The future of Puma

Germany's Puma expects more pain from currency swings

The Luxonomist. 17/02/2015
Puma and Rihanna

Puma predicted a strong U.S. dollar and currency fluctuations would weigh on earnings this year after the German sportswear company suffered a surprise loss in the last three months of 2014.Puma promised to take steps including price increases to blunt this impact, meaning it should be able to achieve a slight increase in core earnings and net profit in 2015.

The impact of the dollar strength was already evident in the fourth quarter when the company reported a net loss of 4.6 million euros ($5.25 million), compared with forecasts for a net profit of 7 million. The sportswear industry sources the vast majority of products from Asia in U.S. dollar contracts. Puma said the weakness of the Russian rouble was also hurting, as was volatility in the Mexican and Argentine peso and Polish zloty.

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The loss came despite a 7.5 percent rise in quarterly sales to 751 million euros that beat average analyst forecasts. Sales were driven by strong growth in the Americas, where Puma makes a third of its sales, up a currency adjusted 15 percent.Puma shares were 0.2 percent lower at 1125 GMT compared with a 0.3 percent firmer German small-cap index.Majority owned by French luxury goods group Kering , Puma is a distant third in the sportswear market behind Nike and Germany’s Adidas.

Bolt To Bow Out
Puma has been spending heavily on marketing and sponsorship, including ousting Nike as kit supplier to English Premier League soccer club Arsenal this season, trying to restore its reputation as a sports performance brand after a shift into fashion hurt its image. Operating expenditure rose 8.6 percent in the quarter after Puma launched its the biggest ever marketing campaign in August, prominently featuring Olympic sprint champion Usain Bolt, who has said he will retire in 2017.

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Bolt remains central to Puma’s brand. The company launched a new springy-soled running shoe dubbed IGNITE with the Jamaican at a glitzy event in New York’s Times Square only last week.Puma, which named pop star Rihanna as its women’s creative director in December, said marketing spending would continue to rise in 2015, although it would tightly control other costs.

The German company predicted a mid-single-digit rise in currency-adjusted sales for 2015. Growth was seen coming in the second half after a flat first half when it faces tough comparisons following last year’s soccer World Cup. ($1 = 0.8768 euros) (Additional reporting by Joern Poltz in Herzogenaurach; Editing by Keith Weir and Tom Atkins).

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