On October 5, Puma (PUMG.DE) faced a downturn of 9.6%, prompted by analyst warnings of potential third quarter earnings falling below market expectations. The stronger euro against the dollar compared to the previous year is cited as a significant factor. Let’s delve into the challenges impacting Puma’s performance amid broader industry struggles.
The sportswear industry grapples with weakened demand in North America and a slower than expected recovery in China. Increased competition from local brands intensifies the battle for market share, with Nike (NKE.N), Adidas (ADSGn.DE), and Puma at the forefront.
Analysts at brokerage Stifel anticipate a low double digit decline in Puma’s Q3 earnings before interest and tax, surpassing consensus expectations for a 6% decline. This propelled Puma shares towards their worst day since March 2020.
Full Year Guidance
Despite market concerns, Puma asserts its commitment to achieving full year guidance. Puma aims for EBIT between 590 million euros and 670 million euros for 2023, having achieved 641 million euros in 2022.
However, RBC analysts express skepticism about Puma reaching the upper end of its 2023 guidance, suggesting a diminished likelihood of a guidance raise for the full year.
Puma’s third quarter results are slated for October 24, with Adidas, a key industry competitor, following on November 8. Adidas shares experienced a 2.7% decline in response.
Analysts anticipate a potential fourth quarter rebound, emphasizing Puma’s potential to reconfirm positive outlooks for Q4 organic growth, especially as U.S. overstock challenges begin to resolve.
Inventory Challenges and Opportunities
High inventory levels in the U.S., stemming from pandemic induced supply chain disruptions, have impacted apparel retailers. Stifel analysts foresee an improvement in Puma’s inventory levels, indicating a potential turning point for the company in the fourth quarter.
As the industry navigates uncertainties, Puma’s strategic moves and the market’s response remain critical factors to watch. The upcoming earnings reports are poised to unveil the trajectory for both Puma and its competitors, shaping the narrative for the sportswear sector.
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