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Puma Profit Falls Amid Brand Investment

Puma store in SoHo, New York | Source: Puma
By
  • Bloomberg

FRANKFURT, Germany — Puma SE, Europe's second-largest sporting-goods maker, reported a milder-than-anticipated drop in operating profit as the company debuted new products including a pink-and-blue football cleat to stoke sales.

Earnings before interest and taxes in the second quarter tumbled 60 percent to 12.6 million euros ($16.9 million), Puma said in a statement today, compared with analysts’ 10.2 million- euro average estimate. Revenue for the period that ended in June rose 0.6 percent at constant rates of currency exchange.

“2014 is an investment year for Puma,” Mario Ortelli, an analyst at Sanford C. Bernstein, said in a July 24 note to clients. The World Cup and the company’s dual-color shoes “could have a positive sales effect.”

Chief Executive Officer Bjoern Gulden is repositioning Puma around sports-performance gear and seeing strong demand for the company’s bright pink-and-blue EvoPower and EvoSpeed soccer cleats that some players wore during this summer’s World Cup. Gulden, a former professional soccer player, is also spending more on marketing for the back-to-school buying season, promoting the company’s “Forever Faster” ad campaign and signing sponsorship deals, which is dragging on profits.

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“We know that the repositioning of Puma will and the turnaround of the business will take time,” Gulden said in the statement. Sales of the pink-and-blue Tricks boots has been “excellent and exceeded our expectations.” The company’s cost of sales also decreased.

Adidas, Nike

Herzogenaurach, Germany-based Puma is fending off bigger rivals Adidas AG and Nike Inc. in the sports market, and trying to move past years of vacillating between emphasizing sports gear and sport-inspired street wear. Puma’s 2.9 billion euros in expected sales this year are about 15 percent of Nike’s, according to Bloomberg Intelligence analysis.

Puma sponsored teams including Algeria, Chile, Uruguay and Italy in the World Cup, while Adidas sponsored the winning German national team. The company in January landed a deal to sponsor English Premier League team Arsenal Football Club, and is reportedly seeking a deal with Germany’s Borussia Dortmund.

By Aaron Ricadela; editors: Kenneth Wong, Celeste Perri, Thomas Mulier.

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