Puma had a successful third quarter that saw the athleticwear and footwear brand generate a significant bounce back in both sales and earnings, alongside a combination of new partnerships and product launches. But amid recent Covid-19-related lockdowns across Europe, Puma remains cautious regarding what lies ahead during the holiday season.
For the quarter, Puma reported that its net earnings increased by 13 percent to 113.6 million euros ($134.3 million) from 100.5 million euros ($118.8 million) in the prior year. Earnings per share were 0.76 euros (90 cents) compared to 0.67 euros (79 cents). Operating income before interest and taxes was up by 16.8 percent to 189.5 million euros (224.6 million).
Third-quarter sales increased by 13.3 percent on a currency-adjusted basis to 1.6 billion euros ($1.9 billion). All three major categories for the German business—footwear, apparel and accessories—showed strong growth in the quarter, improving by 13.9 percent, 8.8 percent and 23 percent respectively.
Performance categories such as basketball, motorsport, golf and team sports showed the highest growth rates, the company said.
“Despite a very promotional market environment and currency developments that put pressure on our margins, we were even able to improve our EBIT compared to last year,” Puma CEO Bjorn Gulden said in a statement. “This was achieved by continued strong cost control that we initiated in the extremely weak second quarter and through less but more efficient marketing activities. October started well, but the recent development of Covid-19 and the number of infections we are seeing globally make us cautious for the rest of year.”
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The Americas and EMEA led the way in driving the sales increases, with the Americas seeing a 20.7 percent spike and EMEA generating a 17.7 percent boost. Sales in the Asia/Pacific region declined by 1.9 percent, caused by slower growth in Greater China and a sales decline in India, Korea and South East Asia.
Unlike Nike, Under Armour and Adidas, all of which saw declines in their wholesale businesses in their latest quarters, with the first two openly pivoting to more direct-to-consumer-friendly business models, Puma’s wholesale segment actually increased by 12.3 percent on a currency-adjusted basis to 1.2 billion euros ($1.42 billion).
Puma’s DTC business, which includes owned and operated retail stores as well as its e-commerce sites, increased by 16.7 percent on a currency-adjusted basis to 380.9 million euros ($450.3 million), driven by a strong digital sales growth of 60.9 percent. The quarterly growth continues to contribute to the company’s 66.5 percent uptick in the first nine months of the year.
Total inventories in the quarter increased by 7.1 percent to 1.22 billion euros ($1.45 billion). The gross profit margin declined by 270 basis points (2.7 percentage points) to 47 percent, driven in part by more frequent promotional activities.
Due to the unpredictability of the Covid-19 pandemic, Puma did not provide a financial outlook for the full year 2020.
In May, the athleticwear company secured an additional 900 million euros ($1.06 billion) revolving credit facility through a consortium of 12 banks to help it prepare for a potentially longer-lasting impact from the pandemic, though it has yet to tap into those funds.
Puma has also been able to decrease its working capital by 23.2 percent to 703.2 million euros ($831.7 million) from last year’s 915.7 million euros ($1.08 billion). Operating expenses decreased in the quarter by 3.3 percent to 559.6 million ($660.8 million) due to the various cost-saving measures.
Separately, there has also been an increase in the public availability of Puma shares after Kering sold about 5.9 percent of its stake in the brand. The luxury conglomerate has gradually reduced its ownership in Puma since 2018 and now retains 9.8 percent of its outstanding shares.
Puma pushes new products and partnerships
Earnings aside, Puma has made some big moves to boost its brand in recent months. In July, the company launched the RS-Dreamer basketball sneaker in collaboration with hip-hop star J. Cole, and then launched the Ultra 2020 football boot one month later. In September, the company inked a long-term deal with Brazilian football star Neymar Jr., who was formerly signed with mega rival Nike. Puma also has signed a deal with top NBA draft prospect LaMelo Ball that is reportedly worth $100 million.
Last month, Puma brought in designer, creative director and author June Ambrose as a creative partner to lend her expertise to a number of the brand’s basketball collections throughout 2021. Puma is also partnering with TikTok on the platform’s #TikTokFashionMonth, showcasing the talents of five Black TikTok creators and designers culminating in a limited collection live in an exclusive virtual fashion show, dubbed the TikTok Runway Odyssey, held on Oct. 8.
Earlier this month, Puma revived a 50-year-old sneaker by launching the Suede Classic XXI, available on its digital channels. The brand has also partnered again with artist Mr. Doodle to release a winter collection of apparel and footwear featuring his playful, signature designs.
This unisex collection includes a puffer jacket featuring clashing graphic all-over camo print in grey and green with yellow accents, a long-sleeve orange crew shirt, sweatpants with graphic embroidery on the front and back, as well as a hooded dress.
Two sneakers are part of the Puma X Mr. Doodle collection: the SKY LX X Mr. Doodle classic 1980s-style basketball silhouette, which includes a clean white leather upper with green doodle graphics on the formstrip; and the Deva X Mr. Doodle sport-fashion silhouette, which has a white leather upper with eye-catching doodle graphics and a black rubber midsole accented with yellow.
The Puma X Mr.Doodle collection dropped on Nov. 5 on Puma.com, in Puma stores and selected retailers globally.
Puma is even leveraging its partnership with esports brand Cloud9 to debut a new line of footwear, apparel and accessories. The full Puma X Cloud9 collection, which retails for $12 to $120, will be available on Puma.com, www.Cloud9.gg and at Puma’s New York City flagship store starting Nov. 12. Select items from the collection will also be available at Foot Locker, Amazon and Pacsun.
The collection includes three footwear silhouettes made for gamers of all levels, whether for the casual gamer at home and for those who compete on the big stage: the Future Rider, RS-X and the AGF (Active Gaming Footwear). The Future Rider has a casual street style accented with Cloud9’s vibrant blue color throughout and a lightweight midsole for soft cushioning, while the RS-X boasts a bold and exaggerated silhouette with RS technology (short for Running System) and an ultra-cushioned midsole. The AGF features a sleek design aimed at delivering seamless comfort, support and grip engineered to adapt to different active gaming modes with its sock-like fit.