Puma sales beat estimates but U.S. market drags

By Linda Pasquini and Helen Reid

(Reuters) -German sportswear brand Puma’s second-quarter sales grew by 11%, the company reported on Wednesday, slightly ahead of market expectations thanks to stronger revenues from Asia and Europe, while the U.S. dragged.

The sportswear sector is struggling with weakening demand in North America and a slower than expected recovery in China, where Nike (NYSE:), Adidas (OTC:), and Puma are facing increasing competition from local brands.

Puma’s shares were up 3% by 0755 GMT, as the company said it was on track to meet 2023 targets and may even increase guidance if things go well in the third quarter.

However, management sounded a cautious note on market conditions, including an “uncertain” recovery in China and weak consumer sentiment in the United States.

“Currently we see no signs of improvement in the U.S.,” CEO Arne Freundt told reporters on a call.

Puma’s sales in the Americas were down 4.4% from the same quarter last year – a worsening after a 0.8% decline in the first quarter, which Puma blamed on its “relative dependency” on off-price wholesale outlets in the U.S.

Globally, Puma said it achieved its goal of normalising inventory levels by mid-year, with inventories at 2.146 billion euros, down from the first quarter. Retailers in the U.S. have been discounting to reduce a sector-wide build-up of stock.

As raw materials costs start to ease, Freundt said Puma is lowering prices on certain products, but added he couldn’t comment on possible broader deflation in apparel prices.

Freundt said Puma would focus on ‘elevating’ its brand, as the retailer said it saw strong demand for its new terrace sneakers Palermo and Super Team.

The first products from a renewed partnership with Rihanna will showcase the Grammy-winning Barbadian singer’s take on the terrace trend when they launch in September, Puma said.

Puma’s sales came in at 2.12 billion euros ($2.34 billion) in the quarter, up from 2 billion a year earlier and above the 2.05 billion expected by analysts polled by Refinitiv Eikon.

The company confirmed its full-year outlook of high single-digit currency-adjusted revenue growth, and an operating profit of between 590 million and 670 million euros.

Puma’s second-quarter sales in the Asia-Pacific region were strong, up 24.4% from the same quarter last year, but slowing slightly from the first quarter which saw 27.4% growth.

($1 = 0.9043 euros)