Puma to Reorganize After Cutting Forecasts on Slowdown in Europe
Puma SE (PUM), Europe’s second-largest sporting-goods maker, cut its 2012 sales and profit forecasts and said it will close some stores and may also eliminate jobs after business slowed in the first half of the year.
The shares fell as much as 7.3 percent in Frankfurt trading, the steepest intraday drop since July 29, 2010, after Puma said revenue this year will rise at a “mid single-digit rate,” revising the target from “high single-digit.” The slowdown has been particularly noticeable in Europe, it said.
Puma, based in Herzogenaurach, Germany, joins larger competitor Nike Inc. (NKE) in reporting a slowdown in business in Europe, where consumers are reeling from the sovereign-debt crisis. Net income will fall “significantly” from last year’s 230.1 million euros ($283 million) because of a 100 million-euro charge for speeding up and expanding the scope of a program to reduce costs and boost efficiency, said the company, which had previously forecast a mid single-digit percentage increase.
“Puma’s guidance for the year was resting on hope, and now that hope has dematerialized,” said Joerg Frey, an analyst at M.M. Warburg in Hamburg. The extent to which the company’s performance is trailing that of Adidas AG, Europe’s largest sporting-goods maker, hadn’t been fully recognized, he said.
Puma was down 5 percent at 214.25 euros as of 11:50 a.m. in Frankfurt. Adidas fell 0.3 percent to 58.04 euros, after initially sliding as much 2.3 percent.
Adidas, which last updated investors at the time of May’s first-quarter statement, has nothing new to say about its forecasts, a company spokeswoman said. Nike, based in Beaverton, Oregon, said June 29 that profit declined for the first time since 2009 in the fourth quarter of the financial year.
Puma’s first-half earnings before interest and tax fell by 11 percent from a year earlier, while net income was about 13 percent lower, the company reported today. Sales in the period rose 8.8 percent in euro terms, it also said.
Profit was affected by weaker sales in France, Italy and the U.K., which are some of its most profitable countries, Jean- Francois Palus, deputy chief executive officer of Puma-owner PPR (PP) SA, said in a phone interview. The company still had “a very good performance” in Germany, while sales increased by at least 10 percent in China during the second quarter, he said.
The streamlining of Puma’s European operations will include redistributing office space and reviewing selling costs, excluding those tied to advertising and promotion, Palus said.
“We are going to simplify Puma’s organization,” he said. How the reorganization affects jobs is being defined and will be presented to Puma’s workers council, Palus said.
The profit revision “doesn’t change anything” regarding Puma’s revenue target of 4 billion euros by 2015, he said.
Palus declined to comment on the size of PPR’s stake in Puma. PPR holds about 80 percent of Puma, he said in February.
Puma said it will release more details of its business performance when it reports second-quarter earnings July 26, when PPR, which also owns Gucci, reports first-half profit.
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