Puma Seeks to be Forever Faster as Turnaround Seen Dragging OnAndrew Roberts
Puma SE Chief Executive Officer Bjoern Gulden pledged to make Europe’s second-largest sporting-goods maker more agile as it seeks to reconnect with consumers following a further reduction to the profit outlook.
Gulden, the former Pandora A/S CEO who joined Puma in July, today unveiled the “Forever Faster” initiative, which he said will speed up decision-making, problem solving and the time the company takes to react to new trends.
“We know that our business is currently in a difficult position,” Gulden said in a statement today. “Although it will take some time, we will turn this business around.”
Puma said today that fourth-quarter earnings will be hurt by one-time charges of about 130 million euros ($174 million) relating to the closure of a product development center in Vietnam and transferring international product teams to Germany from the U.K. While the charges will lead to material cost savings, getting Puma back on track will take at least another year, said Andreas Inderst, an analyst at Exane BNP Paribas.
“Forever Faster is a nice tag line, but what is really behind it we won’t know until the second half of 2014,” Inderst said in a phone interview. “That’s the dilemma of the new management. There are very long lead times.”
Puma fell as much as 3.3 percent in Frankfurt, the steepest intraday drop since July 24, after the company also reported third-quarter earnings that missed estimates.
“With restructuring being in its fourth year and still no signs of groundbreaking success, we see no reasons to get enthusiastic in the short term,” said Michael Kuhn, an analyst at Deutsche Bank AG in Frankfurt.
Earnings for the year will be positive “but significantly below those of 2012,” Puma said today. Yesterday, crosstown rival Adidas AG forecast rising profit.
Third-quarter earnings before interest, tax and special items fell to 80 million euros from 99 million euros a year earlier, trailing estimates of about 81.5 million euros, Puma said in a separate statement. A 1.4 percent decline in currency adjusted sales was in line with full-year guidance, it said.
The maker of $90 Ferrari Drift Cat 5 sneakers also confirmed that it expects a low to-mid-single percentage drop in currency adjusted full-year sales.
The stock was down 1.8 percent at 219.20 euros as of 11:43 a.m. The shares are being supported by speculation that controlling shareholder Kering SA may seek a full takeover, said Volker Bosse, an analyst at Baader Bank.
Puma, which has been undertaking restructuring measures since 2009, is closing stores, eliminating jobs and cutting product ranges to combat declining footwear sales, while seeking to boost its performance-wear credentials.
The company, known for its leaping cat logo, needs to reduce costs and develop innovative products, according to Juergen Kolb, an analyst at Kepler Cheuvreux in Frankfurt.
“The state of the brand is critical and there are not too many restructuring initiatives left,” he said.
Puma’s performance in the quarter was hampered by currency fluctuations, particularly the weakness of the Japanese yen, Kering, which also owns the Gucci brand, said at the time.
Kering owns about 84 percent of Puma, its Chief Financial Officer Jean-Marc Duplaix said in October. The French company has been buying Puma shares “in an opportunistic way” when they’re available on the market, he said last month.
Adidas, which like Puma was started by brothers Rudi and Adi Dassler in the Bavarian town of Herzogenaurach, yesterday reported a bigger gain in third-quarter profitability than analysts had estimated and said the build-up to the 2014 World Cup in Brazil will start boosting revenue this quarter.