German sportswear group Puma has lowered its prognoses for sales and profits for the year, because sales in Europe and Asia leave a lot to be desired. According to company management sales will be 1% to 5% lower than in 2012 and also the operating profit is under pressure.
Exceptionally long winter in Asia
Puma points to the results of the first quarter as a reason for the adjustment: a drop in sales by 2.3% to 782 million euro and a drop in profits by 32% to 50 million euro. Both figures were well below expectations.
The disappointing results are mainly due to the situation in crisis-prone Europe and the exceptionally long winter in Asia: in Europe sales dropped by 4.8%, in Asia by 2.9%. Fortunately for the company, Mexico, Brazil and Argentina somewhat soothed the pain. Russia and Turkey also performed well.
Lower profits on the horizon
Furthermore Puma saw its gross profit margins drop from 51.2% to 49.1%. The company says it is suffering from bad foreign exchange hedging and higher inventory costs, especially for sneakers.
Management said the company is “unlikely to meet its original guidance of low- to mid-single-digit growth”, even before one-time expenses. Puma is also working on the implementation of a cost savings plan. Company management does however expect the profit of 2013 to be higher than that of 2012.
Puma is part of the French luxury group Kering, the former PPR.