Puma aims to boost its brand in 'challenging' market
Reuters
Published Feb 27, 2024 07:04
Updated Feb 27, 2024 16:06
By Alexander Hübner and Helen Reid
(Reuters) -Puma warned of a weak first half of the year in a challenging market on Tuesday but the German sportswear group stuck to annual targets set in January and announced a new campaign to boost its brand.
Its shares gave up modest early gains and were down 2% at 1521 GMT.
Sportswear companies, such as Adidas (ETR:ADSGN), Nike (NYSE:NKE), and Puma are having to work harder to convince cash-strapped shoppers to buy sneakers, tracksuits and hoodies.
Puma's new marketing push, set for launch in April, comes after it has struggled to strengthen its brand over the past few years, CEO Arne Freundt told reporters at the company's headquarters in Herzogenaurach.
Selling to more upmarket retailers, creating more products tailored to specific markets, and focusing on fewer, higher-profile, brand ambassadors are among the ways Puma is trying to boost its image.
The sportswear maker in 2023 started a second partnership with pop star Rihanna, while signing rapper A$AP Rocky and footballer Jack Grealish among others.
LAGGING RIVALS
Puma's shares have lagged Nike and Adidas over the past year, dragging the company's valuation down.
Stifel analyst Cedric Lecasble said a share buyback, possibly worth hundreds of millions of euros, could be one way for Puma to improve it.
"The shares have suffered a lot and the balance sheet is strong," Lecasble said.
Puma will discuss capital allocation strategy at its capital markets day on Feb. 29 and March 1, Freundt said in an investor call.
Puma's fourth-quarter sales in the Europe, Middle East and Africa (EMEA) region dropped 5.2% to 668 million euros, a sharp reversal after 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 revenue from its own stores has grown.
In the Americas, currency-adjusted sales fell by 6.4% to 846 million euros ($918.5 million), hit by a slump in the value of the Argentine peso. It will continue to weigh on profitability in the first half, Puma said.
Asia-Pacific, the only region that grew in the fourth quarter, saw sales rise 2.8% on a currency-adjusted basis to 468.3 million euros, led by strong growth in the Greater China region and India.
Freundt said he expected disproportionate growth in China this year, and saw the U.S. market resuming growth in the second half.
The company sees a potential rise in freight rates in the second half of the year because of Red Sea shipping disruptions, he added.
Overall, Puma's footwear sales grew by 12.4% in 2023 while apparel sales dipped 0.3% as shoppers prioritise shoes.
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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.
($1 = 0.9211 euros)
Written By: Reuters
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