Though 2020 started off strong for Puma, the pandemic’s imprint has the company positioning itself for survival.
In a Nutshell: With sales and earnings sliding, the company has set itself in a three-phase plan: “Survive, Recover, Grow Again,” CEO Bjorn Gulden said in Puma’s earnings release Thursday.
“The first quarter was difficult, but we feel we did a decent job,” Gulden said. “The second quarter will financially be even worse with more than 50% of global sports and sport lifestyle space being closed. We are mitigating the impact on our revenues wherever we can by focusing on e-commerce and the markets that are opening up again.”
Puma’s plans for survival will look different in certain markets, as China, Korea, and Europe are making their way toward survival and the U.S. is still very much in the survival phase with so many stores still closed.
In the first quarter, the coronavirus outbreak forced Puma to pull an additional 900 million euros ($975.92 million) from its revolving credit facility and suspend a dividend payment scheduled for May 7.
“The goal is to get through this without any Puma employee losing their job,” Gulden said. “To survive this crisis in cooperation with all our partners such as retailers, suppliers, landlords, financial institutions, authorities, investors, and customers is crucial.”
Puma declined to offer an estimate of the impact the virus will have on the rest of the fiscal year.
Sales: Although growth was strong at the start of the year, Puma’s sales fell by 1.3 percent to 1.29 billion euros ($1.4 billion)—though this loss still came in above the Wall Street estimate of 1.26 billion euros ($1.37 billion).
E-commerce sales, on the other hand, increased by 40 percent in the quarter.
Gross profit margin fell by 140 basis points to 47.6 percent, which, according to Puma, was the result of lower sales in China, inventory devaluation and return provisions.
Earnings: The company’s operating result (EBIT) decreased by 50 percent to 71.2 million euros ($77.21 million) while net earnings and earnings per share declined by nearly 62 percent to 36.2 million euro ($39.2 million). That led earnings per share to fall from 0.63 euro to 0.24 euro ($0.68 to $0.26). Wall Street estimates had Puma’s EBIT at 75 million euros ($81.33 million) for the quarter.
CEOs Take: “We are mitigating the impact on our revenues wherever we can by focusing on e-commerce and the markets that are opening up again,” Gulden said. “We are working with our factories and other partners in our supply chain to minimize the damage, assure timely deliveries, avoid excess stock as much as possible and to find fair solutions for all of us.”