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Footwear Bounces Back at Puma Despite Global Store Closures

Even in the face of continued lockdowns in major markets, Puma has had a hot start to 2021.

First-quarter sales at the German footwear and athleticwear brand increased by a currency-adjusted 25.8 percent year over year to 1.55 billion euros ($1.88 billion), with total net income reaching 109.2 million euros ($132.3 million).

While the previous quarter saw apparel take the lead for Puma with 15.7 percent growth, amid only 3.8 percent footwear growth, the latter category made a significant rebound in the first quarter as both segments jumped 27 percent.

In a Nutshell: Approximately 30 percent of the retail stores selling Puma products in Europe and Latin America are still closed due to Covid-19 lockdown measures, with the remaining 70 percent mostly operating with significant restrictions.

In a statement, Bjørn Gulden, CEO of Puma SE, said he felt “confident that 2021 will be a better year than 2020” despite the uncertainty related to pandemic-related closures, supply chain capacity issues and freight cost increases.

As the supply-chain issues continue, Puma started operations at its new German multi-channel distribution center in Geiselwind this month in partnership with TGW Logistics Group. Puma says the 680,000-square-foot, largely automated distribution center is able to process up to 74 million items per year.

Inventories increased by 8.3 percent year over year to 1.22 billion euros ($1.48 billion) from 1.13 billion euros ($1.37 billion). Trade receivables—the money Puma is still owed from its wholesalers after delivery—increased 36.5 percent from 672 million euros (814.6 million) to 917.5 million euros ($1.11 billion) due to strong sales growth in March. On the liabilities side, trade payables—the money Puma still owes its vendors—increased by 42.1 percent from 742.3 million euros ($899.8 million) to 1.05 billion euros ($1.27 billion) due to extended payment terms agreed upon with suppliers.

First-quarter gross profit margin improved by 90 basis points (0.9 percentage points) to 48.5 percent despite negative currency impacts. The improvement was driven by better product sell-through and reduced promotional activity.

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Given the strong first quarter from a sales and EBIT perspective, Puma gave a clearer outlook on its 2021 full-year projections, changing its initial expectation from “at least moderate sales growth with upside potential” to “mid-teens sales growth” for the year. The outlook for both the operating result and net earnings has not changed, with the company initially stating that both metrics will “show a significant improvement compared to 2020.”

Due to the store restrictions and continued lockdowns, Puma foresees a continued negative impact of the pandemic on the business throughout 2021.

The footwear and athleticwear brand also is developing a new educational program with The Trevor Project, the world’s largest suicide prevention and crisis intervention organization for lesbian, gay, bisexual, transgender, queer and questioning (LGBTQ) young people.

The program, titled #REFORMTheLockerRoom, is the latest addition to Puma’s #REFORM social justice platform and addresses the urgent need to support LGBTQ youth athletes and their mental health in athletic environments.

In the first year of its Puma partnership, The Trevor Project led a series of research-focused initiatives, including seven roundtable-style seminars, to identify how equal, safe and affirming access to sports participation may benefit the mental health of LGBTQ youth athletes and prevent LGBTQ youth suicide. Informed by learnings from these initiatives, The Trevor Project is introducing a new curriculum overseen by subject matter experts that will encompass a virtual facilitated learning experience focusing on competency training in LGBTQ youth identity and suicide prevention.

“Since announcing our multi-year partnership with The Trevor Project last year, we have been inspired by the work the team has done to create a curriculum that will help break down barriers and create even more opportunities for LGBTQ youth who want to play and be part of the game,” said Adam Petrick, global director of brand and marketing at Puma. “It’s exciting and encouraging to receive positive feedback about the program thus far from coaches, athletic departments and leagues, and sports leaders across the U.S., and we look forward to expanding the curriculum’s footprint over the next few years.”

#REFORMTheLockerRoom aims to close participation gaps and ensure all LGBTQ youth can participate in sports as their authentic selves with the full support of coaches, athletic directors, and other sports leaders. Beginning this summer, the program will become available to select schools, state athletic associations, and organized leagues.

Net Sales: First-quarter sales at Puma increased by a currency-adjusted 25.8 percent year over year to 1.55 billion euros ($1.88 billion). All regions and product divisions supported this sales growth with currency-adjusted double-digit increases. Americas was up 38.5 percent to 533.9 million euros ($646.9 million), driven largely by North America sales, while the Asia/Pacific region grew 28.8 percent to 442.4 million euros ($536 million), led by Greater China and EMEA was up 14 percent to 572.4 million euros ($693.6 million) despite lockdowns across Europe.

Footwear, which jumped 27 percent on a currency-adjusted basis to 773.8 million euros ($937.7 million) and apparel, which improved 27.2 percent to 532 million euros ($644.6 million) led the sales bump, based on the strong demand for Puma’s running, training and sportstyle categories. Accessories sales grew 19.4 percent to 243 million euros ($294.4 million) strongly supported by golf, as well as the legwear and bodywear business.

Puma’s wholesale business increased by 24.3 percent to 1.2 billion euros despite lockdown-related store closures in several markets and the North American supply chain constraints.

The direct-to-consumer business, which includes owned and operated retail stores as well as e-commerce, increased by 31.3 percent to 346.8 million euros, driven by 74.9 percent e-commerce growth.

Net Earnings: Net income increased significantly to 109.2 million euros ($132.3 million) from 36.2 million euros ($43.9 million) in the year-ago period. Earnings per share were up to 0.73 euros (88 cents) in the first quarter of 2021 from 0.24 euros (29 cents) in 2020’s first quarter.

Operating result (EBIT) improved 116.7 percent to 154.3 million euros ($187 million) year over year in the quarter, from 71.2 million euros (86.3 million) in the year-ago period.

CEO’s Take: “2021 will unfortunately be again a year with a lot of uncertainty which will make efficient operations and accurate planning difficult. Our objective continues to be maneuvering through this difficult time as well as possible in the short term without hindering the mid-term momentum of Puma,” Gulden said. “We will continue to invest in product and marketing, strengthen our relationships with our retail partners and do everything we can to please our consumers. The Covid-19 pandemic will probably continue to impact our industry throughout 2021, but we feel very confident for the mid-term future of Puma and our industry.”