwing brand, headquartered in Helsingborg, Sweden. “It will probably happen soon.”
Shanley would not comment on possible Puma targets. However, industry experts have named brands such as Fila, Lugs and Via Disadora. Puma’s competitors, such as Nike, Adidas and Reebok, have made strategic acquisitions in recent years, and the athletic industry also has consolidated at the retail level with a number of high-profile mergers.
The company estimated sales growth in 2006 should be 20 to 30 percent.
Puma said it believes it can almost double its current size in the next five years, estimating that it may have the potential to generate 3.5 billion euros, or $4.2 billion, in sales by then. The company had sales of $1.99 billion last year.
In the second quarter, Puma’s U.S. sales soared 42.4 percent. Its businesses in Europe, the Middle East and Africa posted “a slight increase” to 240 million euros, or $288 million, while orders in the region fell 7.9 percent.
By segment in the second quarter, footwear climbed 12.8 percent to 603 million euros, or $725 million; apparel was up 6.7 percent to 224 million euros, or $269 million, while accessories soared 26.4 percent to 65 million euros, or $78 million.
For the first half of 2005, Puma’s profits rose 13.1 percent to 149.8 million euros, or $180 million, from 132.4 million euros, or $159 million. Sales gained 12.1 percent to 892 million euros, or $1.07 billion, from 796.1 million euros, or $956.8 million, a year ago.