Despite a dip in Q3 earnings due to a robust euro, Puma remains confident in achieving its full year profit targets, offering a boost to investors as its shares gained 4%.
Positive Outlook for Puma
Puma, the well known German sportswear brand, stood firm on its annual profit forecast, thanks to cost cutting measures that helped offset the impact of a stronger euro on its third quarter earnings.
The company’s stock rebounded with a 4% increase in early trading, after taking a 10% hit earlier in the month when analysts expressed concerns about Q3 earnings falling short of market expectations due to currency fluctuations.
Q3 Earnings and Revenue
In the third quarter, Puma reported an operating profit of 236.3 million euros ($252.3 million), down from 257.7 million euros in the previous year. However, the company outperformed expectations by posting a 6% growth in revenue in currency adjusted terms, reaching 2.31 billion euros.
Annual Profit Target and Q4 Expectations
Puma affirmed its annual operating profit goal, which falls within the range of 590 million to 670 million euros. The company anticipates a strong improvement in profitability in the fourth quarter, driven by reduced marketing, sourcing, and freight costs, even in a challenging consumer demand environment.
Puma’s CEO, Arne Freundt, expressed optimism, stating, While the market continues to experience significant macroeconomic headwinds and 2023 remains a transition year, we outgrew the market.
Currency fluctuations adversely affected Puma’s sales in euro terms during the third quarter. The stronger euro, compared to the same period the previous year, impacted the conversion of dollar sales into Puma’s home currency.
In terms of regional performance, Puma excelled in the EMEA region with 9.9% growth in the third quarter, while sales in Asia Pacific increased by 4.6%, and the Americas saw a modest 2.5% gain.
Analysts have noted that Puma faces challenges in key markets like the United States and China, where its brand perception is not as strong. To address this, Puma is working to position its products in higher end stores and using celebrity partnerships, such as the recent announcement of American rapper A$AP Rocky as creative director for its Formula 1 collaboration.
Sales Channels and Competition
Puma primarily generates revenue through multi brand retailers. The company reported a 3.1% increase in its wholesale business in currency adjusted terms, while sales from its own stores and websites surged by 17.4%. Notably, Puma has faced intensified competition as larger competitors like Adidas and Nike refocus on wholesale distribution.
As retailers in the United States recover from overstocking, which led to discounting, Puma has effectively managed its inventory, reducing it by 20.3% compared to the previous year’s levels as of September 30.
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