Even as Puma laid out a strong set of results and raised its forecast for the year, company executives said Wednesday they were preparing for tough times ahead.
“It was a very good second quarter, a very good first half, for Puma,” the company’s chief executive officer Bjorn Gulden told journalists at a virtual press conference. “But we do see the risks ahead. We strongly believe that we will be going through difficult times again — maybe not because of COVID-19, but because of inflation and an energy crisis and a lot of political tensions.”
For the second quarter of 2022, Puma reported net sales bounded 18.4 percent to just over 2 billion euros. The company surpassed market expectations of around 1.9 billion euros in sales.
Puma now says it should hit growth in the mid-teens, currency adjusted, for the full year, up from previous guidance of 10 percent growth.
Gulden said the company is going to focus more on lifestyle offerings and, later this year, move further into outdoor apparel with a category called Puma Seasons. Puma was also “getting its act together” to better exploit the brand’s archive of classic retro sneakers, he added.
Puma’s EBIT also exceeded market expectations, improving 34.4 percent to 146 million euros. Market analysts had predicted an EBIT of around 130 million euros.
Gulden warned that the company’s gross margins are under pressure and to achieve its forecast EBIT for 2022 of between 600 million and 700 million euros, Puma will need to sell more, market in a more focused way, and raise prices.
“There is huge pressure on a lot of costs — raw materials, production, energy,” Gulden noted. “So far we have only raised prices in single digits. And we will continue to try and raise prices in a smart way. That means adding new price points instead of making existing shoes more expensive.”
Nonetheless, Gulden predicted mid- to high-single-digit price rises before the end of this year, and then double-digit increases during 2023.
He also noted that inflation was already markedly different in various markets. For example, Latin America and Turkey were already seeing higher inflation while China and the U.S. would most likely experience lower rates.
The key in high inflation situations, he said, would be reacting quickly and letting local managers set suitable prices.
In the future, eventual price rises in Europe would be higher than in the U.S. because of currency adjustments, Gulden added.
This quarter, in Puma’s home market of Europe, sales grew 21.5 percent in the second quarter to reach 706.2 million euros. In the Americas, second-quarter sales grew 25.6 percent to hit 940.6 million euros.
The North American market continued to be more of a focus for Puma, particularly after the brand’s success in wooing basketball fans there over the past three years. Gulden boasted that signature shoes for Puma’s NBA brand ambassador LaMelo Ball had sold out almost immediately. Puma would also be releasing signature shoes in five colorways for female basketball star Breanna Stewart later this year.
“I think it’s the first time in 10 years that any brand has done a signature shoe for a female player,” Gulden said.
The Asia Pacific market continued to be difficult and lagged far behind, mostly because of problems with pandemic-related lockdowns in mainland China, Puma explained. During the second quarter, sales in this territory fell 1.8 percent to 355.1 million euros.
Puma noted that while other countries in this territory recorded strong growth of 15 percent in the second quarter, China sales fell 44 percent.
Gulden cited twin crises in China: First, the politically motivated boycott of Western-made goods that made it impossible to market products there efficiently and then, just as this was fading somewhat, pandemic-related lockdowns knocked sales back again.
In China, Puma is in a “trial and error phase,” Gulden said.
About 80 percent of Puma products sold in China are now being made in China. “That means shorter lead times and also more dedicated product lines for the Chinese consumer,” he noted. “We are also trying to find other marketing avenues, so we’re working with micro-influencers and doing lots of physical events.”
Puma’s much larger competitor Adidas lowered its guidance for the full year on Tuesday, sending its shares down 4.8 percent in Wednesday afternoon trading.
“No one in Europe or America has been in a high inflation economy [for a while], nobody knows how this will go,” Gulden argued. “As with COVID-19, you’re going into territory you haven’t been in before. So yes, there’s uncertainty and yes, everything is not easy. But the situation is the same for everybody. We just need to do better than the rest.”