Nov. 7 (Bloomberg) -- Puma AG, Europe's second-largest maker of sporting goods, had a smaller profit decline than analysts estimated in the third quarter as the company contained an increase in advertising and research spending.

Net income slid 5.2 percent to 87.1 million euros ($111 million), or 5.39 euros a share, from 91.9 million euros, or 5.68 euros, a year earlier, the Herzogenaurach, Germany-based company said today on its Web site. That beat the 81.8 million- euro median estimate in a Bloomberg survey of 10 analysts. Sales jumped 30 percent to 699.2 million euros.

Puma, whose golf shoes are worn by U.S. Open champion Geoff Ogilvy, has increased spending by almost 50 percent this year and offered new products such as golf bags and women's jeans to gain 4 billion euros of additional sales through 2010. Selling, general and administrative expenses rose 45 percent to 228.2 million euros in the quarter, less than estimates of about 245 million euros.

``Puma had already said clearly that it's going to put all available resources into the brand this year,'' said Uwe Weinreich, an analyst at HVB Group in Munich who gives the stock an ``outperform'' recommendation. ``Since the full-year outlook is unchanged, we can assume that Puma is planning a number of marketing investments in the brand in the fourth quarter.''

The company, known for its leaping-cat logo, said today it still expects profit to drop less than 10 percent this year.

Profit Forecast

The shares rose 10.60 euros, or 3.8 percent, to 289.90 euros in Frankfurt. The gain increased Puma's market value to about 4.9 billion euros. The stock has advanced 18 percent this year, matching the 70-member Bloomberg World Apparel Index.

Shares of Puma rose last month on a report that Nike Inc., the world's biggest sporting-goods maker, may try to buy the company to compete with Adidas AG. ``There are always rumors on the market, which we don't comment on,'' Puma Chief Executive Officer Jochen Zeitz said today in an interview.

The company forecast full-year operating profit of about 360 million euros and growth of about 35 percent in sales from last year's 1.78 billion euros. Fourth-quarter profit will decline at least 10 percent from a year earlier, it said.

Gross margin, a measure of profitability, will reach the higher end of the company's goal of between 50 percent and 51 percent, Puma said. In the third quarter, the margin shrank by 1.7 percentage points from a year earlier to 50.4 percent. The company expects earnings to recover next year.

Order Backlog

``We're targeting another record profit next year, which means we want to exceed 2005's earnings,'' Zeitz said. Puma posted operating profit of 397.7 million euros in 2005. The company also expects ``solid sales growth'' next year, he said.

Third-quarter sales rose 30 percent as more North American and Asian customers bought Puma products. The analysts surveyed by Bloomberg had estimated revenue growth at 31 percent. Puma's order backlog rose 26 percent from a year earlier, slowing from the 32 percent increase in 2005's third quarter.

Sales growth in Asia more than doubled as the company expanded in the region. U.S. revenue growth slowed to 23 percent from 63 percent a year earlier as slower economic growth held back consumers during back-to-school shopping.

``Puma continues to be a strong brand in the U.S.,'' said Deborah Aitken, an analyst at WestLB in London with a ``buy'' rating on the stock. The company has ``very strong business'' in Finish Line shoe outlets and department stores there, she said.

World Cup

Puma also said today it will supply Ducati Motor Holding SpA's Corse motorcycle racing teams with shoes for three years, starting in 2007, to expand a motor-sports line introduced this year. The company also will sell clothing with the Ducati brand.

The World Cup contributed to a 40 percent jump in first- half sales of soccer-related goods, Puma said July 7. The company sponsored Angola and the other African teams that played in the tournament, which took place for four weeks through July 9 in German cities including Berlin.

Puma and Adidas, Europe's largest maker of sporting goods, were started by brothers Adi and Rudi Dassler and are based in the same Bavarian town. Stock in Puma jumped almost 20-fold in the five years through 2005 as revenue about quadrupled.

To contact the reporter on this story: Maria Sheahan in Frankfurt at msheahan1@bloomberg.net.

Last Updated: November 7, 2006 12:01 EST