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Puma reports 12.8 percent sales growth in Q2

By Prachi Singh

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Business |REPORT

Puma’s sales growth continued in the second quarter of 2016 with sales improving by 12.8 percent currency adjusted and 7 percent reported to 826.5 million euros (908.7 million dollars) with all segments contributing to this positive development. Based on two good quarters, sales for the first half-year improved by 9.9 percent currency adjusted or 5.3 percent reported to 1,678.4 million euros (1,845.7 million dollars)).

Detailed financial review of the second quarter

The EMEA region posted a double-digit growth rate of 23.5 percent currency adjusted or 18.8 percent reported to 321.3 million euros (353.1 million dollars). All countries within the region showed strong performances, especially in the Teamsport category. In the Americas region, sales increased by 5 percent currency adjusted to 315.6 million euros (346.8 million dollars) with growth in North- and Latin America. In Euro terms, however, sales decreased by 3.9 percent, as the weakness of currencies in Latin America, notably in Argentina, had a negative impact on reported sales.

The Asia/Pacific (APAC) region performed well with sales increasing by 10.3 percent currency adjusted and 9.1 percent in euro terms to189.6 million (208.4 million dollars). China was the main driver of this positive development.

Footwear sales came in at 360.2 million euros (395.9 million dollars), representing an increase of 7.3 percent currency adjusted or 0.4 percent reported). Apparel posted the highest growth rate among the three product segments, improving by 19.5 percent currency adjusted and 13.6 percent reported to 299.1 million euros (328.7 million dollars). Sales in accessories improved by 14.1percent currency adjusted and 10.9 percent in euro terms to 167.1 million euros (183.7 million dollars).

Highlights of the first half-year

The main driver for growth in the first half was the strong performance in the EMEA and APAC regions. The company said, this sales development supports the full-year guidance of a high single-digit growth of currency adjusted net sales.

Sales in the EMEA region showed the highest increase, rising by 14 percent currency adjusted or 10.4 percent in euro terms to 675.7 million euros (742.7 million dollars), with France and the DACH area (Germany, Austria, Switzerland) having developed particularly well. From a product perspective, all three product segments recorded double-digit growth. In the Americas region, sales rose by 5.2 percent currency adjusted but declined 2.2 percent reported to 603.6 million euros (663.5 million dollars). North- and Latin America contributed to this positive development. However, negative currency effects in Latin America, notably in Argentina, continued to impact the sales development in euro terms.

Sales in the Asia/Pacific region were up by 10.8 percent currency adjusted or 9.4 percent reported to 399 million euros (438.6 million dollars). China recorded a double-digit growth rate and Japan also showed a solid upturn. This positive development was supported by strong demand for Puma footwear in the region.

Sales in Puma's footwear segment amounted to 752.2 million euros (826.8 million dollars), representing an improvement of 7.9 percent currency adjusted or 2.1 percent reported). Apparel grew by 13 percent currency adjusted or 8.5 percent reported to 589.2 million euros (647.5 million dollars), contributing the major part of the overall sales increase. Accessories sales rose by 9.4 percent currency adjusted or 7.3 percent in euro terms, driven by a higher demand for backpacks and headwear amongst others.

Including ecommerce, Puma's own and operated retail sales increased by 12.2 percent. This represents a share of 20.5 percent of total sales for the first half of 2016 against 20.2 percent in the previous year on the back of healthy like-for-like sales growth and the extension of our retail store network, as well as a growing ecommerce business.

Gross profit margin in Q2 and first half

The negative currency impact from the stronger US-Dollar continued to put pressure on the gross profit margin in the second quarter, resulting in a decrease of 110 basis points to 45.6 percent, which is reflected in all product segments. The footwear gross profit margin softened slightly from 42.3 percent to 41.9 percent, the apparel margin fell from 50.7 percent to 49.5 percent and the accessories margin declined more strongly, mainly due to the difficult golf market, from 50 percent to 46.6 percent. The operating result (EBIT) improved by 75.1 percent to 11.9 million euros (13 million dollars).

Net earnings amounted to 1.6 million euros (1.7 million dollars) compared to a loss of 3.3 million euros (3.6 million dollars) last year, translating into earnings per share of 0.11 euros (0.12 dollars) after a loss of 0.22 euro (0.24 dollars) in the second quarter of 2015.

In the first half, at 46.2 percent, the gross profit margin was 60 basis points below last year's 46.8 percent, due to the negative currency impact on cost of sales from the stronger US-Dollar. At 53.2 million euros (58.4 million dollars), the operating result (EBIT) for the reporting period came in 20.1 percent higher than in 2015. At 27.4 million euros (30.1 million dollars), net earnings also improved by 27.6 percent. As a consequence, earnings per share went up to 1.84 euros (2.02 dollars) versus 1.44 euros (1.58 dollars) in the last year.

Outlook for 2016

Puma continues to expect a currency adjusted high single-digit increase of net sales, a gross profit margin on previous year’s level, an increase in currency adjusted operating expenses in a mid to high single-digit range and an operating result (EBIT) between 115 million euros (126 million dollars) and 125 million euros (137 million dollars).

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Puma