Puma Sees Sneaker Growth Persisting as Gucci Owner Retreats
(Bloomberg) -- Puma SE is counting on the trend of sneakers invading schools and offices to continue unabated, bolstering its growth as an independent company.
The German sportswear company said Monday it expects operating profit to rise by as much as one-third this year as its sneakers and hoodies find their way into more young shoppers’ wardrobes.
The forecast comes after majority owner Kering SA last month said it plans to pass on most of its stake to investors to focus on luxury brands like Gucci, with shareholders voting on the proposal on April 26. While that means more than half of Puma’s shares will be traded freely, they have fallen since then because the announcement ended speculation about a possible takeover of the sportswear company.
Booming demand for suede sneakers, classic tracksuits and other “athleisure” wear helped the company surpass 4 billion euros ($4.9 billion) in sales for the first time, as Nike Inc. and Under Armour Inc. in the U.S. are losing ground. Puma recently added actress Selena Gomez to its sponsorship roster alongside singer Rihanna as it shifts marketing expenses away from television to online media.
The company had put a lot of hope in its sponsorship of the Italian national soccer team, but after it failed to qualify for the 2018 FIFA World Cup, that deal will bring in significantly less money for the company, Chief Executive Officer Bjoern Gulden told reporters Monday. Puma has added the Senegalese national team to its roster, but doesn’t expect that partnership to be as lucrative as its relationship with Italy could have been.
“Italy not qualifying of course was tough for us, because -- as you can imagine -- you prepare for a World Cup not after qualification,” he said.
The strength of the euro cut sales by 6 percent in the fourth quarter of 2017. Gulden said he expects the trend to worsen in the first quarter of 2018, but the company is factoring that into its forecast.
Puma in October lifted its forecast for earnings before interest and taxes, and results published Monday clearly beat that guidance.
Puma on Monday said:
- Operating profit will rise 25 percent to 33 percent in 2018, to a range of 305 million euros to 325 million euros in 2018; analysts expect 31 percent
- A sponsorship of soccer club AC Milan, previously supported by Adidas, will start on July 1
- 2017 sales rose most strongly in footwear, growing 23.5 percent after adjusting for currency effects
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