By Miles Socha
with contributions from Cathrin Schaer
 on May 7, 2020
A fall look from Lafayette 148.

Business in China should be “back to normal” by June, Puma chief executive officer Bjørn Gulden predicted Thursday, sharing glimmers of hope after reporting net profits dwindled 61.6 percent in the first quarter to 36.2 million euros.

“We had a very good April (in China), up versus 2019,” he told a conference call, while cautioning that those tallies were plumped by the resumption of wholesale shipments there. Like-for-like sales are still trending roughly 10 to 15 percent down.

“People are very eager to buy children’s shoes, and every kind of shoe for running and walking,” Gulden said. “You will see sports growing in most markets because people feel they should be doing something for their health. In Germany, I’ve seen more people running than ever before.”

Gulden described a three-stage strategy of “survive, recover, grow again” amid the spiraling coronavirus crisis, and did not sugarcoat that the numbers are going to get worse.

“The second quarter will financially be even worse with more than 50 percent of global sports and sport lifestyle space being closed,” he said. “APAC with China and Korea is recovering. Europe is hopefully also moving toward a recovery while the Americas, with almost all stores closed, are in the middle of the survive phase.”

Echoing many of its peers, the company said 2020 started off promisingly, and then COVID-19 emerged in China and virtually shut down the business for six weeks. Global revenues in the first three months of the year eased 1.3 percent in currency-adjusted terms to 1.3 billion euros, ahead of consensus forecasts.

Puma blamed currency impacts, lower sales in China, inventory devaluation and return provisions for a 140 basis point drop in its gross profit margin to 47.6 percent.

It proposed suspending its dividend payment at its annual general meeting Thursday, held digitally.

“I hope you understand that we can’t pay a dividend in such difficult times as these,” Gulden told shareholders who had logged in, adding that senior managers had also volunteered to accept between 25 and 30 percent less remuneration.

The company gave no guidance for the balance of the year, with Gulden noting “we are mitigating the impact on our revenues wherever we can by focusing on e-commerce and the markets that are opening up again.”

In the quarter, sales in Asia-Pacific dropped 12 percent in currency-adjusted terms with China, Japan and Korea the most severely impacted countries.

Hit by the health crisis later in the quarter, the EMEA and Americas regions saw revenues increase 3.5 percent and 3.1 percent respectively.

Footwear improved 1.9 percent while apparel was down 6.3 percent in Q1, Puma said.

Online sales bounded 38 percent in the quarter to 84 million euros, and catapulted 77 percent in April. Still, e-commerce accounted for only 6.5 percent of Puma revenues in 2019, and the company is gunning to reach about 10 percent in about three years.

Gulden noted that e-commerce in China, its only lifeline during lockdowns there, has slowed down as physical stores reopened. He noted department stores and malls are not doing as well as other stores. “There are fewer customers, but they’re buying more.”

Puma operates about 860 stores worldwide, and around a third have reopened with greeters to limit the number of shoppers, gloves and sanitizers on offer, floor signage to keep people apart and plexiglass shields at cash desks.

The company has not slowed development of new products for 2021 and is relying on digital materials, including 3-D CADs, video conferencing and shipments of physical samples to sell its spring-summer 2021 collection to retailers.

Gulden revealed that Puma secured a 900-million-euro revolving credit facility to help it navigate the crisis, with more than half of the moneys coming from KfW, a German state-owned development bank. “The goal is to get through this without any Puma employee losing their job,” he said.