Puma boosted as European sneaker demand offsets weaker US market
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PUMA said strong demand for sneakers in Europe and a recovery in China has helped counterbalance a weaker performance in the US during the third quarter.
The German sneaker company narrowly beat analysts’ estimates with an operating profit of 236 million euros (S$342.1 million) during the period and confirmed its earnings forecast for the full year.
Puma shares gained nearly 6 per cent in early Frankfurt trading on Tuesday (Oct 24). The stock has been under pressure in recent weeks and had its biggest intraday drop in more than three years earlier this month after the sportswear company’s comments on a call with analysts spurred concerns about sales.
Shares of rival Adidas, which recently boosted its guidance for the second time in three months, rose as much as 3 per cent.
The third-quarter earnings “should help bring some calm after a couple of eventful weeks”, James Grzinic, an analyst at Jefferies, wrote in a note.
Chief executive officer Arne Freundt is relying on momentum in Europe – especially eastern Europe – along with Latin America and increased demand in China to counteract shrinking sales in the US, the world’s largest sports market.
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Puma highlighted the challenging geopolitical and macroeconomic environment, citing the wars in the Middle East and Ukraine, high inflation and the risk of recession that’s clouding consumer sentiment.
Even so, the company has been experiencing strong growth in countries such as Turkey, South Africa and even Ukraine, where stores are open again despite the war with Russia and demand is picking up, Freundt said on a call with reporters.
Momentum in those countries helped make the EMEA region Puma’s best performer in the quarter, with sales jumping by 10 per cent, twice the pace seen in Asia-Pacific and quadruple that of the Americas. Sales weren’t booming everywhere in the region, though.
“In Europe, the further north you go, the worse the growth trajectory,” Freundt said.
In the US, Puma is trying to focus on higher-priced soccer, basketball and running sportswear in the face of a weakening economy. The company previously relied on cheaper products there. Puma expects to resume growth in the US at some point in 2024, Freundt said, thanks in part to buzzy new collaborations with celebrities including Rihanna and A$AP Rocky.
Big shoemakers such as Adidas and Nike are also fending off fast-growing smaller brands such as On Holding and Hoka, which are especially gaining ground in running shoes. BLOOMBERG
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