PARIS — Puma SE’s efforts to turn around its flagging business are slowly starting to pay off.
“I’ve been speaking to you for four quarters, telling you the same story — that it will take time,” Puma chief executive officer Bjørn Gulden said during a conference call Friday about the company’s third-quarter results.
“But we feel there is an improvement at the base of the company, and we will continue to see improvements in 2015,” he assured.
Puma is repositioning itself as a performance sports brand “that also sells lifestyle,” Gulden said, noting the company is eager to improve its distribution, launch new products and spend heavily on image and marketing, which is weighing on profits.
Although Gulden would not reveal the exact media spend over the last 12 months, he said the shortfall in EBIT, which declined to 46 million euros, or $61 million, from 80 million euros, or $106.1 million, in the third quarter was “only marketing.”
The German activewear firm, controlled by French group Kering, reported third-quarter net earnings dropped 45 percent to 28.9 million euros, or $38.3 million.
Dollar figures are converted from the euro at an average exchange rate for the period to which they refer.
But sales are picking up again.
In the three months ending Sept. 30 they advanced 3.7 percent to 843.4 million euros, or $1.1 billion, which was “slightly better than expected,” observed Gulden, highlighting that “footwear sales were up for the first time in seven quarters.”
They improved 2 percent on currency-adjusted terms versus the third quarter last year, buoyed by the introduction of the EvoSpeed boot, worn by several key players during the soccer World Cup.
Sales increased across all regions, most notably in Asia and the Pacific, up 9.6 percent, which the company attributed to the successful start of the Forever Faster brand campaign that launched in August.
“[It] reached consumers in 35 countries, generating 1 billion TV impressions in our target group [that is 17- to 34-year olds] as well as 31 million online views,” the company noted, adding that market surveys showed “a very positive consumer reception.”
The campaign marks the first major step in the firm’s long-term marketing strategy, which will involve continuous investment up to the Olympic Games in Rio de Janeiro and the UEFA European Championships, both to take place in 2016.
In the Americas, where sales were up 1.4 percent, or 6.3 percent on currency-adjusted terms, joint product and marketing programs with key retailers started to bear fruit.
“Our most prominent example is currently the Puma Lab at Foot Locker, which we launched in February 2014 and [which] has developed very positively as we have expanded our presence in the U.S. throughout the year,” the company said.
Gulden reminded “that [Puma’s] business is a wholesale business,” which comes with “a cycle of 12 to 18 months before you see results,” and that “building confidence in the marketplace” takes time. But he also noted that making progress in a market “as competitive as the U.S. makes it easier to translate [the success] into other regions.”
Consequently, the company revised its outlook for 2014, projecting a low single-digit increase in currency-adjusted net sales, which it previously forecast flat for the full year. Operating expenditures are slated to “increase significantly” due to more investments throughout the second half of the year, but net earnings are said to remain unchanged.
Net earnings in the nine months declined 43 percent to 68.6 million euros, or $93 million, while sales were down 2.9 percent to 2.2 billion euros, or $3 billion, hit by negative currency exchange rates that are likely to cause more headwinds for the remainder of 2014.