Second quarter results

Puma’s consolidated sales in the second quarter of 2014 were in line with expectations, rising by 0.6% currency adjusted to 652.2 million euros. Continued currency weakness in Turkey, Russia, South Africa, India, Japan and the Americas, resulted in a decline in euro terms of 5.8%.

The American region presented the only increase in currency adjusted terms, with sales up by 4.6% reaching 250.6 million euros; in euro terms sales were down by 6.2% in this region. Initiatives like the Puma Labs at Footlocker is recognized by the company as having an important contribution to the performance improvement in North America, with Latin America benefited from increased Teamsport sales, particularly in Chile and Mexico. In the EMEA region, sales declined by 1.4% currency adjusted (-4.0% in current terms) to 255.7 million euros with the strong performances in the United Kingdom and Switzerland not to entirely offset the decline in French and Scandinavian wholesale revenues. Sales in the Asia/Pacific region declined by 2.3% currency adjusted (-8.3% in euro terms) to 145.9 million euros: despite solid growth in Korea and India, the performance in Japan was pressured by the sales tax increase at the beginning of the quarter which led to a decline across categories.

By product type, distinctive trends in the quarter, as currency adjusted footwear sales declined by 9.1% in the second quarter to 277.6 million euros (-15.8% in current terms); apparel however, improved by 12.8% currency adjusted to 241.1 million euros, as a result of the World Cup supported strong performances (jerseys and other fan wear). Accessories sales also improved by 3.4% currency adjusted (reaching 133.6 million euros) due to continued demand for Puma’s socks and bodywear. Golf equipment sales declined during the quarter due to the weaker golfing environment.

Puma’s gross profit margin increased from 46.0% to 46.7% for the second quarter of 2014 as promotional activities declined compared to the same period last year. Footwear gross profit margin decreased from 44.1% to 42.7% due to the product and category mix. Consolidated net earnings declined from 17.5 million euros to 4.2 million euros impacted in part by a slightly higher tax rate in the quarter due to tax expenses related to prior years. As a result, earnings per share decreased from 1.17 euros to 0.28 euros in the second quarter of the year.

Bjørn Gulden, Chief Executive Officer of Puma commented: “Puma’s second quarter sales and operating profit developed in line with our expectations. I was very happy with Puma’s visibility during the World Cup in Brazil (…) In addition, we celebrated a successful Arsenal launch in July, followed by very good initial sales at retail of Arsenal replica jerseys".

Half year results

Currency adjusted sales were flat during the first half of 2014 reaching 1 377.9 million euros, however, continued currency weakness in important countries to lead to a decline of 6.5% in euro terms.

Puma highlighted the varied regional performance in the first half, with sales in the EMEA region declining by 0.5% currency adjusted to 593.0 million euros (-3.4% in current terms), where strong performances in the United Kingdom and Turkey were not enough to entirely offset lower sales in France and Scandinavia. Currency adjusted sales in the Americas increased by 2.1% to 485.8 million euros with improvements in the USA, Canada and Chile. Asia/Pacific sales declined by 2.2% currency adjusted (-10.0% in euro terms) to 299.2 million euros as decreases in Japan and Oceania could not be fully compensated for by increases in India and Korea.

In terms of product segments, footwear sales declined by 8.0% currency adjusted (-14.9% in euro terms) to 598.4 million euros in the first half of the year. Sales in apparel increased by 7.6% currency adjusted (+0.8% in euro terms) to 487.0 million euros, and accessories sales also rose by 6.6% currency adjusted (+1.6% in current terms) to 292.5 million euros.

Half year consolidated net earnings fell from 67.8 million euros to 39.8 million euros, a 41.3% decline; with earnings per share declining from 4.54 euros to 2.66 euros.

Strategy update

The company also announced a strategy update, as they continue to pursue the aim to position themselves as the World’s Fastest Sports Brand, while improving their product engine, optimizing the distribution quality and increasing the speed. In terms of brand repositioning, the biggest marketing campaign in the company’s history has been created to communicate Puma as a true Sports Brand. The campaign demonstrates how athletes like Usain Bolt, Mario Balotelli, Rickie Fowler, Marta, Lexi Thompson and Ferrari are the epitome of the brand’s values: brave, confident, determined, and joyful. The campaign kicked-off on August 7th in North America, Latin America and Asia-Pacific and will be rolled out to Europe and EEMEA shortly afterwards. The launch of this campaign marks the start of a long-term marketing strategy, with continuous investment up to the Rio de Janeiro Olympic Games in 2016 and beyond.

Bjørn Gulden commented: "We are now looking forward to launching our new “Forever Faster” marketing campaign in August, which is another step in the process of becoming the “fastest sports brand in the world”. But, as I have said all along: We know that the repositioning of Puma and the turnaround of the business will take time. However, I feel we are making progress on all our key strategic priorities and we have initiated the right projects to make 2014 the start of the turnaround.”

2014 continues to be a turnaround year for Puma, where the brand will try to re-establish itself in the market place, bringing back a path of profitable and sustainable growth in the mid-term. To support this turnaround, Puma claims they will continue to invest strongly in marketing and sports assets, while maintaining tight control on other operating expenditures.

Given Puma’s results in the first half of the year, management continues to expect flat full year currency adjusted net sales and a slight increase in the gross profit margin. Full year guidance for net earnings (3% of net sales) remains unchanged from the first quarter. Puma reiterate that the continued volatile currency movements may have a negative impact in their yearly results.

For more information about the Puma please visit the company's website.