Puma Hamstrung by Strong Dollar as Earnings Miss Estimates

  • Shoemaker reiterates forecasts for full-year earnings growth
  • Asian sales rose 9.8% and growth picked up in Europe

Puma SE reported first-quarter profit short of analysts’ estimates as the strength of the dollar added to production costs in Asia.

Earnings before interest and tax rose 10 percent to 41.3 million euros ($47 million), Puma said in a statement Friday. The average analyst estimate was 41.9 million euros. The stock fell 2.7 percent to 201 euros at 11:03 a.m. in Frankfurt, practically erasing its gains this year.

The dollar’s strength has left Puma’s gross margin little changed and sales growth at less than 4 percent despite the company’s promise of "high single-digit" growth for the year. The profit margin was 46.8 percent last quarter and it’s been falling the past few years as Chief Executive Officer Bjoern Gulden spends on sponsorships designed to re-associate the brand with sports and fashion after a period of lackluster performance.

"You’re trying to increase prices at the rate the market can take it," Gulden said on a conference call with reporters Friday, adding that the weakness of the Argentine peso wiped out gains in that market.

"We’re getting hurt very hard in Argentina, which is a big and profitable market for us," he said.

Overall, sales rose 3.7 percent during the quarter to 851.9 million euros. Puma was helped by a strong performance in the Asia-Pacific region, where sales rose 9.8 percent led by China, and in Europe, where growth picked up in Germany, Austria and France.

Women’s sneakers were a bright spot, and Puma’s footwear sales increased for the seventh straight quarter. The company has a design partnership with the singer Rihanna and Gulden said "high-end department stores and boutiques" are starting to request her branded shoes, in addition to sneaker outlets.

Puma’s performance should get a boost from the upcoming Euro 2016 and Copa America soccer tournaments on two continents this summer, and Gulden said new merchandise would hit stores coinciding with the games. He said the summer Olympics in Brazil would have a smaller effect on sales.

The results come after Adidas AG this week raised its full-year profit forecast for the second time in less than three months.

"Within the backdrop of global peers’ double-digit sales momentum during a triple major sporting event year, Puma’s first-quarter sales performance appears less impressive," John Guy, an analyst at MainFirst Bank AG, said in a note to clients.

Puma reiterated it expects full-year Ebit of 115 million euros to 125 million euros, gross margin at last year’s level of 45.5 percent, and high-single-digit sales growth, adjusted for currency fluctuations.

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