Puma expects cost pressure on margins to persist in 2023

GERMAN sportswear maker Puma on Wednesday (Mar 1) gave a forecast for 2023 profit with a midpoint below last year’s number, expecting some impact from currency effects and higher freight and raw material costs.

Rising materials and freight costs along with a stronger US dollar, inventory markdowns and higher promotion expenses have pressured margins in the sporting goods sector.

The company forecast annual operating profit (EBIT) in a range of 590 million to 670 million euros (S$842.5 million to S$1,015.2 million), with currency-adjusted sales expected to grow in a high-single-digit percentage rate.

“We presume this guidance assumes limited benefit from a reopening of China,” Jefferies analysts wrote in a note to clients.

The guidance midpoint of 630 million euros compares to EBIT of 641 million euros Puma reported for 2022, which was up 15 per cent from 2021 but slightly below analysts’ estimate of 644 million euro in Refinitiv Eikon data.

Gross profit margin decreased by 420 basis points to 44 per cent in the fourth quarter, the company said, citing an industry-wide increase in promotional activity amid high inventory levels.

“We expect the gross profit margin to be under more pressure in the first half of the year than in the second half,” Puma said in a statement.

The company expected market conditions in the US and China to normalise this year.

The stock was down 1.9 per cent in morning trading, having fallen as much as 4 per cent after the market opened. REUTERS