Puma seeks to be Forever Faster despite dragging turnaround

Paris: The chief executive officer of Puma AG Rudolf Dassler Sport, 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 on Friday. “Although it will take some time, we will turn this business around.”

Puma said on Friday that fourth-quarter earnings will be hurt by one-time charges of about €130 million ($174 million) relating to the closure of a product development centre in Vietnam and transferring international product teams to Germany from the UK. While the charges will lead to material cost savings, getting Puma back on track will take at least another year, said Andreas Inderst, 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% in Frankfurt, the steepest intraday drop since 24 July, 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.

Profit falls

Earnings for the year will be positive but significantly below those of 2012, Puma said on Friday. On Thursday, crosstown rival Adidas AG forecast rising profit. The
third-quarter earnings before interest, tax and special items fell to €80 million from €99 million a year earlier, trailing estimates of about €81.5 million, Puma said in a separate statement. A 1.4% 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% at €219.20 as of 11:43am on Friday. 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.

Restructuring measures

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% 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 in October.

Adidas, which like Puma was started by brothers Rudi and Adi Dassler in the Bavarian town of Herzogenaurach, on Thursday 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. Bloomberg