Puma raised 2019 sales guidance on Thursday, projecting growth of 15 percent, up from an earlier projection of 10 to 13 percent in the first half of the year.
“The third quarter developed very positively for us and ended as the best quarter that Puma has ever achieved — both in terms of revenue and EBIT,” chief executive officer Bjørn Gulden said in a statement.
Sales in the third quarter vaulted 17 percent to 1.48 billion and grew in all regions and across all product divisions. Over the past nine months, sales increased 16 percent to 4.02 billion. Gross profit margin rose in the third quarter to 49.7 percent. EBIT jumped 25 percent to hit 162 million.
Puma’s biggest growth continues to come in the Americas and Asia-Pacific, with China particularly positive, echoing results at luxury firm Hermès, also reported Thursday.
Revenues shot up 26.5 percent at constant currency in Asia-Pacific and 18 percent in the Americas. The EMEA region — Europe, Middle East and Africa — remained the weakest, with currency adjusted growth of 8 percent.
Puma conceded that its main challenge in the next months will be U.S.-China trade tensions that saw 15 percent tariffs imposed on goods coming out of China this September. Puma’s margins are good, but not as high as they would have been without the new tariffs, Gulden explained.
In this last quarter, companies are simply absorbing the costs of tariffs in their margins, Gulden said, but costs may also eventually be transferred to consumers. Puma currently has no such plans, but Gulden said it would follow suit if bigger brands — meaning Nike and Adidas — raised their prices. “What will happen next year, I think no one knows,” he cautioned.
Puma has also taken other measures to sidestep trade tensions. The brand used to make 50 percent of its U.S.-bound products in China, but has reduced that to around 20 percent. “We will continue to reduce that,” Gulden added. “It’s obvious that if tariffs continue, then more and more of the volumes will then be moved [out of China]. It’s an ongoing process. It can probably not be reduced to zero because there are styles that have specific moldings and specific production facilities.”
Puma is now sourcing goods in other countries like Vietnam and Indonesia, working together with manufacturers to allow for longer lead times and sending Chinese-made goods to other markets. Its Chinese supplier is also producing a lot more for the local market because it is growing so fast, Gulden said. “That actually has some advantages especially when it comes to speed.”
“I still hope the tariffs will disappear again,” he continued. “Because it would make our life a lot easier.”
Despite trade tensions, Gulden said he was confident that Puma would achieve the new guidance of 15 percent. “We don’t expect a slowdown in our business for the foreseeable future,” Gulden told journalists in a conference call. “We already have a good order book in the U.S. for Q1 [in 2020] and for part of Q2. The market is big enough and we have so many good stories.”
The third-quarter results fell within analysts’ predictions and investors reacted cautiously Thursday morning, with Puma shares losing a couple of percentage points.
The company opened its first flagship store on Fifth Avenue in New York in August and Gulden also expressed enthusiasm about the start of the NBA season in the U.S. The brand has just signed sponsorship deals with RJ Barrett of the New York Knicks and Kyle Kuzma from the Los Angeles Lakers, as well as launching a high fashion collaboration with Balmain and Cara Delevingne.