Optimism Grows at Puma After ‘Very Good’ Q1 Results
BERLIN — The mood at Puma’s press conference on Wednesday morning, revealing the company’s first-quarter results for 2021, was cautiously buoyant.
The first quarter “was, as expected, very good,” chief executive officer Bjorn Gulden said. ” I think it’s fair to say that we are surprised that during the pandemic the demand for sports products in general has been so high.”
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However, he said, circumstances remained uncertain as COVID-19 infections continue to rise around the world. The company was confident enough to predict growth in the mid-teens for the rest of 2021 but couldn’t be more precise at the moment, Gulden said. “I hope that when we get to the releases in the second quarter we can be more specific,” he concluded.
Market analysts at JPMorgan, Goldman Sachs and RBC Europe lauded the company’s better-than-expected performance.
Despite the fact that around a third of Puma’s stores remain closed in Europe, the German sportswear brand reported sales rose 25.8 percent to 1.55 billion euros in the first quarter. In the first quarter of 2019, the company reported revenues of 1.32 billion euros.
In the first three months of this year, sales in Europe — which accounts for 37 percent of the business — increased 11 percent to 572.4 million euros.
Puma saw bigger increases in the Americas and in Asia Pacific, with sales there rising 38.5 percent and 28.8 percent, respectively.
Gulden said Puma’s entry into basketball was paying off in North America, noting that “it was the key to the younger consumer.”
Asia Pacific totals were impacted by shoppers in the Greater China region, who pushed net sales 40 percent higher there. Sales in the rest of Asia only grew 12 percent.
Puma had been as affected by the boycott that some Chinese consumers had called for on Western brands like Nike, Adidas and H&M but not quite as dramatically, Gulden said.
Sales in China had been very strong until the final weeks of the first quarter, he explained. “Then the tension between China, America and Europe on the Western China situation grew and that caused our traffic to go down pretty heavily in the last week of March,” he noted.
The trend is continuing and footfall remains lower than usual in Puma stores, the CEO said, before carefully sidestepping reporters’ questions about his own opinion on the controversy around cotton from Xinjiang. “I am far too small to have an opinion about that,” Gulden stated. “We are observing and trying to work with our retail partners there.”
Gulden did speak at length about another of the industry’s recent problems with freighting delays, and the difficulties of getting product out of factories in Asia and into America and Europe. There were fewer freighters on the oceans and less staff at docks.
In January, Puma sales only rose 0.4 percent compared to the previous year because of inventory shortages and shipping delays of, on average, between three to four weeks, Gulden explained. Retailers in America were “screaming out for product,” he said. But things are getting back to normal now, which explained the 75.3 percent increase in sales in March.
Freighting price rises will continue to have an impact though. Shipping contracts are normally signed a year in advance, the executive noted. “So that will last until at least April next year.”
Footwear made up half of all Puma’s sales, totaling 773.8 million euros. Apparel sales reached 532 million euros and accounted for 34 percent of Puma’s business, while accessories hit 243 million euros.
Puma has recently returned to making running shoes and this was very deliberate, Gulden explained, as during the past year gym closures and the prohibition of team sports meant that running had “exploded.”
“I think it’s also true that people in lockdown, in home office, have eaten a little bit more,” Gulden joked. “So then they need to do some activity to keep their weight down.” Consumers had also bought more casualwear for comfort at home and another growth area was in yoga clothing and other apparel suitable for exercising at home.
Gulden said the brand was looking forward to the Tokyo Olympics, scheduled to begin in July, where it was outfitting more athletes than ever before. Companies don’t tend to sell much during the Olympics because of strict licensing regulations, Gulden explained. “But it creates a positive attitude [about] sports in general,” he argued.
More sales were likely to result from the European soccer championships, slated to start in June. Puma’s relatively new partnership with Brazilian soccer star Neymar Jr. was also bringing rewards, Gulden said. Neymar Jr. ended a high-profile, 15-year relationship with Nike last year; the deal, reported to be worth $105 million, was supposed to run until 2022.
Puma’s e-commerce sales continued to speed forward, rising 74.9 percent in the first quarter. The company doesn’t reveal how much of its direct-to-consumer business, which includes its own stores, is made up of e-commerce, but direct sales rose 31.3 percent overall to 346.8 million euros.
Puma also recorded 116.7 percent growth in its EBIT to 154.3 million euros over the first quarter. The huge growth is a result of the fact that EBIT had halved over the same quarter last year, diving 50 percent to hit 71.2 million euros. Nonetheless, the rise in EBIT still reflected growth of around 8 percent when compared to more stable times in 2019. Back then, Puma’s EBIT in the first quarter was 142.5 million euros.
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