PUMA - Results in line with expectations
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Growth in all product categories / positive trend in Footwear continues
Herzogenaurach, November 6, 2015
2015 Third Quarter Facts
- Reported sales up by 8.4% to € 914 million (+3.1% currency adjusted)
- Growth in Footwear driven by Running and Training category
- Gross profit margin down 50 basis points to 45.8% due to adverse currency effects
- OPEX increase due to marketing/retail activity, IT investments, and currency impacts
- Operating result (EBIT) comes in at € 41 million
- First appearance of Rihanna in PUMA TV ads and first Rihanna inspired footwear launch
- Second wave of Forever Faster marketing campaign focuses on Training featuring IGNITE XT and PUMA brand ambassadors
- PUMA athlete Usain Bolt wins three gold medals in Beijing, underlining PUMA being the Fastest Sports Brand in the World
2015 Nine Month Facts
- Reported sales grow by 12.9% (+4.9% currency adjusted) to € 2,509 million, in line with expectations
- Gross profit margin falls by 80 basis points to 46.4% due to currency effects
- OPEX amount to € 1,090 million due to higher marketing activities, retail expansion, and IT investments as well as adverse currency impacts
- Operating result (EBIT) amounts to € 85 million
- Earnings per share come in at € 2.77
- Performance products especially in Running and Training have continued to show good sell-through
Bjørn Gulden, Chief Executive Officer of PUMA SE: “PUMA’s sales in the third quarter developed as expected with growth in all product categories. I am happy to see that our footwear category has increased for the fifth quarter in a row.I am especially pleased to see that also the sell-out at retail to the end consumer is continuously improving in all categories. The launch of the first PUMA BY RIHANNA shoe, the "Creeper”, has been extremely successful and most retailers have sold out within hours or days.We have generally seen a very positive development in our Women's business and we will put even more focus on the female consumer going forward. The continued volatile currency trends in some markets and the weakness of the Euro, especially towards the US Dollar, continues to put pressure on gross profit margin, OPEX, and net earnings. We have taken and will continue to take countermeasures but, as already indicated in the last two quarters, we cannot fully offset these negative impacts on our earnings. Good feedback from retailers, better sell-out and a solid order book validate our outlook for the fourth quarter and allow us to confirm our full-year guidance.“
Third Quarter 2015
Currency adjusted sales in line with expectations
In the third quarter of 2015, sales developed as anticipated: PUMA generated consolidated sales of € 914.4 million, representing an increase of 3.1% currency adjusted. In reported terms, the growth versus last year was 8.4%.
Americas outperform EMEA and Asia/Pacific region
In the third quarter, sales in the EMEA region (Europe, Middle East, and Africa) declined slightly by 3.6% currency adjusted to € 375.7 million. This result compares against high prior year figures, when last year´s performance was positively impacted by the Arsenal launch in the third quarter and included sales of Tretorn (the trademark rights were sold in the second quarter 2015). Without these effects, sales in the EMEA region would have been flat in the third quarter.
Growth in the Americas continued, with North and Latin America both showing strong performances, with sales up 10.8% currency adjusted to € 325.1 million. The United States were one of the key growth drivers with sales increasing double-digit.
In Asia/Pacific (APAC), sales were up 5.0% currency adjusted to € 213.6 million. While China and India showed substantial growth within the region, sales in Korea declined.
Performance products drive sales growth in all product segments
Footwear continued to grow as in the last quarters and is the main driver of PUMA’s total increase in net sales: Sales of € 408.4 million represent a rise of 3.5% currency adjusted. This development is mainly due to the growth of our Running and Training category with the IGNITE and Descendant product platforms.
In the Apparel segment, the sales growth of 2.5% currency adjusted to € 346.9 million was mainly attributable to the success of the Training products.
Sales with Accessories went up 3.7% currency adjusted to € 159.1 million, supported by strong sales in Europe and North America.
Gross profit margin impacted by currency effects
At 45.8%, gross profit margin fell short of last year´s figure by 50 basis points, due to negative currency effects impacting cost of goods sold. The footwear gross profit margin decreased from 41.9% to 41.2%, the apparel margin rose from 49.6% to 49.8% and the margin for accessories fell from 50.3% to 49.1%.
OPEX in line with expectations
Operating expenditures (OPEX) amounted to € 381.9 million in the third quarter. This represents an increase of 9.3% in reported terms versus the third quarter in 2014. As in previous quarters, OPEX was again impacted by negative currency effects, while PUMA continued to invest in marketing activities to further strengthen the brand´s positioning as the Fastest Sports Brand in the World. Ongoing campaigns as well as an increased number of own retail stores in operation also contributed to the higher OPEX. At constant currencies, the increase in OPEX is limited to 4.3% versus last year, reflecting tight underlying cost control.
Operating result (EBIT)
At € 41.1 million, the operating result was 11.2% below the last year´s figure.
Financial result
Unfavorable differences from currency conversions continued to weigh on the financial result, which came in at € -5.1 million.
Net earnings
Net earnings of the third quarter amounted to € 20.0 million (compared to € 28.9 million in the third quarter last year), resulting in earnings per share of € 1.34 (compared to € 1.93 last year).
Nine Months 2015
In the period from January to September 2015, consolidated sales developed in line with our expectations, rising by 4.9% currency adjusted to € 2,508.5 million. In reported terms, the increase is significantly higher at 12.9% as major currencies, in particular the US Dollar and the Chinese Renminbi, strengthened against the Euro.
Americas particularly strong
In the EMEA region, sales were flat at € 987.9 million, as stronger sales in Germany and Poland could not compensate for declines in other markets such as Switzerland and Benelux.
The Americas showed the highest growth among the regions, with both North and Latin America contributing to the increase of 9.4% currency adjusted to € 942.4 million. Within Latin America, Argentina as well as Mexico stood out with a solid double-digit growth.
Sales in Asia/Pacific were also strong, rising 7.2% currency adjusted to € 578.2 million. This increase was supported by the positive development in China and India, while sales in Japan were more muted.
All product segments contribute to growth
Footwear was the best performing segment in the first nine months, showing an increase of 8.6% currency adjusted to € 1,145.3 million. The Running and Training and the Teamsport categories supported this good result, reflecting the relevance of PUMA´s strategy to focus on performance.
Apparel rose 2.6% currency adjusted to € 890.0 million, positively impacted by the development of Training products. Accessories increased slightly by 0.6% currency adjusted to € 473.1 million.
PUMA’s retail sales increase in absolute terms and on a comparable store basis
PUMA increased the share of retail sales in total net sales from 19.5% to 20.4%. In absolute terms, retail sales rose to € 510.9 million (+9.5% currency adjusted). This result was supported by improved sales on a comparable store basis as well as an increased number of retail stores operating (33 more stores compared to one year ago).
Gross profit margin impacted by adverse currency effects
Again, PUMA’s gross profit margin for the period was strongly impacted by negative currency effects. At 46.4%, it fell short of last year´s result by 80 basis points. The footwear gross profit margin decreased from 42.9% to 42.1%, apparel margin was stable at 50.4% and the margin for accessories decreased from 50.7% to 49.6%. PUMA will continue to take countermeasures such as selective price increases to secure profitability, but such adjustments are to be done carefully in order not to impact consumer demand. Furthermore, in some countries, the costs of hedging outweigh its financial benefits, or in some cases, currency hedging is not possible at all. In addition, we are aiming to reduce such exposure to volatile currencies by increasing the share of locally sourced products in some of the most impacted markets.
OPEX increase as a result of strong marketing and retail activities
In the first nine months of 2015, operating expenses (OPEX) amounted to € 1,090.4 million, a 15.5% increase in reported terms. This rise stems from unfavorable currency effects as well as strong marketing activities including media investments and sponsorships of brand ambassadors. Opening up new stores and investing into IT infrastructure also contributed to the development. At constant currencies, the increase in OPEX is limited to 7.8% versus last year, as PUMA continued to put a strong emphasis on strict control of other operating costs.
Operating result (EBIT)
Operating income came in at € 85.4 million compared to € 117.4 million in the previous year.
Financial result
Unfavorable differences from currency conversions weighed on the financial result, which fell to
€ -9.9 million. These effects were in particular related to Latin American countries and Turkey.
Net earnings / earnings per share
Net earnings for the first nine months came in at € 41.5 million compared to € 68.6 million in the previous year, representing earnings per share of € 2.77 (1-9/2014: € 4.59).
Net Assets and Financial Position
Increase in working capital to serve higher demand
To support sales growth and serving the higher demand from new retail stores as well as ensuring product availability, inventories increased by 20.2% to € 689.5 million. Trade receivables went up by 3.3% to € 565.6 million. Trade payables were at € 509.0 million, rising 10.9% compared to last year´s figure. In total, working capital rose 11.8% to € 711.4 million.
Cashflow / CAPEX
As a result of the higher working capital requirements, the free cashflow went down to € -248.0 million for the nine-month-period 2015 compared to € -114.4 million as of September 30, 2014. The free cashflow was also impacted by higher CAPEX, which grew from € 47.8 million last year to
€ 54.6 million. This reflects our increased investment in IT and retail stores.
Cash and cash equivalents
Cash and cash equivalents were also impacted by the higher working capital requirements and decreased by 12.1% to 269.6 million, while borrowing increased as part of PUMA’s short term financing activities.
Brand and Product Update
In our Running and Training category, we benefitted from excellent athlete and team performances at the 2015 IAAF World Championships in Beijing with 18 podium positions for PUMA sponsored athletes and teams. The World’s Fastest Man Usain Bolt once again proved his status as the greatest athlete of all time with triumphs in the 100m, 200m and 4x100m relays, extending his record-breaking personal haul of IAAF World Championships gold medals to 11. The stellar performances of the Jamaican Team, which finished second in the medals table after Kenya, as well as the performances of the other PUMA teams including the Bahamas, Cuba, Grenada, Cayman Islands, Switzerland and the Dominican Republic, secured a strong brand visibility of PUMA throughout the competition.
The great achievements of our athletes in Beijing’s National Stadium came only shortly after the launch of our second major Forever Faster brand campaign, which had a dedicated focus on Training. Asking the question “What are you training for?” the campaign was brought to life through the unique training stories of PUMA’s most elite ambassadors such as Usain Bolt, Rihanna, Sergio Agüero, Arsenal Football Club, and the Cuban National Boxing team. The films intimately capture our athletes’ motivations and tactics to constantly improve through training. Underpinning this campaign was PUMA’s latest innovative footwear offering within the IGNITE franchise: the IGNITE XT. This high intensity training shoe’s responsive design maximizes energy and movement throughout high intensity workouts.
In our Teamsport category, we recently launched the latest iteration of our eye-catching Duality football boots, continuing the theme of two distinct coloured boots in one pair. This was applied to PUMA’s two football boot families, evoPOWER and evoSPEED, and worn by PUMA stars such as Cesc Fàbregas, Sergio Agüero, Marco Reus, and Antoine Griezmann. Furthermore, PUMA introduced the new bright blue colourway of its lightest football boot to date, the evoSPEED SL. It is worn on pitch by PUMA stars including midfielder Marco Verratti, who helped to secure the qualification of the PUMA partnered Italian national team for the 2016 UEFA European Championship next year in France. PUMA teams Czech Republic, Slovakia, Austria and Switzerland have also qualified.
In our successful Motorsports category, PUMA continues to be a leading supplier with its outstanding Mercedes AMG Petronas and Scuderia Ferrari F1 teams. Mercedes' Lewis Hamilton won his third Formula 1 Drivers’ World Championship with his 10th victory of 2015 at a thrilling United States Grand Prix two weeks ago. Having already grasped the Constructors' Championship title for the second consecutive year prior to this, the “Silver Arrows” are enjoying their most dominant season in more than 60 years.
In September, COBRA PUMA GOLF golfer Rickie Fowler enjoyed another victory at The Deutsche Bank Championship at TPC Boston. Wearing his signature orange apparel and equipped with his COBRA Fly-Z+ Driver, Fowler powered his way to a victory. His looks consisted of PUMA apparel and footwear from our 2015 Autumn/Winter collection, for example the Titantour, the coolest shoe in golf. COBRA PUMA GOLF athlete Lexi Thompson recently won the LPGA KEG Hana Bank Championship in South Korea, proving her outstanding talent once again with her second victory of the year and sixth overall.
Strategy Update
Our sales for the first nine months of this year and the very positive feedback from retailers around the world regarding our new products as well as a strong order book confirm that we are on the right track. Our stronger sales performance in Footwear underlines our progress in becoming the Fastest Sports Brand in the World.
We have continued to improve our product offering for women and our communication approach to them. Building on a strong heritage and credibility with women, we have emphasized female consumers as a key growth segment for PUMA. A key element of this strategy is our collaboration with world-famous artist Rihanna as brand ambassador and Creative Director, which we have taken to a new level. She plays a prominent role in our second Forever Faster brand campaign, a multi-million euro media investment with a dedicated focus on Training. Within the campaign, Rihanna is featuring the training shoe IGNITE XT. Her first TV commercial for PUMA initially aired in September.
Beyond a mere endorsement, PUMA has just launched the first in a series of Rihanna-inspired footwear and apparel styles. The “Creeper” is the first sneaker from PUMA by Rihanna under her FENTY Label. It remixes the iconic PUMA Suede with a creeper sole inspired by the NYC punk rock scene with high-end details and Rihanna's signature branding. The first limited edition black and white colorway of the Creeper was available only on our PUMA.com website and a PUMA-hosted pop-up store in New York’s SoHo neighborhood. The shoe generated unprecedented social media and PR coverage for PUMA and sold out within hours. More colorways are currently being sold via PUMA.com and key retail partners worldwide.
We will further optimize our product offering for women across our performance and lifestyle categories in the coming seasons. This is not limited to, but includes additional Rihanna-associated styles, such as the boxing-inspired Eskiva shoe available in November 2015 and a complete collection of footwear and apparel styles to be launched in 2016.
Our efforts to further improve our close collaboration with key retailers are critical in our go-to-market strategy. The Creeper launch would not have been possible without the close alignment of our product and marketing teams with key retailers. Additionally in North America we have improved our presence with shop-in-shops, special wall units and permanent in-store communication at major sports accounts including Finish Line and Champs. As for PUMA’s owned and operated stores, we have continued to roll out our new Forever Faster store layout to currently eleven locations worldwide.
Social, economic and environmental sustainability is a core value for all of us at PUMA. We believe that keeping these dimensions in balance is crucial to achieving sustainable business development. Therefore we welcomed the opportunity of becoming an official partner of COP21. As an official partner of the UN Climate Change Conference in Paris, we will equip 180 students in charge of welcoming visitors from all over the world. These trainee hosts and hostesses will wear specifically designed PUMA outfits that are entirely made of organic cotton.
Outlook for the Financial Year 2015
The business development in the first nine months of 2015 was in line with our expectations and our full-year guidance for 2015 remains unchanged.
We reiterate our expectation that adverse currency effects, particularly the strengthening of the US Dollar versus nearly all other currencies, will continue to impact PUMA’s reported gross profit margin, OPEX and EBIT. PUMA has already taken and will continue to take countermeasures, but the impact will not fully offset the negative currency effects.
In the remainder of 2015, PUMA will continue to invest strongly in marketing to further enhance and reinforce its new brand positioning. The investments in the upgrade of PUMA’s current IT-infrastructure and the extension of our own retail store network will also continue. This will result in an increase in OPEX that will be further impacted by negative currency effects. At the same time, PUMA’s management will continue to put a strong emphasis on strict control of other operating costs.
Thanks to the countermeasures implemented and at the current exchange rate levels, we expect a slightly softer drop in the gross profit margin for the full-year at the lower end of the range of minus 100 to 150 basis points versus last year. The improvement in gross profit margin due to these countermeasures, however, comes at a slight negative effect on net sales. Nonetheless, we continue to expect an increase in the medium single-digit range for full-year currency-adjusted net sales and we reiterate our expectation for a full-year EBIT in a range between € 80 million and€ 100 million, with net earnings impacted accordingly.
Media Relations:
Kerstin Neuber - Corporate Communications - PUMA SE - +49 9132 81 2984 - kerstin.neuber@puma.com
Investor Relations:
Johan-Philip Kuhlo – Global Strategy - PUMA SE - +49 9132 81 3170 – investor-relations@PUMA.com
Notes to the editors:
· This press release and financial reports are posted on www.about.puma.com.
· PUMA SE stock symbol:
Reuters: PUMG.DE, Bloomberg: PUM GY,
Börse Frankfurt: ISIN: DE0006969603– WKN: 6969603
Notes relating to forward-looking statements:
This document contains forward-looking information about the Company’s financial status and strategic initiatives. Such information is subject to a certain level of risk and uncertainty that could cause the Company's actual results to differ significantly from the information discussed in this document. The forward-looking information is based on the current expectations and prognosis of the management team. Therefore, this document is further subject to the risk that such expectations or prognosis, or the premise of such underlying expectations or prognosis, become erroneous. Circumstances that could alter the Company's actual results and procure such results to differ significantly from those contained in forward-looking statements made by or on behalf of the Company include, but are not limited to those discussed be above.
PUMA is one of the world’s leading Sports Brands, designing, developing, selling and marketing Footwear, apparel and accessories. For over 65 years, PUMA has established a history of making fast product designs for the fastest athletes on the planet. PUMA offers performance and sport-inspired lifestyle products in categories such as Football, Running and Training, Golf, and Motorsports. It engages in exciting collaborations with renowned design brands to bring innovative and fast designs to the sports world. The PUMA Group owns the brands PUMA, Cobra Golf, Dobotex and Brandon. The company distributes its products in more than 120 countries, employs more than 10,000 people worldwide, and is headquartered in Herzogenaurach/Germany. For more information, please visit http://www.puma.com