PUMA AG announces its consolidated financial results for the second quarter and first half of 2010



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    • PUMA AG announces its consolidated financial results for the second quarter and first half of 2010

    PUMA AG announces its consolidated financial results for the second quarter and first half of 2010


    Highlights Second Quarter:
    •Consolidated sales up by 2.5%
    •Gross profit margin improved to a strong 50.3%
    •Overall cost structure continues to improve
    •Operating result at € 64.1 million, up 1.7%
    •EPS rise 16.4% from € 2.55 to € 2.97
    •Integration of Cobra Golf according to schedule
    •Share-buyback program initiated


    Highlights January-June:
    •Consolidated sales post a slight increase of 0.1%
    •Gross profit margin up versus last year at 51.3%
    •Strong improvement in cost structure as a result of the cost reduction program
    •Operating result before special items improved to € 183.2 million , up 3.4% versus last year
    •EBT increase by 185,5% to 181 million with EPS jumping to € 8.48 from € 2.92 last year
    •Working Capital and Cash position continue to improve

    Outlook 2010:
    •Management confirms expected sales growth in the low to mid single-digits due to a strong improvement in the overall outlook
    •EBIT before special items is expected to increase compared to last year
    •Phase 4 Revisited (2011-2015): New refined strategy to unfold PUMA’s long-term potential will be presented with Q3 results


    Jochen Zeitz, CEO: “PUMA performed according to plan in the second quarter and we are gearing up for solid growth in the second half of the year based on a strong outlook. Given an overall improvement of the global economies as well as our decisive measures taken in the past 18 months to adjust our organization and processes to the new market realities, we feel ready to re-engage with our long-term expansion plan as of next year. “Phase IV revisited 2011-2015” shall enable us to significantly tap into PUMA's long-term sales potential of 4 billion Euros and beyond."


    Sales and Earnings Development


    Global Brand Sales
    PUMA’s brand sales in the second quarter – comprised of consolidated and license sales - increased by 1.3% in Euro terms.

    Consolidated Sales
    Consolidated sales in the second quarter increased by 2.5% in Euro terms to € 615.4 million. Currency neutral, consolidated sales softened by 4.8% on high comparables after closeout sales and a high inventory availability last year. Deliveries in June were impacted by late product deliveries and there were no pre-shipments unlike last year. On a currency-neutral basis, Footwear sales were down by 9.7% at € 321.2 million and Apparel sales fell by 5.3% to € 208.6 million. Due to first time consolidations, Accessories sales improved significantly by 20.6% to € 85.6 million.

    After the first six months, consolidated sales were down by 3.7% currency-neutral but increased by 0.1% in reported terms to € 1,298.5 million. Sales in EMEA and Asia/Pacific were below last year’s levels. Sales in the Americas region, however, increased 12.7% currency-neutral despite of the overall challenging market environment after both sub regions - North America and Latin America - sustained their positive performances from the first quarter. Footwear sales declined currency-neutral by 7.2% to € 700.1 million. Apparel sales decreased by 2.0% to € 435.4 million. Accessories sales, however, advanced by 8.9% to € 163.1 million.

    Gross Profit Margin
    In the second quarter, the gross profit margin improved by 30 basis points from 50.0% last year to 50.3%. This increase mainly results from a lower share of closeout sales that more than offset negative impacts from currency hedging, the regional mix and higher raw material costs. After the first six months, PUMA’s gross profit margin reached 51.3% after 51.1% last year. Footwear reported 50.6% compared to 49.7% and Apparel 52.7% versus 52.3%. Accessories declined to 50.7% from 54.9% last year, which is mainly due to the increase in the scope of consolidation with the inclusion of Cobra Golf.

    Operating Expenses
    Operating expenses increased by 3.4% to € 250.5 million in the second quarter due to the inclusion of the Cobra Golf business into the consolidation as well as currency effects. Omitting these two factors, OPEX would be below last year. In the first six months operating expenses declined by 0.7% to € 492.8 million, which translates into a cost ratio of 37.9% after 38.2%.


    The operating result came in at € 64.1 million in the quarter after € 63.1 million last year. As a percentage of sales, the EBIT ratio dropped slightly to 10.4% from 10.5%. Adjusted by costs stemming from the Cobra integration, the EBIT margin would have improved compared to last year.
    After six months, the operating result before special items increased by 3.4% to € 183.2 million from € 177.1 million, which translates into an operating margin of 14.1% versus 13.6% last year.

    Financial Result/Income from associated companies
    Due to lower interest rates and lower accumulation of interest on purchase price liabilities from acquisitions, the financial result in the second quarter was at € -1.5 million versus € -2.1 million last year. After six months, the financial result stood at € -2.7 million compared to € -3.7 million last year. An income of € 0.4 million was generated from associated companies in the quarter.

    Net Earnings
    The company’s pre-tax profit (EBT) was € 63.1 million in the second quarter versus € 61.0 million last year. Net earnings totaled € 44.8 million versus € 38.5 million, representing an increase of 16.4%. This translates into earnings per share of € 2.97 compared to € 2.55 last year.

    In the first half, EBT rose significantly to € 180.9 million from € 63.4 million last year. As a result, net earnings improved by 190.4% to € 127.9 million from € 44.0 million. Earnings per share were at € 8.48 compared to € 2.92. The operational tax ratio was calculated at 29.3% versus last year’s 26.5%.

    Net Assets and Financial Position



    As of June 30, 2010, total assets were up by 16.1% to € 2,377.6 million. The equity ratio improved from 56.6% in last year to 61.7% in spite of a higher balance sheet total.

    Working Capital
    Net inventory increased by 5.7% to € 456.8 million but decreased 5.7% on a currency-adjusted basis. Accounts receivable increased by 8.1% from € 502.8 million to € 543.4 million, which compares to a currency-adjusted decrease of 0.7%. Working capital improved to € 521.7 million from € 540.6 million last year – showing again a significant improvement compared to previous quarters and thus underpinning our strong focus on managing working capital.


    In the first six months, the company invested € 23.3 million versus € 27.4 million last year. The reduction in capital expenditure together with a solid improvement in working capital led to a strong increase in PUMA’s free cashflow before acquisitions of € 77.3 million from € 45.1 million last year. An outflow of € 101.9 million versus € 61.0 million last year related to acquisitions.

    Cash Position
    Given the strong focus on cash management, total cash at the end of June rose by 49.8% from € 302.7 million to € 453.4 million and bank debts declined by 28.8% from € 44.8 million to € 31.9 million this year. As a result, net cash was up from € 257.9 million to € 421.5 million this year, representing a remarkable increase of 63.4%.


    Share Repurchase
    PUMA AG started its share buyback program and purchased 55,892 of its own shares during the second quarter, which equals 0.4% of the share capital and reflects an investment of € 12.9 million.


    Other Events


    Spain Arbitration Ruling
    According to an arbitration ruling the former Spanish license holder Estudio 2000 S.A., which owned several PUMA trademark rights, has been obliged to vest these to PUMA AG. Through the vesting of all of the word, image and combined PUMA trademark rights in Spain, PUMA AG would ultimately own all trademark rights and take over the operational business in Spain, hence ensuring a consistent brand management strategy. According to the arbitration ruling, the vesting of the trademark rights is subject to a one-time payment of up to 98 million Euros to Estudio 2000 S.A. However, after a thorough legal assessment, PUMA AG will challenge the ruling and believes that a favourable outcome is more likely than not. PUMA now confirms that a cancellation recourse will be filed within the next days. This potential is classified as a contingent liability which has not been recognized as a liability in the financial statements.


    PHASE IV Revisited (2011-2015) - New refined strategy to unfold PUMA’s long-term potential
    PUMA’s initial Phase IV expansion plan was slowed down by the global economic crisis that curbed PUMA’s sales progress. With an improved outlook of the global economy, which should lead to a reasonable market recovery, PUMA’s management is revisiting its long term development plan, leading to a refined strategy, aligned with today’s market realities, to unfold PUMA’s long-term potential. The strategy and impact of “Phase IV Revisited 2011-2015” will be laid out in detail – together with the release of PUMA’s third quarter results - on October 26th at the Brand Center of PUMAVision Headquarters in Herzogenaurach, Germany.


    Outlook 2010


    Given a strong outlook in sales for the second half, we continue to expect sales growth in the low to mid single digits for the full year 2010. Gross profit margins should remain unchanged to last year’s level. EBIT before special items is expected to improve compared to last year.



    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 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, Yasuhiro Mihara and Sergio Rossi. The PUMA Group owns the brands PUMA, Cobra and Tretorn. The company, which was founded in 1948, distributes its products in more than 120 countries, employs more than 9,000 people worldwide and has headquarters in Herzogenaurach/Germany, Boston, London and Hong Kong. For more information, please visit www.puma.com


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