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Puma expects weaker first half due to 'challenging' market conditions

Sportswear companies including Adidas, Nike, and Puma, have seen demand weaken as customers battling with inflation cut spending on non-essential goods

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Reuters
3 min read Last Updated : Feb 27 2024 | 3:44 PM IST
Puma on Tuesday said it expects a weak first half of the year in a challenging market, but shares in the German sportswear brand climbed as it kept its dividend and stuck to the annual targets it set in January.
 
Sportswear companies including Adidas, Nike, and Puma, have seen demand weaken as customers battling with inflation cut spending on non-essential goods.
 
"Going into 2024, we see that the market environment remains challenging," Arne Freundt, Puma's CEO, said in a statement.
Shares in Puma rose by 1.9%, however, as the company announced a dividend of 82 cents per share, the same payout as a year ago, and announced a new brand campaign launching in April, the first such campaign in 10 years.
 
In what analysts said was a surprising decline, Puma's sales in the Europe, Middle East and Africa (EMEA) region dropped 5.2% in the fourth quarter to 667.9 million euros, compared to a 9.9% year-on-year increase in the third quarter.
 
Puma said the slowdown was due to retailers in the region having excess stock. Puma makes most of its sales through retail partners, though revenues from its own stores have grown.
 

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Currency-adjusted sales in the Americas fell by 6.4% to 846 million euros ($918.5 million), hit by a slump in the value of the Argentine peso. The devaluation will continue to impact on profitability in the first half, Puma said.
 
Asia-Pacific, the only region delivering growth in the fourth quarter, saw sales rise 2.8% on a currency-adjusted basis to 468.3 million euros, which Puma said was helped by strong growth in the Greater China region and India while sales in the rest of Asia were held back by weak consumer sentiment.
 
Puma reiterated its 2024 forecast for mid-single-digit percentage growth in currency-adjusted sales, and earnings before interest and tax of 620 million to 700 million euros.
 
"We continue to believe that management has been conservative with its guidance and a weaker industry outlook is already in the valuation," analysts at Deutsche Bank said in a note.
 
Puma's shares have lagged Nike and Adidas over the past year, dragging the company's valuation down.
 
As the industry struggles with excess stocks, Puma said its inventory stood at 1.8 billion euros by the end of 2023, a decline of 19.6% from a year prior.
 
Overall, Puma's footwear sales grew by 12.4% in 2023 while apparel sales were down 0.3% as shoppers prioritise shoes over track suits and hoodies.

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Topics :PumaPuma Indiasportswear brandsadidasNike

First Published: Feb 27 2024 | 3:44 PM IST

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