Puma shares plunge on profit target downgrade
By Josh White
Date: Thursday 23 Jan 2025
(Sharecast News) - Puma shares plunged on Thursday morning, after the German sportswear company reported disappointing earnings and downgraded its profitability targets.
The company announced a cost-cutting programme aimed at achieving an EBIT margin of 8.5% by 2027, a delay from the previous target of 2025.
It said the cost reductions would include measures related to personnel expenses, potentially involving job reallocations, though specific details were not disclosed.
In the fourth quarter, Puma's EBIT rose to €109m, falling short of analysts' expectations of €131m.
Full-year net income declined to €282m from €305m a year earlier, due in part to higher interest payments and the impact of its US joint venture, which boosted revenue but weighed on profitability.
Sales for the year rose 4.4% to €8.8bn, with direct-to-consumer and accessories segments outperforming traditional footwear and apparel.
Analysts had raised concerns over Puma's ability to compete in an increasingly crowded sportswear market, where newer brands such as On Running and Hoka were gaining market share.
The company's efforts to reposition itself by focusing on higher-priced performance gear had resulted in the phasing out of lower-cost products, affecting overall sales momentum.
Chief executive officer Arne Freundt, who took over in 2022, acknowledged the challenges, stating that while sales growth has been solid, profitability remains a key concern.
He indicated that the company would prioritise translating revenue growth into improved margins in the coming years.
The firm's performance contrasted sharply with that of Adidas, which recently reported strong earnings driven by demand for retro sneakers such as the Samba and Gazelle.
Puma had struggled to capitalise on the retro trend, with its comparable models, like the Palermo and Speedcat, failing to gain similar traction.
At 1159 CET (1059 GMT), shares in Puma were down 13.15% in Frankfurt, at €34.09.
Reporting by Josh White for Sharecast.com.
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