- Q2 sales miss
- Revenue down in North America, Greater China
- Full-year outlook downgraded
German sports brand Puma (PUM:ETR) plunged 18% to €20 in Frankfurt after posting weaker-than-expected second-quarter sales (24 July) and warning it will deliver an unspecified loss for 2025.
The world’s third largest sportswear manufacturer, behind Nike (NKE:NYSE) and Adidas (ADS:ETR), Puma pinned the blame for the earnings alert on the ‘muted brand momentum’ it expects to persist as well as the potential impact of US tariffs.
Like its larger competitors, Puma ships trainers and sporting apparel into the US from low-cost manufacturing destinations including China and Vietnam, leaving it acutely exposed to President Trump’s new levies.
In London, shares in sportswear retailers JD Sports Fashion (JD.) and Sports Direct-owner-Frasers (FRAS) fell in early dealings on the negative read-across from soggy demand for the Puma brand and fears they could be impacted by a flurry of margin-crimping promotions.
GUIDANCE DOWNGRADED
Puma took a pounding on the warning it now sees full-year 2025 sales declining by a low double-digit percentage, rather than growing in the low-to-single digits as previously guided.
The Herzogenaurach-headquartered company now expects to post an operating loss for the year, a massive downgrade on previously-forecast profits in the €445 million (£388 million) to €525 million range.
The lowered outlook reflects ‘softer top-line development, increased currency headwinds, the impact of the US tariffs and additional measures, including one-off charges, to further align the cost base in the second half of the year’.
UNDER (MARGIN) PRESSURE
Amid stiff currency headwinds, Puma’s second-quarter sales fell by 2% to €1.94 billion with revenues down across the key markets of North America, Europe and Greater China.
By channel, the sales decline was driven by softness in the wholesale business, which overshadowed decent growth in Puma’s direct-to-consumer operations.
Investors were spooked as Puma reported a 70 basis point gross margin decline to 46.1% caused by increased promotional activity and adverse currency swings.
‘Amid ongoing volatile geopolitical and macroeconomic volatility, Puma anticipates that both sector-wide and company-specific challenges will continue to significantly impact performance in 2025,’ the company warned.
‘Key factors include muted brand momentum, shifts in channel mix and quality, the impact of US tariffs, and elevated inventories’, which increased by 9.7% to almost €2.2 billion in the quarter.
Puma’s new CEO Arthur Hoeld has a big task turning round a brand that has struggled to connect with consumers over recent years.
The Adidas veteran took over at Puma earlier this summer after former boss Arne Freundt departed following a string of profit warnings and a boardroom dispute over strategy.
JD DOWN IN SYMPATHY
AJ Bell investment director Russ Mould observed: ‘Puma has warned of elevated stock levels and a sharp decline in North American sales, triggering a major profit warning. It’s everything investors feared, putting further pressure on what’s already a depressed share price.
‘There is a negative read-across to JD Sports whose shares fell in sympathy. JD has large exposure to the US market and runs the risk of being swept up in a whirlwind of discounting. Excessive stockpiles of Asian-sourced goods in the US could encourage retailers to slash prices to get products moving. In this situation, sportswear sellers like JD will need to decide if they take part and stomach lower profit margins or stand firm to protect margins but risk shoppers going elsewhere.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
