Puma riding high as sales surge, Selena Gomez shoe sells out

As it faces up to a future without Kering, on Tuesday Puma issued its Q1 results report and it had plenty of good news. The sports giant, which is currently riding the athleisure wave and also launching a raft of collaborations, said its currency adjusted sales surged over 20% as all regions and product segments did well.


Puma

And there was other good news too as the gross profit margin rose, operating expenses were up only in single-digits, and operating profits grew strongly.

So let's look at the detail. Those currency-adjusted sales powered ahead by 21.5% to €1.131 billion. Admittedly, sales on a reported basis didn't rise quite as fast, but a 12.5% increase is far from shabby.

The gross profit margin was up by 110 basis points to 48.2%, while operating expenses (OPEX) increased only 7.5%, further improving the firm’s operating leverage, and operating profits (EBIT) “improved significantly” to €112 million, up from €70 million a year ago. Net earnings rose by 35.8% to €67.4 million.

Footwear continued to be the main growth driver followed by Apparel and Accessories. Running and Training as well as Sportstyle were the categories with the strongest growth rates.

The news came just a day after the company celebrated the launch of its collaboration with Selena Gomez at its HQ, with the “highly exclusive” Phenom Lux, the first shoe designed by the star (who is also Coach’s brand ambassador) having already sold out. The company is also gearing up to launch a complete shoe and apparel line with Gomez this autumn.

It's one of a number of collaborations the company is involved in at the moment with a trio of classic Puma suede shoes set to launch next month in the colours of some of make-up line Mac’s bestselling lipsticks. And there's more. Puma also has collaborations with Sega, Polaroid, Roland, and Ader Error. These take inspiration from Sega’s Sonic the Hedgehog character, as well as from game-changing photography and music technology.

And on Tuesday, in soccer/football, Puma said it will be official sponsor of AC Milan for the 2018/19 season and of Brazilian top club Sao Paulo Palmeiras for the 2019 season, while it has also signed long-term agreements with the Senegalese and Serbian Football Associations.

It all points to a future strategy that is similar to the one that’s proving successful at German rival Adidas, with a combination of pure sports, pure fashion and much in-between to appeal to serious fitness fans, as well as trend lovers and sneakerheads.

Back with those Q1 results, CEO Bjørn Gulden, said: “We started the year with both first-quarter sales and profitability coming in stronger than we had expected. The double-digit sales growth in all regions and product segments, including an exceptionally high growth in Asia, led to a very strong organic sales increase. [The] operating result even grew by 60% due to higher sales, an improvement in our gross margin and a tight OPEX management.”

As Gulden mentioned, sales growth was broadly spread around the world, but Asia Pacific was particularly strong. It was driven by China, which achieved strong sales growth of 34.8% in the first quarter.
But Gulden also said that “because of an uncertain business environment caused by volatile currency rates and the difficult economic trade environment, we raised our outlook for the full year only slightly.”

The company now expects its sales to grow between 10% and 12% in local currency (previous 10%) and EBIT to come in between €310 million to €330 million (previous €305 million to €325 million).”

And that could mean China may not see such strong growth in the future as the company faces “several uncertainties in our business environment [that] have recently developed.” These include “adverse and volatile currency developments, political instabilities as well as the uncertain trade environment between the USA and China.”

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