ROUNDUP 2: Puma with jump in sales in the first quarter – forecast confirmed

(new: details)

HERZOGENAURACH (dpa-AFX) – The sporting goods manufacturer Puma (PUMA SE) has started the new year with significant growth. The company has recorded strong demand, said CEO Bjrn Gulden when presenting the figures for the first quarter on Wednesday in Herzogenaurach. The company continues to struggle with high costs due to supply chain bottlenecks. And the difficulties in the important Chinese market continue. All of this means Puma remains cautious for the year as a whole. Management confirmed the prognosis.

Sales increased in the first quarter by almost a quarter to 1.9 billion euros, as Puma announced. Adjusted for currency effects, the increase was almost 20 percent. Despite restrictions in the supply chain, it was possible to “procure enough products to be able to partially meet the increasing demand,” said Gulden. Demand still exceeds supply. Total product inventories rose by almost a third in the quarter. At the same time, Puma also increased inventories in the warehouses, which according to Gulden gives reason to hope for a strong second quarter. However, growth continues to come primarily from stock that is still in transit and therefore not available for sale.

The adidas competitor’s growth was driven by robust development in the Americas region, which increased sales by around 44 percent at constant currency. In the important North American market it was almost 40 percent. In the USA, the re-entry into the basketball business a few years ago is increasingly paying off for the brand with the big cat.

But the European business is also doing well, with a sales increase of almost 25 percent. The development was slowed down by the ongoing problems in China. In addition to the ongoing political tensions with the western world, which are making the Chinese increasingly turn to domestic brands, the renewed outbreak of the corona pandemic is now also having an additional impact on business. Sales in China fell sharply again in the quarter – down 37 percent at constant currency.

Despite higher costs, among other things due to the ongoing problems in the supply chain, Puma was able to increase its results. The operating result (EBIT) increased by 27 percent to 196 million euros. The Russian war in Ukraine reduced the result by ten million euros. Puma has closed its stores in Russia and stopped sponsoring. Puma was able to add a good eleven percent to 121 million euros in consolidated earnings. The numbers were above analysts’ expectations.

In a first reaction, analyst James Grzinic from the investment house Jefferies wrote that the pressure on gross margins was greater than feared in the first quarter. However, Puma more than compensated for this with higher sales and strict cost discipline. Looking ahead, there is little evidence to date that Western consumers are tightening their belts in the face of heightened inflationary pressures. The share initially rose significantly at the start of trading, but gave up its gains by midday and recently lost 0.1 percent.

The annual forecast confirmed Puma. “Based on such a strong first quarter, we would normally raise our outlook for the year as a whole,” explained Gulden. However, factors of uncertainty are the corona situation in China, the war in Ukraine, the continuing tense freight situation and inflationary pressure. Although Puma sees further potential for growth in sales, it does see increased cost pressure. “In this situation, we will continue to prioritize increasing our market shares and our medium-term growth potential over short-term profit optimization,” said Gulden. The Puma boss currently sees no indications of a deteriorating consumer environment, for example due to the Ukraine war or rising inflation.

Puma continues to expect currency-adjusted sales growth of at least ten percent for 2022. The operating result is expected to increase from EUR 557 million in the previous year to between EUR 600 and 700 million. In the context of the China lockdowns, the annual targets, which were initially considered too conservative, appeared in a different light, Stifel analyst Cedric Lecasble noted./nas/men/jha/