Puma Q3 sales up 6.4 percent but earnings decline

REPORT_ Puma’s 2014 third quarter sales performance was positive, as consolidated sales rose by 6.4 percent currency adjusted to 843 million euros (1,044.6 million dollars). This represents an increase of 3.7 percent in euro terms, as continuing currency effects from various countries had a negative impact on sales.

Sales in the EMEA region increased by 4.4 percent currency adjusted to 388 million euros (480.8 million dollars). Performance improved in Western Europe, notably in Germany. Sales increased by 6.3 percent currency adjusted to 265 million euros (328.2 million dollars) in the Americas, as North America continued to benefit from improved wholesale business, including key account initiatives like the Puma Labs at Foot Locker. Sales in Latin America also rose, supported by a strong Teamsport business within the region.

Asia/Pacific sales increased by 10.7 percent due to growth in all key markets, including India, China, Korea and Japan. This growth was supported by the successful start of the Forever Faster brand campaign, the positive reception of Puma’s new Arsenal jerseys and a strong accessories business.

Third quarter footwear sales rose by 2 percent as Teamsport sales, particularly the Puma evoSPEED boot, continued to improve. Puma’s third quarter apparel sales rose by 11.4 percent, supported by strong demand for our Teamsport products, especially Arsenal jerseys and kit. Accessories sales also improved by 7.5 percent, due to continued demand for socks and bodywear. However, golf equipment sales declined in the quarter as the golfing environment remained very weak.

Puma’s gross profit margin declined from 47.1 percent to 46.3 percent for the third quarter of 2014 on the back of adverse currency impacts as well as shifts within the product mix which influenced the margin negatively. In addition, stronger sales in the distribution business within Latin America, particularly in footwear, led to a decline in the footwear margin from 44.4 percent to 41.9 percent. Apparel margin decreased slightly from 49.9 percent to 49.6 percent. However, the margin for accessories improved from 48.6 percent to 50.3 percent.

However, consolidated net earnings declined from 53 million euros (65.6 million dollars) to 29 million euros (35.9 million dollars). As a result, earnings per share decreased from 3.53 euros (4.37 dollars) to 1.93 euros (2.39 dollars) in the third quarter of the year.

Currency adjusted sales rose by 2.4 percent for the first nine months of the year to 2.2 billion euros (2.7 billion dollars). As currency volatility continued to have a negative impact in the third quarter, nine month sales in euro terms declined by 2.9 percent. Currency adjusted sales in the EMEA region rose by 1.4 percent with improvements in the United Kingdom and throughout Eastern Europe, the Middle East and Africa.

Sales in the Americas increased by 3.5 percent, with sales growth evenly spread over North America and Latin America. Asia/Pacific sales rose by 2.5 percent, with positive performances throughout the region except in Japan, where the business climate in the first half of the year prevented a better result.

In terms of product segments, footwear sales declined by 4.4 percent in the first nine months of 2014. Sales in apparel increased by 9.1 percent and accessories sales also rose by 6.9 percent. Puma’s own and operated retail sales for the first nine months of the year increased by 3.4 percent, equal to 19.5 percent of total sales, as comparable sales in our stores improved during the period.

Puma’s nine month gross profit margin declined slightly to 47.2 percent due to negative impacts from currency/hedging. The decline in the footwear gross profit margin from 44.9 percent to 42.9 percent was almost offset by increases in the apparel margin, from 49.6 percent to 50.4 percent, and in the accessories margin, from 50.2 percent to 50.7 percent.

Consolidated net earnings fell from 121 million euros (149.8 million dollars) to 69 million euros (85.4 million dollars) for the first nine months of 2014, with earnings per share declining from 8.07 euros (10 dollars) to 4.59 euros (5.69 dollars).

Given Puma’s results through the first nine months of the year, company now expects a low single digit increase in currency adjusted net sales and a stable gross profit margin for the full year. Puma’s full year guidance for EBIT and net earnings (approximately 5 percent and 3 percent of net sales respectively) remains unchanged. Company reiterates that the continued volatile currency movements will have a negative impact of around 50 basis points on the EBIT and net earnings margin for the year.