As Puma was announcing its second quarter results on Wednesday morning, the German sportswear company’s share prices plummeted on the local stock market, sinking to their lowest value in six months. That leaves Puma shares hovering at their lowest level in around six years.
All this was despite the fact that, as Puma chief executive Arne Freundt insisted, the company was doing exactly what it had said it would do.
In the second quarter, sales at Puma were down 0.2 percent to 2.12 billion euros as consumers tightened their belts. When adjusted for currency effects, sales were 2.1 percent up. Despite a slow start to the year, this meant Puma racked up 4.22 billion in sales in the first half, an increase of 1.3 percent in currency-adjusted terms.
“We fully delivered on our outlook for the quarter and are well on track to deliver on our outlook for the full year,” Freundt said in a statement.
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Still, the second quarter results also prompted the German sportswear maker to slightly lower its forecast for full-year operating profit.
Puma’s EBIT — earnings before interest and taxes, or operating profit — was up 1.6 percent in the second quarter to 117.2 million euros. This was below market expectations of around 119 million euros. Over the first six months of the year, EBIT fell 5.1 percent year-over-year to 276.2 million euros.
While Puma still expects sales to grow in the mid-single digits over the rest of the year, it reduced its maximum forecast EBIT slightly. Instead of expecting it to come in somewhere between 620 million euros and 700 million euros in 2024, it now projects EBIT somewhere between 620 million euros and 670 million euros.
During Wednesday morning’s online press conference, Freundt faced tough questions on why investors had lost faith in Puma and why Puma was not doing as well as its much larger German competitor, Adidas, when both were working in the same market and Puma had also launched a major global marketing campaign.
In January last year, former Puma chief executive Bjorn Gulden moved from the smaller brand to head Adidas. Puma then appointed Freundt — previously the chief commercial officer there and before that, responsible for sales in Europe — as the new boss.
But while Puma revenues have remained static, Adidas’ have grown 11 percent. And Freundt is now under pressure.
During the press conference, Freundt dismissed any talk of competing with Adidas, saying Puma competed in a marketplace, not just against one company.
In terms of investor attitudes, Freundt told journalists: “We have always said we would focus on delivering what we have promised to the market. I think when you look at how we have delivered on Q1 and Q2, we have done exactly what we said.”
In a challenging environment with many factors that a business could not control — such as geopolitical instability, muted consumer sentiment, higher freight and supply chain costs and currency headwinds — it was necessary to focus on what Puma could control, Freundt argued.
“With the order book we have in hand and the trajectory we see, we feel we are on a very good track to achieve our outlook,” he stated.
Inside the Numbers
In terms of product categories, Puma footwear sales, at constant exchange rates, were flat at 1.09 billion euros in the second quarter. Apparel sales grew 9 percent to 705.6 million euros on a currency-adjusted basis, while accessory sales decreased 4.7 percent to 314.8 million euros.
According to Freundt, the plan is that new partnerships, products and designers, as well as incubating certain sneaker styles to take advantage of upcoming trends, will see further growth over the second half of the year.
“On the consumer sentiment side, we are continuing to see that the major markets are not showing any sign of improvement,” he said. “So we continue to focus on newness and [bringing] innovation to the market.”
In June, Puma announced its partnership with Hyrox, a new fitness trend that combines running and exercise. It has also brought on board American designer Salehe Bembury, who has collaborated on footwear designs for a wide variety of brands, including Versace, New Balance and Crocs, to oversee its basketball shoes. Bembury is also supposed to be helping recruit Puma’s next basketball star.
Puma has found success in the U.S. with signature sneakers for basketball player LaMelo Ball and recently released its first lifestyle collaboration together with the athlete, a chunky sneaker called the LaFrancé, after the NBA star’s own streetwear collection.
Puma has also been working on its offering toward the growing lo-profile sneaker trend, the Speedcat, a shoe originally out of motor racing.
“All of our pre-launches [of Speedcat] so far in Asia have been extremely successful,” Freundt noted. “And most of the product we put into South Korea, China and Japan has resulted in an immediate sellout. It’s also the first time in a very long we saw people queuing up in front of our stores.”
A Geographic Breakdown
In Puma’s home market of Europe, the Middle East and Africa, or EMEA, sales at constant exchange rates fell 4.3 percent to 817.9 million euros in the second quarter. The company explained that this was due to tough year-on-year comparables in parts of the sales territory, including Ukraine, Turkey and South Africa. Sales in Western Europe actually grew 2.7 percent, Freundt pointed out.
In the first six months of 2024, EMEA sales were down 2.2 percent.
In the Americas — North America and Latin America — sales rose 9 percent on a currency-adjusted basis to 887.5 million euros. This was driven by strong growth of 24.3 percent, currency adjusted, in Latin America and comparatively flat growth in the U.S., Freundt explained. However, after five quarters of seeing business in North America decline, the 1.7 growth, currency adjusted, should be seen as a small win, the executive argued.
“Numbers are improving there incrementally but not to a significant extent. We hope that after the [U.S. presidential] election, consumer sentiment will come back stronger,” he continued.
In Asia Pacific, revenues were up 1.9 percent, on a currency adjusted basis, to 411.9 million euros. This was driven by growth of 7.6 percent in Greater China, with sales in the rest of the region slipping 0.7 percent.
Skeptics Abound
Despite Freundt’s protestations that the company had delivered what it promised, market analysts were not as enthusiastic.
“We are surprised and disappointed by the magnitude of the lower guidance [versus] our below-consensus expectations,” Piral Dadhania, a director for capital markets at the Royal Bank of Canada, wrote in a note to investors.
Other analysts from the likes of JP Morgan, Goldman Sachs and UBS also noted that Puma’s second-quarter results were weaker than anticipated and likely disappointed investors.
