28 Apr Puma’s Q1 Boosted By Americas Momentum
Puma reported earnings rose 11.2 percent in the first quarter on a 23.5 percent revenue gain. Currency-neutral growth of 19.7 percent was led by gains of 44.1 percent in the Americas region and 25.5 percent in EMEA that offset declines in Greater China. The company maintained its outlook for the year.
2022 Frist Quarter Highlights
Sales increase by 19.7 percent currency adjusted to €1,912 million (+23.5 percent reported/Q1 2021: €1,549 million);
Gross profit margin declines to 47.2 percent (Q1 2021: 48.5 percent);
Operating expenses increased 18.6 percent while its operating ratio improved;
Operating result (EBIT) improves by 27.0 percent to €196 million (Q1 2021: €154 million);
EBIT margin increased by 30 basis points to 10.3 percent (Q1 2021: 10.0 percent);
Net earnings improved 11.2 percent to €121 million (Q1 2021: €109 million);
Puma collaborated with French fashion brand AMI;
Puma released a special edition of LaMelo Ball’s MB.01 basketball shoe;
Puma partnered with Alfa Romeo F1 Team Orlen with race gear for China’s F1 driver Zhou Guanyu and Valtteri Bottas;
Puma and Lega Serie A sign long-term partnership for 2022/23;
Puma trials garment-to-garment recycling in circularity project Re:Jersey;
Neymar Jr. and Puma launch Future Instinct football boot edition;
Puma’s “She Moves US” brand campaign continues with runner Molly Seidel and footballer Sara Björk; and
Puma signs a multi-year contract with the Brazilian Confederation of Athletics.
Bjørn Gulden, CEO, Puma SE: “We have had a very good start into 2022. Despite of all the obstacles and uncertainties, we achieved a sales growth of 20 percent to €1,912 million and an EBIT growth of 27 percent to €196 million in the first quarter. The demand for our products was high, both from retailers and consumers, and our operations people were able to move enough product through a tight supply chain to partly fulfill this increasing demand. I am very happy to see that the growth is coming from all product divisions and all business units. We have had the highest growth rates in the performance categories like Running, Football, Basketball, and Golf, which confirms that our investments into innovation and marketing are paying off. Based on such a strong first quarter, we would normally raise our outlook for the full year. But given the increased uncertainty in the world, we have decided to stick to our initial outlook from the beginning of this year. The COVID-19 outbreak in China, the crisis in Ukraine, a very tight freight situation, and inflationary pressures are all uncertainties that force us to remain very flexible and to manage our business as well as possible in the short-term without hindering Puma’s mid-term momentum. We see further upside on the revenue side but also increased pressure on our OPEX and gross margin due to all the uncertainties. In this situation, we will continue to prioritize market share gains and our mid-term growth potential over short-term profit optimization. We will also continue to prioritize the health and safety of our people and not save on anything here. Now, this is especially important for all our employees and their families in Ukraine. The Puma Family means more than profitability.”
First Quarter 2022
Sales increased by 19.7 percent to €1,912.2 million (+23.5 percent reported). Americas reported the strongest sales growth of 44.1 percent, driven by continued demand for the Puma brand in the North American and Latin American markets. Sales in EMEA were up 25.5 percent, reflecting growth across all key markets in Europe. Sales in Asia/Pacific declined 17.0 percent due to the current market environment in Greater China resulting from COVID-19-related restrictions and geopolitical tensions. All product divisions grew double-digit, with Footwear being up 18.2 percent, Apparel at 16.0 percent, and Accessories at 32.2 percent. The growth was driven by demand for its Performance categories, including running and training, teamsports, golf and basketball, and the sport style category.
Puma’s Wholesale business increased by 23.3 percent to €1,528.2 million and its DTC business was up by 7.1 percent to €384.0 million. Sales in owned and operated retail stores increased 21.3 percent, while e-commerce declined 13.2 percent as Puma continued to prioritize its retailers when supply was limited due to the current market environment in Greater China.
The gross profit margin declined by 130 basis points to 47.2 percent due to an unfavorable geographical and channel mix and higher freight rates, while currencies had a slight positive effect. Operating expenses increased by 18.6 percent to €712.8 million due to higher marketing expenses, more retail stores operating and higher sales-related distribution and warehousing costs. Despite ongoing operating inefficiencies due to COVID-19, especially in the supply chain, the OPEX ratio decreased to 37.3 percent (Q1 2021: 38.8 percent).
The operating result increased by 27.0 percent to €196.0 million (Q1 2021: €154.3 million). A strong sales growth and an improved OPEX ratio resulted in an EBIT margin increase by 30 basis points to 10.3 percent (Q1 2021: 10.0 percent).
Net earnings increased from €109.2 million to €121.4 million, and earnings per share were up by 11.1 percent from €0.73 in the first quarter of 2021 to €0.81 in the first quarter of 2022.
The company’s working capital increased by 35.8 percent to €1,004.8 million (March 31, 2021: €740.2 million). Inventories were up by 32.2 percent to €1,618.3 million (March 31, 2021: €1,224.0 million), with most of the increase driven by Goods in Transit. Given the uncertainty about the impact of the COVID-19-related restrictions on its suppliers in Asia, Puma accelerated the delivery of its products wherever possible. Trade receivables increased by 23.0 percent to €1,128.5 million (March 31, 2021: €917.5 million), mainly due to sales growth. On the liabilities side, trade payables increased by 20.9 percent to €1,275.0 million (March 31, 2021: €1,054.9 million).
Puma has had a strong start to the year with a sales growth of 19.7 percent to €1,912 million and an EBIT increase of 27.0 percent to €196 million in the first quarter of 2022.
2022 continues with a high level of uncertainty in the global business environment. Several governments implemented regional or country-wide restrictions due to COVID-19, which continues to impact its manufacturing and retail store operations. The supply chain remains challenging due to port congestions, limited shipping capacities and continued freight rate increases. The war in Ukraine has had a negative impact leading to lost sales and EBIT and an indirect impact through the general tense geopolitical situation and increasing uncertainty worldwide. As a result, Puma said it continues to see inflationary pressures in all markets.
Despite the uncertainties, Puma confirmed a currency-adjusted sales growth of at least ten percent, with upside potential, in the financial year 2022. In line with its previous outlook, Puma anticipates its operating result (EBIT) to be in the range of €600 million and €700 million (2021: €557 million) and net earnings to improve correspondingly. The development of its gross profit margin and its OPEX ratio in 2022 will largely depend on the degree and duration of the geopolitical negative impacts. While Puma said it plans to stay focused on its growth momentum by servicing its retail partners and consumers in the best possible way, it expects inflationary pressures from higher freight rates and raw material prices and operational inefficiencies due to COVID-19 and the war in Ukraine to dilute its profitability in 2022.
Puma said, “The achievement of this outlook is subject to continued manufacturing operations in its key sourcing countries in Asia and no major business interruptions due to COVID-19. In line with the previous years, Puma will continue to manage the challenges short-term without hindering the positive mid-term momentum. The strong and profitable growth in the first quarter, a strong order book, an exciting product line-up, as well as very good feedback from retailers and consumers, make us confident for the mid-term success and growth of Puma.”