Nov 7, 2014
Puma footwear sales recover amid marketing push
Nov 7, 2014
HERZOGENAURACH, Germany - German sportswear firm Puma reported its first rise in footwear sales in almost two years and benefited from strong demand for its new Arsenal soccer shirts, allowing it to lift its 2014 sales target.
Puma is seeing the first returns on its heavy marketing expenditure and costly sponsorship deals like the one with top English side Arsenal. The spending is designed to restore Puma's reputation as a sports performance brand after a shift into fashion hurt its core business.
However, Puma was forced to trim its margin forecast because of higher marketing costs as it seeks to make up ground lost in recent years to market leader Nike and German rival Adidas, the two biggest names in sportswear.
It ousted Nike as kit supplier to Arsenal this season, took a stake in German club Borussia Dortmund and launched its biggest advertising drive yet, featuring Olympic champion sprinter Usain Bolt and soccer star Mario Balotelli.
"I am convinced that the product in 2015 is better than in 2014," Chief Executive Bjorn Gulden told Reuters.
"I am confident that the basis has been laid for the turnaround," added Gulden, a former professional soccer player who was installed by majority owner Kering in July 2013 with a mandate to revive the company.
Puma shares, which jumped on Monday on talk that French luxury group Kering has found a buyer for its 86 percent holding, were up 3.8 percent at 1030 GMT, compared with a 0.6 percent firmer German small-cap index.
Gulden said he had seen no signals of a change of ownership from the majority shareholder but declined to comment further.
WORLD CUP SOCCER BOOTS
Puma said third-quarter net profit fell 45 percent to 29 million euros ($36 million) due to currency effects and higher marketing spending, slightly shy of average analyst forecasts for 30 million.
"2015 will be another difficult year with only a very mild margin increase," said Kepler Cheuvreux analyst Juergen Kolb, who rates the Puma stock "hold".
"But Puma is back on the pitch with marketing support, endorsement players and teams and new products. Hence, the worst is probably behind it."
Quarterly sales rose 3.7 percent to 843 million euros, an increase of 6.4 percent after stripping out currency effects.
Footwear sales, which account for 44 percent of the total, grew a currency-adjusted 2 percent - the first rise in seven quarters - helped by the popularity of its evoSPEED soccer boot, worn by several top players at the World Cup in Brazil.
Strong demand for Arsenal shirts helped apparel sales rise by a currency-adjusted 11.4 percent.
Puma now expects a low single-digit percentage increase in 2014 currency adjusted net sales, compared with a previous forecast for flat sales. It sees a stable gross profit margin, compared to a previous target for a slight increase.
The gross margin fell slightly in the first nine months to 47.2 percent.
Local rival Adidas, which is also spending heavily on marketing to try to keep place with Nike, also trimmed its gross margin target for the full year on Thursday to 48-48.5 percent from 48.5-49 percent.
$1 = 0.8072 euro
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