Puma profit warning takes shine off summer of sport

German sportswear maker Puma expects a sharp drop in profit this year, as weak consumer spending in Europe holds back the sales boost its expects from this summer’s high-profile sporting events.

Its profit warning on Wednesday follows those of French food group Danone, German heavy engines maker Deutz, and steelmaker Salzgitter, who all blamed slowing demand in debt-laden Europe.

U.S. firms from personal computer maker Hewlett-Packard to consumer staples company Procter & Gamble and coffee chain Starbucks have also highlighted weakness in Europe, while retailer Metro has said that the debt crisis is even hurting shoppers in Germany, Europe’s strongest economy.

Puma, which makes just under half its sales in Europe, said on Wednesday that earnings would be significantly below last year’s 230.1 million euros ($281 million), hurt by charges as it speeds up cost cuts. First-half net profit fell 13 percent.

The company is more heavily exposed than larger rivals Nike and Adidas to markets in western Europe, where the region’s debt crisis has squeezed consumer spending and boosted unemployment among the young people targeted by sportswear makers.

Like its rivals, Puma has hoped a sports-packed summer including the London Olympic Games – where Puma poster boy Usain Bolt will be defending his 100m and 200m sprint titles – and last month’s Europe 2012 soccer tournament in Poland and Ukraine will boost overall sales.

In an unscheduled statement on Wednesday ahead of second-quarter results due next week, Puma lowered its forecast for 2012 sales. It now expects them to rise by around 5 percent, compared with a previous forecast for an increase of almost 10 percent.

“The Olympics and Euro 2012 will mean big spikes in marketing budgets and the battle was whether the companies could do enough on the top line to offset this,” said an analyst who asked not to be named.

Puma had already put a disappointing first quarter down to the reluctance to spend among cash-strapped European consumers, which make up around 45 percent of its total sales.

A wet summer in parts of northern Europe has added to retailers’ pain, with some stores starting sales earlier and Britain’s Marks & Spencer and JJB Sports partly blaming the rain for keeping shoppers away.

Even sportswear maker market leader Nike has been more cautious of late, saying it was experiencing a slowdown in China, while Adidas said on Wednesday it was closing its only wholly-owned factory in China for cost reasons.

Puma said on Wednesday that net earnings will come in significantly below last year’s 230.1 million euros ($281 million), it said, dented by around 100 million euros of charges.

On average, analysts had been expecting Puma to report net profit of 243.4 million euros for 2012 before Wednesday’s warning, according to Thomson Reuters I/B/E/S.

Shares of Puma, which is 80 percent controlled by French luxury goods group PPR, slipped 5.1 percent to 214.05 euros by 1035 GMT. PPR was up 0.2 percent after earlier falling 1.5 percent.

Shares in Adidas opened 2 percent lower, but narrowed their losses to trade down 0.2 percent.

“It’s definitely a surprise,” said another analyst who declined to be named. “But it can’t be read across 1:1 to Adidas, because they had already performed significantly better in the first quarter.”

Puma said first-half sales were up 8.8 percent in euro terms. It said it would provide more details with its full quarterly report next week.

Puma, founded in 1948 when Rudolf Dassler fell out with brother Adolf and set up a firm to rival Adolf’s Adidas, is trying to reassert its credentials in the sports performance business after focusing too much in fashion on recent years.

20120723-222712.jpg

Advertisements
This entry was posted in Retail. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s