Yahoo Finance Basketball and America Key to Puma’s Strong Q1
Puma is having “a very good start” to its year, beating market expectations as revenues in the first quarter surged 19.7 percent to 1.91 billion euros.
The brand’s promising first quarter follows on a record-breaking year in 2021. Last year’s sales were driven by increases in North America, and Puma’s focus on this territory has continued to pay off this year, Puma chief executive officer Bjørn Gulden said during an online press conference.
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In the Americas, sales zoomed 44.1 percent, currency adjusted, to hit 815.9 million euros.
Gulden credited Puma’s investment in basketball, starting around three and a half years ago. The brand’s sponsorship deal with LaMelo Ball, a player for the Charlotte Hornets and last year’s NBA Rookie of the Year, earned Puma a “breakthrough in basketball, and is one of the reasons for our great growth in America,” Gulden explained. “We’ve invested in becoming a ‘cool’ brand.”
Ball’s signature shoes sell out as soon as they are released, Gulden added. In September, the German company will launch a women’s signature basketball shoe, together with Seattle Storm player Breanna Stewart.
In Puma’s home market of Europe, sales grew 25.5 percent to 708.8 million euros.
The Asia Pacific market was responsible for the only red numbers on Puma’s balance sheet this quarter. There, sales fell 17 percent, currency adjusted, to 387.4 million euros, with mainland China continuing its boycott of some Western-made goods.
“Our performance in China is not due to COVID,-19” Gulden explained. “It’s because of the BCI [Better Cotton Initiative] boycott, and now we are getting the lockdown situation on top of that.”
Gulden believes that tensions around the boycott will calm. “It’s in the interests of the Chinese consumers and the Chinese authorities,” he said. “We just have to make sure we get the growth in other markets while China is struggling.”
In terms of product categories, all grew during the first three months of this year. Sales of footwear increased by 18.2 percent while apparel and accessories grew by 16 percent.
Puma now plans to exploit sectors that Gulden said the company had previously neglected a little. This includes childrenswear, Puma classics and more fashion-based looks.
There are plans to more regularly relaunch versions of Puma’s classic shoes from the past, as well as to put more focus on men’s sports style. This has seen Puma collaborate with younger businesses like Australian skate brand Butter, the Los Angeles-based designer Rhuigi Villaseñor of Rhude, and French brand Ami Paris by Alexandre Mattiussi.
A number of trends make Gulden optimistic about activewear. Participation in sports grew during the pandemic and has continued to grow, he said. The global sneaker trend is continuing, as is that for more casual clothing at all times. There’s also a running boom and team sports are starting up again.
Puma’s EBIT for the first quarter of the year also beat expectations, coming in 27 percent ahead of last year at 196 million euros.
Analysts at the likes of the Royal Bank of Canada and Jeffries applauded Puma’s results, saying the third-largest sportswear brand in the world had exceeded expectations in tough circumstances.
“We would normally raise our outlook for the full year,” Gulden explained, “but given the increased uncertainty in the world, we have decided to stick to our initial outlook from the beginning of this year.”
Gulden cited continuing problems with freight and logistics, plus delays thanks to COVID-19 lockdowns late last year in its manufacturing hubs in Vietnam.
The ongoing health crisis in China and the war in Ukraine are also of concern.
With regard to the latter, the company has suspended all operations in Russia and has left any sponsorship deals with Russian athletes, Gulden said. It is still paying around 1,300 Russian staff and has also made arrangements for 373 Ukrainian staff. This included establishing a safe house for staff in western Ukraine and organizing transport, jobs, schools and accommodation for those who wanted to leave Ukraine for Germany or Poland.
The Ukraine crisis has probably cost Puma around 10 million euros or so in extraordinary costs, Gulden noted.
Potentially most problematic was the specter of inflationary pressure as a result of the market pressure thanks to the Ukraine war, and a potential drop in consumer demand because of higher prices.
For example, Puma’s operating expenses rose 18.6 percent to 712.8 million euros “as a result of higher marketing expenses, more retail stores operating as well as higher sales-related distribution and warehousing costs,” the company said.
However, Gulden reported, “as yet, we have no indication of any slowdown [in sales]. When we get to the second half [of the year], and inflation continues, then we will see what impact it will have for us.”
Puma expects sales growth of at least 10 percent for the whole year and an EBIT of between 600 million and 700 million euros.
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