PARIS — European activewear firms are bouncing back after a less-than-buoyant 2009.
This story first appeared in the April 29, 2010 issue of WWD. Subscribe Today.
Puma said Wednesday first-quarter profits registered a huge spike over the same period in 2009 and gave an optimistic outlook for the rest of the year. That came a week after Adidas raised its annual earnings forecast and said profits increased for the first time in five quarters on better-than-expected demand.
On the back of a turbulent 2009, when consumers reined in discretionary spending, heads of the two activewear giants are positively bullish.
“We are in the process of getting the crisis more or less behind us, and we have learned how to cope with the changing environment,” Jochen Zeitz, Puma’s chief executive officer, told WWD.
And the timing couldn’t be better given the FIFA World Cup kicks off in South Africa on June 11.
“The outlook for the industry is quite positive for the top line,” said London-based HSBC analyst Erwan Rambourg. “Although we are looking a little more cautiously at EBIT margin.”
Rambourg said catalysts such as the World Cup as well as the recovery of Reebok have given the sporting goods industry a healthy adrenaline boost.
“Excitement around the World Cup is building,” he added.
During a telephone conference on Wednesday, Zeitz said he expects Puma’s pre-tax profit for the year to advance by at least 70 percent on an estimated low- to mid-single-digit sales gain as a cost reduction program and an uptick in orders are expected to work in the company’s favor.
The Herzogenaurach, Germany-based firm, owned by PPR, reported net income for the three months ended March 31 rose to 83.1 million euros, or $115.1 million, from 5.6 million euros, or $7.8 million, during the comparable 2009 period. Sales fell 2.1 percent to 683.1 million euros, or $946.5 million.
Excluding inventory clearance, first-quarter sales were “slightly above” the same period last year, Puma stated.
Dollar figures are converted from euros at average exchange rates.
“We had a good start into the new year from a bottom line perspective, which highlights the effectiveness of our comprehensive restructuring and reengineering efforts,” Zeitz said during the conference call. “We are now looking forward to the upcoming Word Cup and to a successful integration of our newly acquired Cobra Golf business.”
Puma, which will outfit seven teams at the soccer tournament compared with Adidas’ 12, said it saw a double-digit increase in team sport sales. That performance is thanks to World Cup-related ranges, including replica soccer jerseys and a soccer-inspired lifestyle collection designed by New York-based artist Kehinde Wiley. Zeitz said he expects the bulk of World Cup gear will be sold in the second quarter.
By category, sales in the first quarter (excluding currency fluctuations) of footwear decreased 5.1 percent; accessories declined 1.6 percent, and apparel gained 1.2 percent.
By region, sales in the Americas gained 9.8 percent and fell 8.4 percent in Asia-Pacific. Revenues from Europe, the Middle East and Africa, Puma’s largest region by sales, dipped 6.2 percent.
“Asia is showing positive signs, especially China,” said Zeitz. “Our market has worked itself out of the inventory glut, which was caused by the aftermath of the Olympics.”
While Puma scaled back retail expansion plans, Zeitz said in the second quarter the brand will “selectively add new stores” in markets such as Asia, Latin America and possibly the United States. He declined to provide further detail.
Zeitz continued to put the focus on sustainability. The German sports lifestyle brand plans to offset its carbon emissions in order to become a carbon neutral company in 2010, the company said. It also pledged to compensate for emissions deriving from international travel of the Puma-sponsored national football teams participating in the World Cup.