Puma reported first-quarter net income that surpassed analysts’ estimates and raised its 2010 guidance. The company now expects this year’s sales to rise by a low- to mid-single digit percent rate and sees pretax profit up by at least 70%. Q1 sales in the Americas region significantly improved by 9.8%
Among the highlights of the first quarter:
· Consolidated sales down by 2.1%
· Gross profit margin at a strong, sector-leading 52.2%, slightly above last year’s level
· Strong improvements in cost structure as a result of the cost reduction program
· Operating result jumps 115 million Euro versus last year
· EPS increase to 5.51 after 0.37
· Further improvement in equity ratio to 64%
Outlook 2010:
· Management expects sales growth in the low to mid single-digits
· Cost reduction program shall provide cost savings as planned
· Pre-tax profit is expected to improve by at least 70%
Jochen Zeitz, CEO: "We had a good start into the new year from a bottom line perspective which highlights the effectiveness of our comprehensive restructuring and reengineering efforts. Assuming a continuous improvement of the economic outlook and a planned increase of supplier orders, we anticipate low to mid single digit growth for the full year, while net earnings should jump significantly to complete the expected earnings rebound. We are now looking forward to the upcoming World Cup and to a successful integration of our newly acquired Cobra Golf business."
First quarter
In the first quarter Worldwide PUMA brand sales, which include consolidated and license sales, decreased by 2.3% to 720.6 million Euro. Footwear sales were down by 6.0% to 382.8 million Euro and Accessories by 3.1% to 90.3 million Euro. Apparel sales increased by 4.3% to 247.5 million Euro.
Consolidated Sales
PUMA’s consolidated sales in the first quarter were down by 2.7% currency-neutral and 2.1% in Euro terms to 683.1 million Euro ($1 billion). This development should be seen in the context of last years sales increase of 3.6%, which was mainly driven by closeout sales in order to reduce inventories. In addition, supplier orders for the first half of 2010 were placed with caution. Excluding the previous year’s inventory clearance, sales were slightly above last year. Sales in Footwear declined currency-neutral by 5.1% to 378.8 million Euro ($526.5 million) and Accessories decreased by 1.6% to 77.5 million Euro ($107.7 million). Apparel sales rose by 1.2% to 226.8 million Euro ($315.3 million) due to a positive development in PUMA’s teamsport business. In regional terms, sales in EMEA were down currency-neutral by 6.2% to 351.8 million Euro ($438.3 million) (share: 51.5%) and Asia/Pacific declined by 8.4% to 141.0 million Euro ($196 million) (share: 20.6%). Sales in the Americas region significantly improved by 9.8% to 190.4 million Euro ($264.8 million) (share: 27.9%) with both regions – North America and Latin America – positively contributing to this strong performance.
Gross Profit Margin
In the first quarter, PUMA’s gross profit margin reached a strong, sector-leading 52.2% compared to 52.1% last year. The Footwear segment reported 50.7% versus 50.4%, Apparel was at 53.5% compared to 53.7% and Accessories remained unchanged to last year at 55.6%. In terms of region, the gross profit margin in EMEA softened to 54.3% after 55.1%, Americas rose to 47.4% from 46.7% – driven by Latin America – and Asia/Pacific improved to 53.4% from 51.0% last year.
Operating Expenses
Operating expenses decreased by 4.6% from 254.1 million Euro to 242.3 million Euro ($336.8 million.) As a percentage of sales, the cost ratio improved from 36.4% last year to 35.5% because of the cost reduction program introduced last year. Expenses in marketing/retail and depreciation decreased due to the improvement to the overall retail store portfolio.
EBIT
PUMA’s EBIT before special items increased by 4.4% to 119.0 million Euro ($196.8 million) versus 114.0 million Euro last year. As a percentage of sales the EBIT margin improved from 16.3% last year to an excellent 17.4%. Taking last year’s special items into account, EBIT increased from 4.0 million Euro to 119.0 million Euro ($196.8 million).
Financial Result
The financial result was at 1.2 million Euro ($1.7 million) after 1.6 million Euro last year, as the net cash position improved and led to lower interest expenses due to reduced bank debts.
Net Earnings
The pre-tax profit (EBT) jumped from 2.4 million Euro to 117.8 million Euro ($163.7 million.) Net earnings increased to 83.1 million Euro ($115.5 million) from 5.6 million Euro based on a tax rate of 29.5% versus an operational tax rate of 28.5% last year.
Earnings per share rose to 5.51 Euro from 0.37 Euro and diluted earnings per share were at 5.50 Euro compared to 0.37 Euro last year.
Net Assets and Financial Position
Equity
As of March 31, 2010, total assets increased by 2.4% to 2,159.3 million Euro while PUMA’s equity ratio improved significantly from 56.6% to 64.0% this year.
Working Capital
Inventories declined by 15.9% to 375.7 million Euro and accounts receivable went up by 6.7% to 568.6 million Euro. Accounts payables increased by 7.2% to 265.5 million Euro. Working capital remained stable at 595.6 million Euro compared to 596.9 million Euro last year.
Capex/Cashflow
Capital investment amounted to 7.7 million Euro in the first quarter after 11.6 million Euro in the previous year.
The free cashflow came in at 73.4 million Euro compared to 118.0 million Euro last year.
Cash Position
Total cash by the end of March jumped 59.5% to 426.8 million Euro after 267.6 million Euro last year. Bank debts were reduced by 41.8% from 63.2 million Euro to 36.8 million Euro. As a result, the net cash position improved significantly by 90.7% from 204.5 million Euro to 390.0 million Euro.
Outlook 2010
Assuming a further improvement in the overall economic outlook, sales for the full year 2010 should strengthen accordingly throughout the year. The company’s pre-tax profit is expected to improve by at least 70% in 2010 while sales should post an increase in the low to mid single digits.