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Jul 26, 2017
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Puma’s celebrity alliances push up 2nd quarter results

Reuters API
Jul 26, 2017

German sportswear company Puma plans to keep spending to sign up top athletes and celebrities after its flagship star Usain Bolt retires, seeking to bolster a brand that lags market leaders Nike and Adidas. The company's CEO Bjorn Gulden talked with press about its 2nd quarter results on Tuesday, noting Puma will continue with the strategy.

The group announced a 16% rise in sales earlier this month. Usain Bolt, the world's fastest sprinter, will soon be retiring from the sport and as Puma's star brand ambassador.. - Puma

The German brand, fronted by the likes of Rihanna, Cara Delevingne and Kylie Jenner, saw 2nd quarter sales rise by 16% to 969 million euros compared to last year. The brand reported that its running and training products were a big growth driver. It also boasted double-digit increases in sales in its three major regions, namely the Americas, EMEA and Asia-Pacific.

The strong 2nd quarter also pushed up half-year results by 15.8 percent to for sales at EUR 1,973.8 million, a 17.6% increase and above expectations.

Besides better sales, the brand also reported a spike in profitability. With an operating profit of 43 million euros, compared to 12 million a year earlier, the brand has essentially more than tripled its operating margin, which jumped from 1.4 percent in the year-earlier period to 4.5% this quarter. Net profit rose 1.6 euros to 21.9 million euros and its earnings before interest and tax (EBIT) more than tripled to 43.4 million euros.

"We are continuing to invest in sports," chief executive Bjorn Gulden told journalists after the company published full second-quarter results, adding that spending on marketing would remain between 10 and 12 percent of sales in the longer run.

Appointed in 2013 by majority-owner French luxury goods company Kering, Gulden has invested heavily in celebrity marketing to turn around the Puma brand.

For example, Usain Bolt has been at the center of a push to sell sports performance gear, also boosted by its sponsorship of English soccer side Arsenal.

With the eight-times Olympic sprinting champion nearing his last race, the group has signed Canadian Olympic silver medalist Andre de Grasse as well as a number of Jamaican sprinters.

Puma has also seen strong demand for products promoted by celebrities such as model Cara Delevingne and Canadian rapper The Weeknd.

Earlier this month, it hiked its guidance for 2017 sales and operating profit when it first announced a 16 percent jump in currency-adjusted second-quarter sales, led by demand for its shoes.

Like German rival Adidas, which reports results on Aug. 3, Puma has been enjoying a revival in the U.S. market, helped by a shift towards retro styles and away from basketball shoes which has hurt Under Armour and dented Nike's success.

"The good thing is that the newer products are selling well, which means that we get a better margin," CEO Gulden said. "In the beginning you have to over-invest relative to your sales. Now we are at the point where the leverage is kicking in, which means that for every euro of sales we are getting a bit more profit."

"But there is still room to improve, and we have to improve," he added.

With additional reporting from Fashion Network.

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