Puma, growth without glitter

Puma completed the first half of 2017 with a turnover growth of 16%, reaching sales of € 1 billion in six months, notably sports shoes. One positive feature of these sales figures is that their growth was homogenous in all regions almost equally, both in emerging and mature markets.

Improvement in margins
The company improves gross margins, operating and, above all, net profit per share. However, the figures for 2016 were so sluggish in terms of profitability that even growth in the current year leaves the company’s net margin at 3.5%, well below the rest of the Kering group. It is relevant that Puma accounts for 25% of the sales of the Kering group but contributes less than 10% of its consolidated profit. It is true that in the luxury sections of the group, the margins are traditionally wider, but on the other hand, within the sports equipment industry, Puma clearly succumbs to its competitors, not only against Nike, the industry leader , Which has a net profitability of 13.5%, but against, for example, adidas which contributes 8% of net profitability, doubling that of Puma.

It is positive the effort that was made in commercialization has compensated with a higher income, however, these reduced margins cause the company to present a little growth in its working capital, and within the same, Puma has had to increase the days of inventory, An effort that the company justifies as necessary to be able to supply the needs of its distributors in a timely manner. The results do not just generate too much free cash flow, which is also cause for some concern. An  Improvement, indeed, in terms of the management of accounts receivable – collect customers in fewer days – such as accounts payable. The company continues to present a very positive debt ratio of 42% on total assets, most of them unpaid (free of interest).

Usain Bolt to continue as ambassador for the brand
They emphasize the effect of the World-wide Athletics of London, where its star Usain Bolt will dispute his last championships that hope to return to be of great benefit so much for the athlete as for Puma. Bolt’s (who will continue to be the ambassador for the Puma brand beyond his sporting career)  natural relay , has been found in Canadian sprinter Andre de Grasse, the current Pan-American champion in the 100  and 200 meters.

They are generally satisfied with the promotional results given by the football teams they collaborate with, notably the results on both the pitch and sales of their products from the Borussia de Dormund (winner of the German Cup ), Chivas, League Champion in Mexico or Arsenal (winner of the English FA Cup).

As for the female category of Puma, the company is satisfied with the success of its «Do You» campaign which included celebrities like Cara Delevingne, the New York City Ballet or Kylie Jenner introducing a new and original Styling They observe a great interest in the Basket Heart collection as well as in the Fierce hunting line, which offers a sporty style using state-of-the-art technology and offers a combination of high performance and luxury, sport and fashion for consumers of this particular style.

As we can see, the promotional  effort of Puma is gigantic, more so if we consider that is singer star  Rihanna the creative director of the company. In this second quarter it seems that the company has improved its margins, but much still has to improve to reach its competitors.