Puma chief executive officer Arne Freundt on Wednesday gave hints of his strategy for the group, outlining plans to focus more on performance products and detailing upcoming product launches, including the return of the Rihanna-led Fenty X Puma collection.
During an online press conference to discuss the brand’s second-quarter results, Freundt expressed enthusiasm about putting more focus on performance sportswear. “We want anchor ourselves as a performance brand because we have been too much focused on lifestyle and fashion,” he told journalists. “Obviously that repositioning will take time. But we want to stress that we are a true performance brand … we are too dependent on sports lifestyle [products],” he argued.
Second-quarter sales at Puma rose 11.1 percent, in currency adjusted terms, to hit 2.12 billion euros, and the company has continued to grow. The Q2 results gave the German sportswear brand a total of 4.3 billion euros in sales for the year so far.
But Puma, whose sales growth has regularly previously outpaced that of much larger rivals Adidas and Nike, is now being buffeted by the same “macroeconomic headwinds” impacting others in the sportswear sector.
Even though Latin America continued to boom for Puma, the North American market proved problematic, and sales in the Americas fell 4.4 percent in Q2 to 861.5 million euros. This was mainly due to declines in the off-price, or discounted, business, the company said.
But Puma now has a “clear strategy” around this issue, Freundt said. “Off-price plays a crucial part in everybody’s distribution,” Freundt noted. “But it’s about how much share that takes up. We have too much and we need to rebalance that.”
Freundt also stressed the second half of the year would bring a number of important marketing events, mostly directed at the U.S.
These include the next signature sneaker from basketball player LaMelo Ball and, in September, the return of Puma’s previously very successful collaboration Fenty X Puma with Rihanna. Further Rihanna-related products would also drop in November and December.
“I am very sure that we will create a lot of brand heat in the second half of the year,” Freundt said, adding that Puma has also strengthened its U.S.-focused marketing team in Boston and planned fewer marketing campaigns, but of higher quality.
In general, the American market was softer, the Puma boss went on in explaining the drop in sales. “We see that across all different channels. There are less units being sold than last year,” he said. “Consumers are more cautious about spending. But,” he added, “they’re not sacrificing any spend when it comes to sport. They don’t save on kids either and newness is also very important because they [the retailers] like to sell that at full price,” Freundt said, referring to product innovation.
“Reducing inventories is very important in this softer environment, and newness and innovation is what is selling,” he stated.
Puma has already seen some slight improvement in the American market and is hoping to see more once the current back-to-school buying period offers up some concrete numbers in around six weeks’ time. “That will give an important signal for the rest of the year,” Freundt concluded.
Happily for Puma, “strong growth in other regions more than offset the decline in North America,” the company pointed out in a statement. Second-quarter sales in Europe, the Middle East and Africa rose 25 percent to 846 million euros.
The post-pandemic comeback was also continuing in China, with sales growth in Greater China rising 36 percent, compared to the second quarter of 2022. This resulted in overall sales in Asia-Pacific going up 24.4 percent altogether, to total 413.3 million euros.
Freundt was cautious about the Chinese numbers. He believes 2023 will be more of a “transitional year” for China, predicting the around 20 percent growth seen in the first six months of this year to continue in the second half of 2023. However he warned that last year at this time, many Chinese cities were still in a state of COVID-19 lockdown. This makes quarterly comparisons difficult, Freundt said.
“Chinese consumers sentiment continues to be muted,” he noted, saying that when he visited China recently there was still less foot traffic at retail. “Yes, it’s better than last year but it’s not at pre-crisis levels … we will see China return but the speed and the path to recovery is not so certain.”
Unlike in many other countries, there had not been a sudden spending spree after COVID-19 lockdowns ended. “We know consumers are sitting on savings but they’re not putting that into retail,” Freundt noted.
The new Puma boss, who’s been in the job since November 2022, also said that, when it came to sales in China, Puma was lagging behind its international competitors there, more than in any other market.
In fact, a large exposure to the Chinese had negatively impacted Puma rival Adidas during the pandemic and also during politically-motivated consumer boycotts. Adidas had set its sights on China and suffered badly, whereas Puma did not feel the same pain.
This was the first of several differences between Freundt and his predecessor. In discussing strategies to increase sales in China and to combat sluggishness in the Americas, Freundt was not openly critical but gave further hints as to how his strategy night now differ.
Former Puma boss Bjorn Gulden is largely credited with seeing the brand grow at high rates over the past nine years; he left Puma last December to take the reins at Adidas.
Footwear continues to be Puma’s strongest product category. In the second quarter, sales of Puma shoes rose 18.2 percent and the company aims to further increase market share in performance-related footwear, in soccer and running. Meanwhile apparel sales grew 4.2 percent while accessories gained 3.3 percent.
In the second quarter, Puma’s EBIT fell 21.2 percent to 115 million euros. Puma said this was due to an increase in operating expenses, which rose 6.6 percent to 843 million euros over the second quarter. The sportswear sector everywhere has been impacted by rising costs for materials and freight, as well as the rising cost of marketing.
However, as the company noted in its statement, “this is in line with expectations that our gross profit margin and profitability will be under more pressure in the first half of the year than in the second half.”
Puma’s Q2 results came in slightly ahead of market expectations. Analysts expect pressure on the company’s margins to ease later in the year and the sportswear brand confirmed its outlook for 2023. The company still expects to see sales growth in the high single digits and flat EBIT, with earnings between 590 million and 670 million euros.
“We are taking it quarter by quarter in this volatile environment,” Freundt said of Puma’s moderate outlook. “We did see stronger business than expected … and if the trend continues to be positive, as we see it, we will adjust our outlook.”
This story was reported by WWD and originally appeared on WWD.com.
