Puma Cuts Full-Year Forecast as Profit Trails Estimates

Puma SE (PUM) cut its revenue and profit forecasts for this year after reporting first-quarter earnings that trailed analysts’ estimates.

Europe’s second-largest maker of sporting goods now expects a low-to-mid-single digit decline in currency-adjusted sales, Herzogenaurach, Germany-based Puma said today. In February, it forecast unchanged 2013 sales. The company also said it’s unlikely to meet its original guidance of low-to-mid-single digit growth in earnings before interest, tax and special items.

The stock fell as much as 3.5 percent in Frankfurt trading, the biggest drop in three months. Puma is cutting costs to combat a decline in footwear sales while working to boost its performance-wear credentials with products such as $110 Mobium Elite running shoes.

The “very disappointing numbers” signal that the gap with Adidas AG and Nike Inc. “continues to widen,” Jurgen Kolb, an analyst at Kepler Cheuvreux, said in a note to clients. Crosstown rival Adidas reported profit that beat estimates this month, causing its stock to soar to the highest level on record.

Puma stock traded down 2.75 percent at 226.25 euros as of 10:26 a.m. in Frankfurt today. The drop almost wiped out this year’s gain, giving the company a market value of 3.39 billion euros ($4.4 billion).

The company, which in February shifted away from a goal to lift revenue to 4 billion euros by 2015, is closing stores, eliminating jobs and cutting product ranges.

New CEO

First-quarter earnings before interest and tax fell to 79 million euros from 102 million euros a year earlier, Puma said. Analysts predicted earnings of 95 million euros on that basis, according to the average of eight estimates compiled by Bloomberg.

The “business climate in Europe remains challenging,” the sporting-goods maker said in today’s statement, while in China, fitness and training products “did not perform as expected.” Puma repeated its expectation for continued pressure on the gross profit margin. The company still expects net income to rise from the 2012 level.

“Puma will continue to face massive margin implications in its attempt to revive its position as a sports performance brand,” Ingbert Faust, an analyst at Equinet Bank, said in a note to clients.

First-quarter sales fell 4.8 percent, or 2.3 percent excluding currency swings, to 782 million euros, weighed down by “particularly negative” trends in Italy and France, owner PPR (PP) SA reported last month. The western European market will remain challenging for the coming quarters, PPR said.

Puma last month named Pandora A/S (PNDORA) head Bjoern Gulden as chief executive officer-elect, to replace Franz Koch. Gulden, a former soccer professional, will join Puma in July.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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