Puma raises full-year guidance after Man City and basketball boost

German sportswear group Puma raised sales and profit forecasts on Wednesday after a strong second quarter, helped by a return to the U.S. basketball market and a deal with English Premier League champions Manchester City.

Puma shares, which have risen almost 40% in the past year, jumped 6.5% to a record high.
The company has a history of upgrading initially conservative forecasts and RBC analyst Piral Dadhania said the key question is whether Puma can beat its latest guidance.

Chief Executive Bjorn Gulden described Puma’s order book as solid for the third quarter and described the latest forecasts as “realistic, not conservative”.

Puma signed a strategic partnership with English soccer club Manchester City in February - taking over from rival Nike - as its deal with Arsenal ended. Gulden said sales of new kits launched this month were ahead of expectations.

The company, which returned to the basketball market late last year, noted that its sponsored player Danny Green had helped the Toronto Raptors to win their first NBA championship, while retro “Ralph Sampson” shoes have been selling well.

Puma has been growing faster than bigger rivals Adidas and market leader Nike, helped by savvy social media campaigns and partnerships with top athletes, soccer clubs and celebrities such as singer Selena Gomez and rap mogul Jay-Z.

Nike missed analysts’ estimates for quarterly profit in June as the world’s largest sportswear maker spent more on marketing, while Under Armour Inc aid on Tuesday that it now expects a slight decline in North American revenue in 2019.

Puma’s second-quarter sales rose by a currency-adjusted 15.7% to 1.23 billion euros ($1.37 billion), while operating profit rose 39% to 80.3 million euros, both beating average analyst forecasts.

CHINA PLANS

Sales rose 22% in Asia/Pacific and a better than expected 20% in the Americas, helped by the basketball launch and sales of white Cali sneakers promoted by Gomez.

Gulden said he saw no signs of a slowdown of the sporting goods market in China, which he said could rival the United States as the biggest market within five years.

Puma’s inventories were up 19.4%, about 5-7% of which was attributed to preparations for the possible imposition of U.S. tariffs on goods produced in China.

Puma has been moving production out of China to countries such as Vietnam, cutting the proportion of products produced in China for the U.S. market to less than 25% from more than 50% five years ago.

“Should the duties come, I am convinced prices will go up because you cannot move all production out of China,” Gulden told reporters on a conference call.

Puma lifed its full-year currency-adjusted sales growth forecast to about 13% from 10% and predicted operating profit of between 410 million and 430 million euros, up from 395 million to 415 million euros.