EANS-News: PUMA SE Implementation of Transformation Program and Cost Cutting
Measures Impact Third Quarter Net Earnings
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Financial Figures/Balance Sheet
Herzogenaurach (euro adhoc) - Implementation of Transformation Program and Cost
Cutting Measures Impact Third
Quarter Net Earnings
Herzogenaurach, October 24, 2012
Performance Third Quarter 2012
- Consolidated sales increase 6.0% in Euro terms
- EBIT before special items decreases by 16.7% to EUR 98.8 million
- Special items EUR 80 million due to Transformation and cost
reduction
program
- EPS down from EUR 5.45 to EUR 0.81
Performance First Nine Months of 2012
- Consolidated sales grow 7.8% in Euro terms
- EBIT before special items reduced by 13.0% to EUR 247.9 million
- EBIT including special items EUR 168.6 million
- EPS declines from EUR 13.15 to EUR 7.53
- Equity ratio improves from 62.9% to 65.2%
Outlook for the Financial Year 2012
- PUMA's Management maintains its 2012 sales guidance at a mid-single digit
rate in Euro terms.
- Transformation Program complemented by immediate cost cutting measures as
the difficult business environment in particular in Europe required short-
term adjustments.
- Management expects annual net earnings to be significantly below those of
2011, impacted in particular by the one-time expenses.
"PUMA posted a moderate increase in sales in the third quarter despite the
challenging business climate in Europe," said Franz Koch, CEO of PUMA SE. "We
have taken decisive actions to overcome the issues we are currently facing in
particular in Europe. Our Transformation Program 2010-2015 in combination with
immediate cost cutting measures and a strengthened product pipeline in
Performance and Lifestyle for next year will provide a solid basis for
sustainable and desirable growth."
Challenging Business Climate in Europe continues to slow down sales growth
Sales Performance by Segment
PUMA's third quarter consolidated sales grew by 6.0% in Euro terms and by 0.5%
currency adjusted to EUR 892.2 million.
Footwear sales rose by 2.5% to EUR 441.9 million, supported by continuing
demand
for the lightweight running footwear range PUMA Faas and also Heritage styles
such as the evergreen Suede Classics and our Archive Lite Mid and Low designs.
PUMA's success in its running footwear range was underlined by the Olympic
Summer Games that saw PUMA's blend of Sportlifestyle at its best: Outstanding
athletic performances, combined with cool events in town. However, the positive
performance in our Running category was dampened by declines in the Fitness &
Training and Motorsport categories in PUMA's mature markets.
Apparel sales increased by 5.6% to EUR 311.2 million, fueled not only
by
continued strength in our Cobra PUMA Golf division, but also by sales of
replica jerseys as part of our Teamsport category. PUMA has had tremendous
success with Borussia Dortmund replica and fan wear, which has played an
important part in our sales performance in Germany this year.
Accessories continued to climb strongly, up 20.1% to EUR 139.1 million
with
strong results in our American sock and bodywear business and also in Golf. In
September, PUMA was part of a sensational finish at the 2012 Ryder Cup when
Cobra PUMA Golf athlete Ian Poulter, the undisputed player of the tournament,
won all four matches he played in the prestigious competition between the best
golfers from Europe and the USA.
Over the first nine months of this year, consolidated sales improved by 7.8% in
Euro terms or by 3.3% currency adjusted to EUR 2.46 billion. Footwear sales
rose
2.2% in Euro terms, Apparel sales were up 9.8% supported by strong sales in
Running and other performance items, and Accessories rose 23.4%, with Cobra
PUMA Golf products resonating well with consumers.
Sales Performance by Region
Growth continues in the Americas
In regional terms, sales in EMEA declined by 3.4% to EUR 396.7 million as
the
economic slow-down in Europe and restrained consumer spending continued to have
a severe impact on PUMA's business performance. Strong numbers from Germany and
Russia could not completely offset the slowdown elsewhere. However, PUMA
continued its excellent performance in the Americas with sales growing by 20.5%
in Euro terms (10.6% currency adjusted) to EUR 283.2 million in the
third
quarter, with Argentina, Brazil and Mexico all providing strong double digit
increases and continued growth in North America. Asia/Pacific posted a gain of
8.3% in Euro terms to EUR 212.3 million with good numbers from Korea and India
in
particular. Growth in China has slowed down due to a challenging overall market
environment and high inventory levels in the market.
First-nine-month sales in EMEA were down 2.5% with most markets in Western
Europe continuing to face challenges, although Germany returned satisfying
figures, as did Turkey. Conversely, sales in the Americas rose strongly by
18.3% with good results across both North and Latin America. North America
benefitted in particular from continued growth in our socks and bodywear
subsidiary as well as Cobra PUMA Golf. Asia/Pacific increased by 14.9%,
supported again by excellent numbers from India and also Japan.
Sales Performance Retail
Retail continues to grow
PUMA's owned and operated retail operations generated higher sales numbers.
Third-quarter retail sales were EUR 165.0 million, an increase of 22.7%
compared
to EUR 134.0 million for the third quarter of 2011 and equal to 18.5% of
total
sales. For the first nine months to the end of September, retail sales were up
20.4% from EUR 363.0 million to EUR 437.0 million, delivering 17.7% of total
sales
compared to 15.8% at the same stage last year. Comparable sales rose at
existing stores and PUMA continues to open new selective stores in profitable
locations. However, a considerable amount of retail stores in mature markets
are not generating satisfying contributions and will be part of the retail
store network optimization. PUMA's e-commerce business is growing and has
contributed positively.
Margins, Expenses and Profitability
Gross Profit Margin fell in Q3 and for the first nine months of 2012
The gross profit margin declined to 48.2% in the third quarter of 2012, under
pressure from input costs and unfavorable trading conditions in Europe.
Footwear fell from 49.8% to 46.1%, mainly impacted by inventory clearances
which have led to a stock reduction in the footwear category in the third
quarter, ahead of the launch of our new ranges for Spring/Summer 2013. Apparel
fell marginally from 50.3% to 50.1%. Accessories, however, rose from 50.0% to
50.6% compared to 2011.
On a nine-month basis, the gross profit margin declined 110 basis points from
50.6% to 49.5%. Footwear fell from 49.8% to 47.9%. Apparel remained steady at
50.9% while Accessories moved lower from 52.4% to 51.2% due to higher input
costs and the competitive Teamsport business.
Operating Expenses increase
Third-quarter operating expenses rose by 9.5% to EUR 336.1 million in the
third
quarter of the year compared to EUR 307.0 million last year. Retail costs
have
continued to rise as PUMA has increased the number of retail stores it owns and
operates, whilst the Olympics and associated costs meant that marketing was
significantly higher than over the same period in 2011. As well as continuing
to invest steadily in RD&D in order to further strengthen our product
portfolio, we are continuing to enhance our supply chain and IT-systems.
For the first nine months of 2012, OPEX rose by 11.3% or EUR 100.5 million from
EUR
885.5 million to EUR 986.0 million, impacted as above by increased
marketing,
retail and RD&D expenditures as well as investments in line with the
accelerated Transformation Program. The OPEX has also been impacted by currency
effects which alone led to an increase of 450 basis points.
Operating result before Special Items
As a result of the lower gross profit margin and increased operating costs
related to the Transformation Program, the operating result before special
items declined by 16.7% to EUR 98.8 million during the third quarter of 2012.
On
a nine months basis EBIT before special items fell by 13.0% to EUR 247.9
million,
an EBIT margin of 10.1%
Special Items
PUMA recorded a total of EUR 80 million in special items that are related to
the
Transformation Program during the third quarter. These have been mainly
incurred by restructuring the European region, optimizing the retail portfolio
and reorganizing its global operations and functions.
EBIT after special items
EBIT including special items were equal to EUR 19.6 million for the third
quarter
and EUR 168.6 million for the nine months to the end of September.
Financial Result
The financial result was positive at EUR 1.7 million compared to EUR -2.1
million
in the third quarter of 2011, due mainly to positive currency developments.
Similarly, for the year to date, the financial result improved from EUR
-3.9
million to EUR -0.9 million.
Earnings before Taxes
PUMA's third-quarter EBT was down 81.7% to EUR 21.3 million. The quarterly
tax
ratio decreased from 30.0% to 27.7%.
EBT also fell for the first nine months of the year from EUR 281.1 million to
EUR
167.7 million after special items, a drop of 40.3%. The company reported an
improved tax rate of 28.9% compared to last year's 30.0%.
Net Earnings decline
As a consequence of continued pressure on the gross profit margin, increased
expenditures and the special items in particular, consolidated net earnings
fell by 85.1% to EUR 12.2 million. Earnings per share therefore fell to EUR
0.81.
For the first nine months of 2012, net earnings weakened by 42.8% to EUR
112.8
million and EPS decreased to EUR 7.53.
Net Assets and Financial Position
Equity
Total assets as of September 30, 2012 grew by 6.5% from EUR 2,423 million to
EUR
2,580 million, mainly due to an increase in inventories. The equity ratio
improved from 62.9% to 65.2% when compared to the third quarter of 2011. In
absolute figures, shareholders' equity increased by 10.3% from EUR 1,524
million
to EUR 1,682 million.
Working Capital related Assets and Liabilities
Looking at assets, inventories rose by 21.3% in Euro terms to EUR 646.0
million
or 16.8% currency adjusted. This increase is significantly lower than in
previous quarters and testament that our efforts to reduce the current over-
stock levels have been successful in the quarter. Inventories have generally
advanced in the wake of continued retail expansion as well as higher average
prices per unit on stock. Trade receivables rose only slightly to EUR
623.7
million, which is due to a sharper focus and reflects PUMA's dedication to
improve outstanding days. On the liabilities side, trade payables fell slightly
to EUR 382.9 million.
Cashflow/ CAPEX
The Free Cashflow (before acquisitions) came in at EUR -82.7 million compared
to
EUR -89.4 million for the same period in 2011, with working capital
increases
offset by lower tax payments. The payments for acquisitions relate to the
purchase of the outstanding Dobotex shares, effected on January 1, 2012.
CAPEX increased by 21.4% to EUR 54.2 million and continued for the most part
to
be related to investments aligned with the "Back on the Attack" growth plan,
such as supply chain initiatives, IT projects and profitable retail store
extension.
Cash Position
The total cash position as of September 30, 2012 was reduced by 9.4% from
EUR
289.5 million to EUR 262.2 million, affected by the purchase of the
remaining
Dobotex shares. Including bank debts, the net cash position decreased 19.5%
from EUR 255.1 million to EUR 205.4 million.
Implementation Status of PUMA's Transformation Program and Cost Reduction
Measures
PUMA has progressed with and has already begun to implement major parts of its
Transformation Program which was introduced in 2010 as a new development phase
with the aim to reduce complexity and increase operational efficiencies in the
long run. In addition, immediate cost reduction measures were initiated to
improve the overall current financial performance.
New Regional Business Model: At the core of the program is the setup of a new
regional business model which will initially be rolled out in Europe and then
gradually be extended to the remaining regions. The European organizational
structure has now also been expanded to include several central and eastern
European Union member states (Czech Republic, Poland, Hungary, Slovakia and the
Baltic nations). Furthermore, PUMA has reduced the number of organizational
entities from 23 countries to seven areas in order to reduce complexity of the
business. Each area has a full management team and P&L responsibility, while
each country will focus its activities on the commercial side of the business.
The seven areas are: DACH (Germany, Austria, Switzerland), IBERIA (Spain,
Portugal), UKIB (Belgium, Ireland, Luxemburg, Netherlands, UK), NORDICS
(Denmark, Finland, Norway, Sweden) EASTERN EUROPE (Czech Republic, Estonia,
Hungary, Lithuania, Latvia, Poland, Slovakia), FRANCE and ITALY.
Consolidation of Warehouse Portfolio: Correspondingly, PUMA has initiated the
consolidation process of its warehouse portfolio across Europe in order to
generate further efficiencies and cost savings with the long-term objective to
align the warehouse network with the new area structure.
Optimization of Retail Portfolio: PUMA has decided to close a total of
approximately 80 unprofitable stores with the focus on mature markets, while
the company will continue to open new selected stores in profitable locations
primarily in emerging markets. By the end of December 2013, PUMA aims to
operate around 540 stores worldwide, compared to its current 590 stores.
Termination of Collaboration and Endorsement Contracts: PUMA has decided to
divest unprofitable collaborations and endorsement contracts in line with the
overall consolidation of its product portfolio.
Reducing Product Collections: PUMA is planning to downsize its overall product
palette by 30% by the end of 2015. The number of articles has already been
aligned with the company's core categories. The major portion of the article
reduction will come from streamlining regional and local ranges. The first
significant results of this rationalization and simplification will be visible
in Spring/Summer 2013.
Establishment of Business Units: PUMA will evolve its international
organization establishing seven Business Units (Teamsport; Running, Training
and Fitness; Golf; Fundamentals; Motorsport; Lifestyle; Accessories and
Licensing). Product management, design, development and product-specific
marketing will be clustered under each Business Unit. Establishing the Business
Unit structure will help PUMA to press ahead with its sharpened focus on
Performance as well as Lifestyle categories.
Further actions are currently under investigation, to be put in place during
the fourth quarter of the year.
Outlook for the Financial Year 2012
Against the backdrop of a difficult business environment in particular in
Europe, PUMA's management has complemented its 2010-2015 Transformation Program
with immediate cost reduction measures. The above actions require one-time
costs of EUR 80 million which were booked in the third quarter. PUMA expects
that
these one-time expenses will be amortized within two to three years.
PUMA's management continues to forecast annual sales rising by mid-single
digits in Euro terms and net earnings significantly decreasing from last year's
level due to the aforementioned one-off expenses.
Media Relation:
Kerstin Neuber - Corporate Communications - PUMA SE - +49 9132 81 2984 -
kerstin.neuber@puma.com
Investor Relations:
Carl Baker - Finance - PUMA SE - +49 9132 81 3188 - carl.baker@puma.com
Notes to the editors:
- This press release and financial reports are posted on www.about.puma.com.
- PUMA SE stock symbol:
Reuters: PUMG.DE, Bloomberg: PUM GY,
Börse Frankfurt: ISIN: DE0006969603- WKN: 6969603
Notes relating to forward-looking statements:
This document contains forward-looking information about the Company's
financial status and strategic initiatives. Such information is subject to a
certain level of risk and uncertainty that could cause the Company's actual
results to differ significantly from the information discussed in this
document. The forward-looking information is based on the current expectations
and prognosis of the management team. Therefore, this document is further
subject to the risk that such expectations or prognosis, or the premise of such
underlying expectations or prognosis, become erroneous. Circumstances that
could alter the Company's actual results and procure such results to differ
significantly from those contained in forward-looking statements made by or on
behalf of the Company include, but are not limited to those discussed be above.
|PUMA |
PUMA is one of the world's leading Sportlifestyle companies that designs and
develops footwear, apparel and accessories. It is committed to working in ways
that contribute to the world by supporting Creativity, SAFE Sustainability and
Peace, and by staying true to the principles of being Fair, Honest, Positive
and Creative in decisions made and actions taken. PUMA starts in Sport and ends
in Fashion. Its Sport Performance and Lifestyle labels include categories such
as Football, Running, Motorsports, Golf and Sailing. Sport Fashion features
collaborations with renowned designer labels such as Alexander McQueen and
Mihara Yasuhiro. The PUMA Group owns the brands PUMA, Cobra Golf and Tretorn.
The company, which was founded in 1948, distributes its products in more than
120 countries, employs about 11,000 people worldwide and has headquarters in
Herzogenaurach/Germany, Boston, London and Hong Kong. For more information,
please visit http://www.puma.com
Further inquiry note:
Kerstin Neuber
Telefon: +49 (0)9132 81-2984
E-Mail: Kerstin.Neuber@puma.com
end of announcement euro adhoc
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company: PUMA SE
PUMA Way 1
D-91074 Herzogenaurach
phone: +49 (0)9132 81 0
FAX: +49 (0)9132 81-2246
mail: investor-relations@puma.com
WWW: http://about.puma.com/?lang=de
sector: Consumer Goods
ISIN: DE0006969603
indexes: Midcap Market Index, MDAX, CDAX, Classic All Share, HDAX, Prime All
Share
stockmarkets: free trade: Hannover, Berlin, Hamburg, Düsseldorf, Stuttgart,
regulated dealing: München, regulated dealing/prime standard:
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language: English