PARIS — The exit of Kering’s chairman and chief executive officer François-Henri Pinault from Puma’s board of directors on Wednesday has done nothing to calm persistent rumors that the French luxury group is looking to offload the sporting goods maker. But the focus for Kering, according to a company spokesperson, remains on getting Puma back on track in terms of profitability.
Defending the decision to shareholders attending Puma’s AGM on Wednesday at the company’s headquarters in Herzogenaurach, Germany, Jean-François Palus, group managing director of Kering, who will retain his role as chairman of the Puma board, put it down to a streamlining of the decision-making process.
“Six members, among them two employee representatives, are sufficient for an effective and flexible steering of the company,” he said. “The last six years have shown that a smaller board aligns better with the company’s size. We may also not forget that a smaller administrative board also enables the company to save costs.”
On the same day, Puma, in an ad-hoc announcement, said it was raising full-year guidance for 2017 on the back of strong first-quarter results, and released preliminary data for the period.
At the presentation of Kering’s full-year results in February, Pinault said he had no intention of selling off any underperforming brands, including Puma, which saw an improvement in profitability in 2016 but still lags far behind its sector peers. “That is not a priority,” he concluded.
Puma in recent years has been looking to regain its footing having lost its competitive edge and credibility in key segments such as the running shoe category, allowing rivals like New Balance and Under Armour to gain market share, and Adidas and Nike to cement their lead.
Addressing rumors that Kering is looking to sell its majority stake in the firm, Puma’s ceo Bjørn Gulden at the presentation of the company’s full-year results in February said that he couldn’t speak for Kering but that Puma has a “good relationship with the board” which has “allowed us to build an infrastructure and to over invest in marketing and retail to turn the brand around.”
In its bid to reposition itself as a performance sports brand that “also sells lifestyle,” the recruitment of high-profile ambassadors including Rihanna — who presented her third Fenty Puma collection in Paris in March; Cara Delevingne; The Weeknd, and Kylie Jenner, the face of the brand’s Fierce trainer, continues to bear fruit, he said, especially in terms of image. (Jenner alone boasts 85.4 million followers on Instagram.)
As reported, total company sales are now expected to increase at a low double-digit percentage rate in currency-adjusted terms, up from a high single-digit percentage rate, the company said in a statement.
Puma’s full-year earnings before interest and taxes are now anticipated to fall between 185 million euros and 200 million euros, or $196.1 million and $212 million at current exchange, up from the previous guidance of 170 million euros to 190 million euros, or $180.2 million to $201.4 million.
Management at the company still expects that net earnings will improve significantly in 2017. Puma’s total sales in the three months ending March 31 rose 18 percent in reported terms versus first-quarter 2016 to 1 billion euros, or $1.1 billion, the German sporting goods maker said.
Earnings before interest and taxes rose by approximately 70 percent to around 70 million euros, or $75 million.
Dollar figures are calculated at average exchange for the period to which they refer.
Puma is scheduled to release its full results for the first quarter, including profits, on April 25.