Are you sure?

Puma says 2008 off to excellent start

Puma AG forecast higher 2008 sales and profit thanks to the Olympics and European Cup soccer after the German sports goods maker's Q4 operating earnings rose more than a fifth.

Shares of Puma jumped more than 5% after the company said Q4 earnings before interest and tax (EBIT) advanced to €52.4 million ($77.7 million), in line with the average forecast of €52 million in a Reuters poll of 13 analysts.

Puma generated higher sales in Europe and Asia, opened new stores and improved margins in footwear and clothes in the quarter, when sales rose 10.3% on a currency-adjusted basis to €504.5 million.

“Puma had an excellent and successful start into the extraordinary sports year 2008,” Chief Executive Jochen Zeitz told a news conference on Tuesday.

Herzogenaurach-based Puma was the biggest uniform sponsor in the Africa Cup of Nations soccer tournament earlier this year, kitting Egypt, which beat Cameroon to defend its title.

Zeitz said future orders were up 10%, currency-neutral, due to the Olympics and European Cup soccer.

He said Puma expects sales to rise by a single-digit percentage, on a currency-adjusted basis, this year. EBIT is also expected to increase, but the EBIT margin will fall below the 2007 level of 15.7% as the company expands activities and spends more on marketing for major sports events.

“While the sales indication is quite broad (we factor in high single digit), we feel the EBIT guidance may be slightly on the conservative side,” HSBC analysts wrote in a note. “The group should be able to stabilize margins.”

Gucci owner PPR, the French fashion-to-furniture retailer that owns about 65% of Puma, said last month its Q4 sales rose about 15% thanks to its purchase of Puma in 2007.

Zeitz said the company planned to pay a dividend of €2.75 a share for the past year, 10% higher than in 2006.

Puma bought 150,000 treasury shares in January and February for €41.6 million and will continue to buy more this year.

During the fourth quarter, a crisis at US sports shoes retailer Footlocker hurt Puma's US business. Peers such as Nike and Adidas, which reports quarterly earnings on March 5, also saw no new orders as well as cancellation of existing orders as Footlocker shut stores.

Zeitz said its US business could see an improvement in Q2.

Zeitz, chief executive of Puma since 1993, is credited with transforming the company into a lifestyle brand and making it one of Germany's most well known brands abroad.

Puma is still behind rivals Adidas and Nike, both of which are about five times its size in terms of sales. (Reuters)