A return to growth in the Americas helped PUMA meet first-quarter sales forecasts and its order book for the rest of the year was looking “very good”, the German sportswear retailer stated on Wednesday, helping lift its shares nearly 12%.
Revamped and newly trendy shoes from the 1970s and 80s like Puma’s Palermo and adidas’ Samba have helped boost sales for sportswear brands at a time when consumers have cut back on spending and retailers are struggling with excess stocks, Reuters reports.
PUMA CEO Arne Freundt commented: “We delivered our first quarter results fully in line with expectations. While the market continues to be volatile, we delivered growth and gross profit margin improvement despite significant currency headwinds and high prior year comparables. Our retail partners are still working through elevated stock levels, but as our sell-through was higher than our sell-ins, we jointly improved the inventory levels in the wholesale channel. We expect that we will improve sell-in in course of Q2. Our double-digit growth in DTC with fewer discounts confirms the continued strong demand for the brand and thus continued good sell-through.”
Puma is increasing production of the Palermo shoes while being careful to avoid oversupply, Freundt said, echoing comments by Adidas’ CEO last week about managing the trend, reuters further reported.
Freundt further noted: “Our strong momentum in performance categories driven by exciting innovations and newness is ongoing and we are further growing our market shares. For our Sportstyle category, 2024 is a transition year to build the future success in the elevated distribution. Our go-to-market and demand creation processes are starting to improve and are crucial as a foundation for the success in Sportstyle. We already see that sales of our trending terrace and skate styles Palermo and Suede XL are accelerating month over month and we are very excited to launch our vintage running franchise Easy Rider and low profile shoes Mostro, Speedcat and Inhale this year. With our good order book for the second half of the year and the great start of our brand campaign, I feel very confident about our sequential quarter-over-quarter improvement in 2024.
“We are focusing our efforts on building the foundation for the next chapter of growth based on increased brand desirability. The launch of our first brand campaign in a decade was an important first step and the first results came in above our expectations. I could not imagine a better year than the 2024 Year of Sport to advance PUMA’s brand elevation journey. We are looking forward to celebrating this summer’s events with our employees, consumers, retail partners and brand ambassadors.”
FIRST QUARTER 2024
Sales increased by 0.5% (ca) to € 2,102.3 million from a strong quarter in the previous year (Q1 2023 grew +14.4% ca and reported). Currencies have continued to be a major headwind since Q2 2023, negatively impacting sales in euro terms by approximately €100m in Q1 2024 (-3.9% reported).
The Americas region recorded positive sales growth for the first time in four quarters, growing by 1.0% (ca) to €790m, with the U.S. showing a sequential improvement. Sales in the Asia/Pacific region increased by 0.6% (ca) to €456.6m, driven by continued growth in Greater China. In the EMEA region, sales were flat (ca) at €855.7m, with Europe coming in better than expected.
PUMA’s wholesale business declined by 2.9% (ca) to €1,608.1m, reflecting the continued focus on good sell-through and prudent sell-in to improve inventory levels in the market. Our Direct-to-Consumer (DTC) business grew by 13.5% (ca) to €494.2m, driven by continued brand momentum and scaled back promotions. This resulted in an increased DTC share of 23.5% (Q1 2023: 21.3%), in line with expectations.
Sales in Footwear were up 3.1% (ca), largely driven by continued strong demand for our Football and other performance categories. Sales in Apparel and Accessories declined by 2.4% and 3.2% (ca) respectively.
The gross profit margin improved by 100 basis points to 47.5% (Q1 2023: 46.5%). Significant headwinds from currencies were more than offset by lower sourcing and freight costs as well as a favourable product and distribution channel mix.
Operating expenses (OPEX) decreased by 0.4% to €845.3m (Q1 2023: €848.3m). While marketing investments remained at 10% of sales, strict cost discipline in non-demand generating areas mostly offset warehouse ramp-up costs, investments in digital infrastructure and inflationary pressures. The OPEX ratio increased by 140 basis points to 40.2% (Q1 2023: 38.8%), mainly as a result of a higher DTC share and currency headwinds.
The operating result (EBIT) decreased by 9.4% to €159m (Q1 2023: €175.5m), mainly due to currency headwinds on sales, gross profit margin and OPEX ratio. As a result, the EBIT margin declined 50 basis points to 7.6% (Q1 2023: 8.0%).
The financial result decreased to €-26.8m (Q1 2023: €-7.8m) due to lower gains related to forward exchange transactions (“swap points”) and higher interest rates.
Consequently, net income decreased by 25.5% to €87.3m (Q1 2023: €117.3m) and earnings per share amounted to €0.58 (Q1 2023: €0.78).
OUTLOOK 2024
In line with expectations, the year 2024 has started with geopolitical and macroeconomic challenges as well as currency volatility. In this environment, PUMA continued to make further progress on our strategic priorities of brand elevation, product excellence and distribution quality, particularly in the key markets U.S. and China.
2024 is not only the year of sports, with major events such as the UEFA Euro 2024, CONMEBOL Copa América and the Olympic and Paralympic Games providing the perfect platform to showcase strong product innovation and credibility as a performance brand. It is also the year in which PUMA has started to invest into its first global brand campaign in 10 years to sharpen its positioning as the fastest sports brand in the world.
Supported by the continued brand momentum and despite ongoing geopolitical and macroeconomic challenges, PUMA expects to achieve mid-single-digit currency-adjusted sales growth and an operating result (EBIT) in the range of €620m to €700m for the financial year 2024 (2023: €621.6m). We expect net income (2023: €304.9m) to change in 2024 in line with the operating result.
As in previous years, PUMA will continue to focus on managing short-term challenges without compromising the brand’s medium- and long-term momentum. Our sales growth and market share gains will take priority over short-term profitability. The exciting product newness and innovation for 2024/2025 as well as the very good feedback from retail partners and consumers give us confidence for the medium and long term success and continued growth of PUMA.
KEY DEVELOPMENTS Q1 2024
*Currency-adjusted (ca) sales increase by 0.5% to €2,102m, reflecting a negative currency impact of approximately €100m (-3.9% reported)
*Gross profit margin improves by 100 basis points to 47.5% despite major currency headwinds
*Operating expenses (OPEX) decrease by 0.4% to €845m
*Operating result (EBIT) declines by 9.4% to €159m, mainly due to negative currency effects on sales, gross profit margin and OPEX ratio
*2024 Outlook confirmed: currency-adjusted sales growth at mid-single-digit percentage rate and EBIT in a range between €620m and €700m
*PUMA launches first global brand campaign in 10 years
