Puma Predicts profit jump as Bolt, Rihanna assist resurgence

Puma SE said operating profit in 2017 will grow at least as fast as last year, when three big global sports events and better sales of women’s wear helped the measure jump by a third.

Earnings before interest and taxes, or Ebit, will climb to between 170 million euros ($182 million) and 190 million euros, Puma said Thursday. The company also reported sales and earnings for 2016 that beat analyst estimates, and boosted its dividend by 50 percent.

Chief Executive Officer Bjoern Gulden is in the fourth year of a turnaround effort, balancing sportswear and street styles with the help of endorsements from celebrities including sprinter Usain Bolt and singer Rihanna. Puma’s performance is in contrast with rival Under Armour Inc., which last month forecast sales growth below expectations, sending the shares down the most in nine years and seeing its credit rating cut to junk at S&P Global Ratings.

“We feel we have some momentum and it finally shows in our numbers,” Gulden told a press conference at the company’s Herzogenaurach, Germany, headquarters. “With customers lining up outside of stores to buy our products, that’s the kind of brand you want to have.”

Margin Ambition

Gulden said Puma’s Ebit margin of 3.5 percent is still “ridiculously low” when compared with its larger rivals, and that the company must strive to lift the measure to between 8 percent and 10 percent of sales. Performance in January was “very good,” the executive told Bloomberg in an interview, making him confident of achieving full-year targets.

The shares rose 1.6 percent to 279.15 euros at 12:39 p.m. in Frankfurt trading. The stock has gained 66 percent in the past 12 months, leading that of majority shareholder Kering SA, which advanced 49 percent.

The two-year-old partnership with Rihanna is adding creative input to the company’s women’s lines as well as boosting sales, Gulden said. It’s more important that her collections sell out than that revenue from her products is “maximized,” he said.

Future Stars

Bolt’s imminent retirement from professional sports could mean the Jamaican may become more visible and hence valuable for Puma, the executive also said. The company in recent months signed eight “promising” such athletes that have the potential to become future stars, Gulden said.

Puma’s crosstown rival Adidas AG, in the midst of its own resurgence, plans to report fourth-quarter earnings on March 8.

Highlights of Puma’s results included:

Full-year Ebit rose 33 percent to 127.6 million euros, beating the average analyst estimate of 124.9 million euros
For the fourth quarter, Ebit rose 30 percent to 14.1 million euros
Sales of footwear rose for a 10th consecutive quarter and growth of 15 percent outpaced advances of apparel and accessories
The dividend is increased to 0.75 euros a share from 0.5 euros in 2016
Puma forecast that revenue in 2017 will increase at a high single-digit rate when adjusted for currency swings