Puma Q3 Results Underscore Activewear’s Resilience

As infection rates rise and more lockdown measures are imposed in Europe and elsewhere, activewear brands may be best positioned to weather the crisis.

On Wednesday, Puma said revenues in the third quarter bounded 13.3 percent to 1.58 billion. This follows Nike’s unexpected good results announced last month.

During a press conference, Puma chief executive officer Bjørn Gulden emphasized that plenty of uncertainty still exists and Puma would not be issuing any financial guidance for the full year. However, when asked whether he thought the company would have a positive operating profit by December, Gulden replied: “Yes.”

“We delivered a surprisingly good third quarter and we’re proud of that,” Gulden told journalists. “But when we see what is happening around us, it’s good to be cautious. I don’t even know what’s happening at one o’clock today,” he added, referring to a meeting of German government ministers to discuss whether further lockdown measures were necessary in Puma’s home base.

However, Gulden also doesn’t think there will be another retail situation like that in spring, when almost all stores had to be closed. Sales for the end of September and in October were also looking positive, he noted.

“I am actually very optimistic for the mid-term future,” Gulden continued, “because, as you have seen during this crisis, the consumer is buying sports performance and fashion [products] at a high level. Our Q3 numbers indicate the potential.”

Analysts have argued that the sporting goods sector has proven more crisis-proof than most because of consumers’ increased focus on health and fitness, and an increased willingness to order these kinds of goods online.

At Puma, performance-related products, especially those for individual sports like running or hiking, were selling particularly well, Gulden explained. Products related to group activities did not do as well, reflecting restrictions on team sports. Like all other sporting goods makers, Puma is hoping that events like European soccer championships and the summer Olympics would go ahead next year, he said.

The other area of higher consumer demand was for fashion-related products. “As soon as the market opens up, people are almost storming out to buy the latest sneaker,” Gulden said.

Consumer behavior has also changed. More shoppers were buying online, Gulden said, “but when they come to the store, they buy more than they used to. That’s something we have been seeing for a while.” Additionally, in some regions, while smaller stores in downtown locations had seen fewer sales, other larger shops in less central locations were doing better, he said.

There was massively increased traffic on Puma’s own websites: Puma had already made 223 million euros worth of direct-to-consumer sales online over the first half of the year and this trend toward e-commerce has continued, albeit at a slightly slower rate. Online sales grew 97.1 percent in the second quarter versus 60.9 percent in the third. Puma’s online sales have increased 66.5 percent over the course of the last nine months.

One of Puma’s objectives for 2021 was to enhance that digital focus, using lessons learned during the pandemic. “A lot of young people in our organization are coming up with some very creative ideas,” Gulden said. Somewhat ironically, being forced online had made the company’s marketing more efficient and reduced costs over the past six months, he noted. Puma’s operating expenses, as a percentage of net sales, decreased by 1.2 percent over the first nine months of 2020, compared to 2019.

Puma’s rise in sales came mostly from the Europe, Middle East and Africa region and from North America, with these both posting growth — currency-adjusted — of 17.7 and 20.7 percent, respectively. In Asia-Pacific, sales declined 1.9 percent with the company blaming slower sales in greater China, India, Korea and Southeast Asia for this decline.

Gulden explained that high inventory in China had forced heavy discounts earlier in the year, even after the country came out of lockdown. Numbers of units sold in China were probably higher than the final accounting reflects, he pointed out. “If nothing happens [regarding a further lockdown], we will see stronger Chinese business again in Q4,” Gulden said. China’s upcoming Singles Day shopping holiday on November 11 would provide an indicator of Chinese consumer sentiment, the Puma boss suggested.

Other than China, the Asia-Pacific region presented Puma with “a pretty mixed picture.” Some countries — including Taiwan, Australia and New Zealand — were doing well; others were not. Any shopping area that had been dependent on Chinese tourists was suffering.

Further positive news came via Puma’s earnings before interest and taxes, or EBIT, and an important measure of a company’s profitability. These rose 16.8 percent in the third quarter to hit 189.5 million euros, compared to 162.2 million euros over the same period last year. The company said it had achieved this result through strict cost control from halfway through the second quarter of the year and by making marketing more efficient.

For the nine months, the German firm reported revenues eased 5.1 percent to 3.71 billion euros while EBIT plunged 62.1 percent to 145.9 million euros.

Market analysts at the likes of Jefferies and the Royal Bank of Canada praised the quarter’s results, saying Puma’s EBIT and revenues were above forecasts, although analyst Volker Bosse of investment bank Baader suggested the brand’s ongoing refusal to provide financial guidance would unnerve investors. Puma shares had been gaining in value for several months, but fell back slightly after results were announced.

In a statement, Puma said it was confident about midterm development of the brand. “I can tell you that October started well but with all the restrictions on the table, it makes it very, very difficult to talk about the landing for the year,” Gulden concluded.

Sign up for WWD's Newsletter. For the latest news, follow us on Twitter, Facebook, and Instagram.