Puma reports flat H1 sales at 1.38 bn euros

REPORT_ Puma’s currency adjusted sales in the second quarter increased slightly to 652 million euros (875.7 million dollars) with gross profit margin

improvement to 46.7 percent, up 70 basis points against last year. Currency adjusted sales remained flat at 1.38 billion euros (1.85 billion dollars) in the first half of the fiscal year. Gross profit margin was stable at 47.7 percent.

Commenting on the results, Bjørn Gulden, Chief Executive Officer of Puma said, “Puma's second quarter sales and operating profit developed in line with our expectations. I was very happy with Puma’s visibility during the World Cup in Brazil. Feedback on both our dual-colored Tricks football boots and our national team jerseys with ACTV technology has been great. The sell-through of these products has been excellent and exceeded our expectations. In addition, we celebrated a successful Arsenal launch in July, followed by very good initial sales at retail of Arsenal replica jerseys. We are now looking forward to launching our new Forever Faster marketing campaign in August.”

Puma's consolidated sales in the second quarter of 2014 were in line with expectations, rising by 0.6 percent. However, due to continued currency weakness in Turkey, Russia, South Africa, India, Japan and the Americas, sales declined by 5.8 percent in Euro terms. In the EMEA region, sales declined by 1.4 percent as strong performances in the United Kingdom and Switzerland could not entirely offset a decline in French and Scandinavian wholesale revenues.

Sales in the Americas increased by 4.6 percent, as key account initiatives like the Puma Labs at Footlocker contributed to the performance improvement in North America, and Latin America benefited from increased Teamsport sales, particularly in Chile and Mexico. Sales in the Asia/Pacific region declined by 2.3 percent despite growth in Korea and India, as performance in Japan was pressured by the sales tax increase at the beginning of the quarter which led to a decline across categories.

Puma’s currency adjusted Footwear sales declined by 9.1 percent in the second quarter despite improved Teamsport sales. Apparel sales, however, improved by 12.8 percent as the World Cup supported strong performances in replica jerseys as well as training and fan wear, particularly for the Italian, Chilean and African teams. Accessories sales also improved by 3.4 percent due to continued demand for Puma's socks and bodywear. However, golf equipment sales declined during the quarter due to the weaker golfing environment.

The negative currency impact on sales and gross profit led to a decline in Puma's operating profit (EBIT) from 31 million euros (41.6 million dollars) to 13 million euros (17.4 million dollars) for the second quarter of 2014. The EBIT ratio decreased from 4.5 percent to 1.9 percent. Puma's consolidated net earnings declined from 18 million euros (24.1 million dollars) to 4 million euros (5.3 million dollars) impacted in part by a slightly higher tax rate in the quarter due to tax expenses related to prior years. As a result, earnings per share decreased from 1.17 euros (1.57 dollars) to 0.28 euros (0.38 dollars) in the second quarter of the year.

In the first half, currency adjusted sales were flat in the first half of 2014 at 1.38 billion euros. Continued currency weakness in the aforementioned countries led to a decline of 6.5 percent in Euro terms. Sales in the EMEA region declined by 0.5 percent, where strong performances in the United Kingdom and Turkey were not enough to entirely offset lower sales in France and Scandinavia. Currency adjusted sales in the Americas increased by 2.1 percent with improvements in some major markets including the USA and Canada, while Chile performed well in Latin America. Asia/Pacific sales declined by 2.2 percent as decreases in Japan and Oceania could not be fully compensated for by increases in India and Korea.

In terms of product segments, footwear sales declined by 8 percent in the first half of the year. Sales in apparel increased by 7.6 percent, and accessories sales also rose by 6.6 percent. Puma's retail sales increased by 2.9 percent, equal to 19.6 percent of total sales, as comparable sales in our stores improved during the period. Puma’s half year gross profit margin was unchanged at 47.7 percent. The decline in footwear margin from 45.1 percent to 43.4 percent was offset by the increase in the apparel margin from 49.4 percent to 50.9 percent. Accessories margin was stable at 50.9 percent for the first six months of the year.

Given Puma's results in the first half of the year, company continues to expect flat full year currency adjusted net sales and a slight increase in the gross profit margin, as Puma replaces lower tier distribution with higher tier distribution channels. OPEX is still expected to increase significantly based on increased marketing investments, particularly in the second half of the year.

Andy Koehler, Chief Operating Officer (COO) would be leaving the company effective July 31, 2014. Lars Radoor Soerensen has been appointed as COO of Puma as of August 1, 2014. Lars joined Puma in November 2013 and has led the areas of Business Processes and Intelligence as well as Information Technology. Prior to joining PUMA, Lars was previously the Chief Operating Officer at Bestseller and Esprit and before that he held leadership roles at Adidas and Lego.