Puma launches drive to boost brand as sales falter

Munich — Puma expected a weak first half of the year in a challenging market, the German sportswear brand said on Tuesday, but its shares rose slightly as it stuck to annual targets set in January and announced a new campaign to boost its brand.

Sportswear companies such as Adidas, Nike and Puma are having to work harder to convince cash-strapped shoppers to buy their sneakers, tracksuits and hoodies.

CEO Arne Freundt said at the company’s headquarters in Herzogenaurach that Puma’s new marketing push, launching in April, followed years of struggle to build brand strength.

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, as well as signing rapper A$AP Rocky and footballer Jack Grealish among others.

Puma’s shares have lagged behind those of Nike and Adidas over the past year, dragging the company’s valuation down.

Commenting on the group’s share price performance, Puma chair Héloise Temple-Boyer said in the annual report: “I am convinced that it does neither reflect the actual value of our company nor the good operating performance.”

Stifel analyst Cedric Lecasble said a share buyback could be one way for Puma to boost investor sentiment.

“The shares have suffered a lot and the balance sheet is strong,” Lecasble said, adding that a buyback, if it happens, could be in the hundreds of millions of euros.

Puma’s fourth-quarter sales in the Europe, Middle East and Africa region dropped 5.2% to €667.9m, 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.

Currency-adjusted sales in the Americas fell by 6.4% to €846m, after being hit by a slump in the value of the Argentina’s peso. The devaluation 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 €468.3m, led by strong growth in China and India.

Freundt said he expected disproportionate growth in China this year, and saw the US market resuming growth in the second half.

Overall, Puma’s footwear sales grew by 12.4% in 2023 while apparel sales dipped 0.3% as shoppers prioritised shoes.

Puma reiterated its 2024 forecast for mid-single-digit percentage growth in sales, and earnings before interest and tax of €620m to €700m. The company is set to host analysts and investors for a capital markets day on February 29 and March 1.

Reuters