24 Oct Puma Lifts Outlook For Third Time This Year
Puma reported sales on a currency-neutral basis rose 17.4 percent in the third quarter, led by a 22.7 percent gain the EMEA region and a 15.6 percent jump in the Americas region. In the Asia/Pacific region, sales on a currency-neutral basis rose 10.2 percent.
Overall sales rose 17.4 percent on a currency-neutral basis.
On October 18, Puma pre-announced that operating earnings vaulted 68.3 percent in the third quarter while sales increased on a currency-adjusted basis by approximately 17 percent. The company also raised its guidance for the third time this year.
2017 Third Quarter Facts
- Sales increase by 17 percent currency adjusted to €1,122 million (+13 percent reported) with double-digit growth in all regions
- Gross profit margin up by 230 basis points to 48.1 percent
- Operating expenses (OPEX) increases by 11 percent driven by higher marketing, selling and retail expenses
- Operating result (EBIT) rises to €101 million (last year: €60 million)
- Puma partners with singer, actress and social media icon Selena Gomez
- The new Puma ONE collection drives improved Football sell-through
2017 Nine Month Facts
- Sales up by 16 percent currency adjusted to €3,096 million (+16 percent reported), with all regions showing double-digit growth and footwear being the main growth driver
- Gross profit margin up 120 basis points at 47.3 percent
- Operating leverage with operating expenses (OPEX) increasing by only 12 percent
- Operating result (EBIT) improves to €215 million (last year: €114 million)
- Net earnings almost doubled from €67 million last year to €134 million and earnings per share increase from €4.48 last year to €8.94 respectively
- Puma footwear styles “BASKET HEART” and “IGNITE Limitless” continued to be popular with customers
- Women’s business further strengthened through second Rihanna collection this year, launched in September
Bjørn Gulden, Chief Executive Officer of Puma SE, said, “The third quarter was another good quarter for us with double-digit growth in all regions and strong growth in all product segments. With gross profit margin exceeding our expectations and a continued focus on operating expenses, we were able to deliver a very positive and better than expected operating result (EBIT).
“This development in the third quarter combined with a good orderbook for the fourth quarter made us raise the outlook for the full year. We now expect currency adjusted sales to increase between 14 percent and 16 percent and the operating result (EBIT) to come in between €235 million and €245 million.”
Third Quarter 2017
Puma’s sales growth continued in the third quarter of 2017. Sales rose by 17.4 percent currency-adjusted to €1,121.8 million (+13.3 percent reported), compared to €990.2 million in the previous year. All regions supported the sales growth showing a double-digit increase.On a reported basis, EMEA’s sales climbed 22 percent to 498.3 million, Americas revenues moved up 9.8 percent to 376.6 million; and Asia/Pacific’s sales grew 3.4 percent to 246.9 million.
Footwear continued to be the main growth driver and Accessories also increased double-digit, while Apparel grew at a more modest rate. Footwear sales climbed 23.2 percent on a currency-neutral and accessory sales rose 23.9 percent while apparel was up 7.6 percent. On a reported basis, footwear sales were up 18.9 percent to 545.3 million, apparel sales increased 3.8 percent to 391.8 million and accessories revenues advanced 19.9 percent to 184.7 million.
The gross profit margin improved by 230 basis points from 45.8 percent to 48.1 percent in the third quarter. Further improvements in sourcing, higher sales of new products with a higher margin and selective price adjustments helped to improve the gross profit margin despite negative currency impacts.
Operating expenses (OPEX) grew by 11.4 percent to €442.6 million in the third quarter. The increase was driven by higher marketing, selling and retail expenses, while costs for other operating functions grew only moderately.
The operating result (EBIT) increased from €60.3 million last year to €101.2 million due to strong sales growth combined with an improved gross profit margin.
Net earnings rose from €39.5 million to €62.1 million and earnings per share increased correspondingly from €2.64 to €4.16 in the third quarter.
Nine Months 2017
Sales for the nine-month period increased by 16.4 percent currency adjusted to €3,095.6 million (+16 percent reported) and were above expectations. All regions showed double-digit growth with Footwear being the main growth driver. Major gains were achieved by the Running and Training and Sportstyle categories, with Platform, Suede, BASKET HEART, FIERCE and IGNITE Limitless footwear styles performing well.
Including eCommerce, Puma’s own and operated retail sales rose by 22 percent currency adjusted to €673 million. This represents a share of 21.7 percent of total sales for the nine-month period (20.6 percent in the previous year). The performance was achieved by positive like-for-like growth in our existing retail stores, opening of new stores and strong growth in our eCommerce business.
The gross profit margin improved by 120 basis points from 46.1 percent to 47.3 percent in the first nine months of 2017. The increase of the gross profit margin, despite the negative currency impacts, was driven by further improvements in sourcing, higher sales of new products with a higher margin and selective price adjustments.
Operating expenses (OPEX) rose by 11.7 percent and amounted to €1,260.3 million. The increase was due to higher sales-related variable costs, intensified marketing activities and investments in own retail stores. Costs for other operating functions grew only moderately.
The operating result (EBIT) improved from €113.5 million last year to €214.8 million in the first nine months of 2017. This development underlines the improved operating performance, with strong sales growth, a higher gross profit margin and an improved operating leverage.
Net earnings in the first nine months almost doubled and came in at €133.6 million (last year: €67 million). This result translates into earnings per share of €8.94 compared to €4.48 last year.
Working Capital
Despite the double-digit sales growth and a higher number of owned and operated retail stores, Puma’s working capital increased only modestly to €762.8 million, an increase of 4.3 percent. Inventories were up 11.3 percent at €795.8 million in order to ensure product availability, to support further growth and to meet the increased need for products due to our additional retail stores. Trade receivables rose by 16 percent to €677.4 million and trade payables were up 20.6 percent to €580.5 million.
Outlook 2017
In light of the strong third-quarter increase in sales and profitability as well as the positive business outlook for the fourth quarter of 2017, Puma raises the full-year guidance for its consolidated sales, gross profit margin, operating expenses and operating result (EBIT).
The Management now expects that currency adjusted sales will increase between 14 percent and 16 percent (previous guidance: currency adjusted increase between 12 percent and 14 percent). The gross profit margin is now anticipated to improve to approx. 46.5 percent (previous guidance: approx. 46 percent). Due to the expected increase in sales, the Management now foresees operating expenses (OPEX) to increase at a low double-digit percentage rate (previous guidance: increase at a high single-digit percentage rate).
As a consequence, the operating result (EBIT) is now anticipated to come in between
€235 million and €245 million (previous guidance: between €205 million and €215 million). In line with the previous guidance, the Management still expects that net earnings will improve significantly in 2017.