Event in Progress:
View the latest research on other companies in the sector.
Q3 more solid than feared Consensus expectations had fallen before Q3 results, but today management reiterated its full year sales and profit guidance. Improved trading in October, gross margin momentum and reduced inventory levels all support the solid outlook. Management also said that its product pipeline was the best in a decade, supported by a growing roster of ambassadors and influencers, which now includes A$AP Rocky as Creative Director for Puma x F1. Our EBIT forecast edges up but EPS falls, and we maintain our Neutral rating. Q3 summary - beats EBIT expectations which had been lowered into the print The Q3 punchline was that EBIT was 2% ahead but EPS was 5% below expectations. However, gross margins beat expectations and inventory days are now below 2019 levels. Relative to investor fears ahead of the results, and falling sell-side consensus forecasts in recent weeks, today''s news was solid in our view. Outlook - unchanged guidance but some signs of increased confidence Puma maintained its full year 2023 EBIT guidance at EUR 590m-670m. Management said that it is confident of delivering the mid-point, implying Q4 EBIT of a little above EUR 100m, subject to no major changes in the currency or demand situation. Given the volatile geopolitical and macroeconomic environment there are still risks, but we expect these results have given investors more confidence in achieving this mid-point. This implies consensus is likely to be unchanged or may edge upwards. Minor changes to forecasts We increase our full year 2023 EBIT forecast by c.1% while EPS falls c.2% on higher financial charges. Management did not comment on the 2024 outlook but we remain below consensus. Our price target edges down to EUR 60 (from EUR 63), based on long term margins of c.10%, and we prefer Adidas (+) and JD Sports (+) in the sports sector. We maintain our Neutral rating.
PUMA SE
Puma Q3 preview - due pre-market on 24 October Puma''s shares fell sharply this week on investor fears of slower sales momentum during Q3. We publish our estimates ahead of the Q3 results, released on 24 October. We trim our Q3 EBIT forecast from EUR 238m to EUR 232m, with gross margin and costs largely compensating for weaker topline, although our full year estimates fall by c.3% as we factor in slower sales momentum into Q4. We maintain our Neutral rating. Q3 expectations - lowered into the print At its Q2 results, management had suggested that if Puma''s sales momentum in Q2 and July continued for the rest of Q3 then it might need to raise its full year ''high single digit'' sales guidance. We expect this optimism to have given way to the realities of a slower consumer environment in North America and Asia. The prospect of a sales guidance upgrade and an earnings beat looks lower now, in our view. Full Year 2023 - in the right ball-park Management guidance is for FY23 high-single-digit currency neutral sales growth and underlying EBIT of EUR 590-670m. We expect it to reiterate this guidance at its Q3 results later this month. Consensus (Visible Alpha, 4 October), sits at EUR 635m. We think this is in the right ball-park (we model EUR 630m) but it strikes us that in the absence of upgrades, the c.29% EBIT growth being assumed by consensus for 2024 seems like a high bar. Reiterate Neutral We remain below consensus for 2024, which looks for c.29% EBIT growth (see Figure 4 for details). Our price target edges down to EUR 63 (from EUR 64), based on long term margins of c.10%, but we prefer Adidas (+) and JD Sports (+) in the sports sector. We maintain our Neutral rating.
Full year guidance upside after Q2 sales beat The key takeaway from Puma''s Q2 results was that management said it is ''perfectly on track'' to meet full year guidance. It noted that Q3 had started favourably and that it could adjust its full year outlook in due course. We think this is more of a sales comment, given gross margin pressure in the quarter, rather than a profit comment, but our EPS forecasts edge upwards. We do think, however, that the overall sporting goods environment is now broadly past some of its supply challenges, and the focus should be on brand heat, macro and gross margin recovery. Adidas is our preferred play among the brands, as set out in ADIDAS (+) / INDITEX (=) : From Z to A. Q2 summary - sales beat was the main surprise The punchline from Q2 was that the year is on track, with Q2 registering stronger sales than expected, including a small 100-200bps pull-forward from Q3 shipments. Q2 EBIT beat and EPS missed slightly. North America remains the weak spot and we estimate the growth in China only slightly improved compared with Q1 when compared with 2019 levels. EEMEA, notably Turkey, Ukraine and Middle East, drove over-proportionate growth. H2 outlook - uncertain outlook but a good start to Q3 Management has not changed its guidance, but comments about July trading suggest that Q3 has started ahead of its low/mid-single-digit guidance. The gross margin trajectory improves in H2, as it should for other players in the industry, thanks to lower promotions and lower sourcing costs, although currency will probably remain a headwind into next year. Forecasts broadly unchanged We bank the Q2 EBIT beat but our FY23 EPS forecasts only edge upwards. We remain below consensus for 2024, which looks for c.27% EBIT and c.33% EPS growth. Our price target ticks up to EUR 64, based on long term margins of c.10%, but we prefer Adidas (+) and JD Sports (+) in the sports sector.
Q1 in line, sales slow from here Puma delivered Q1 profits in line with expectations and an EPS beat, although the inventory pile reduced less than hoped. China returned to growth, compensating for a sharp decline in the US where management is containing sales into the off-price channel. But how to play the fade in revenue growth to low/mid-single digits when investors are used to double-digit growth from Puma? We think the stock lacks positive catalysts and maintain our neutral rating. A few surprises in Q1 results Sales and profits were in line with expectations, as Figure 1 overleaf shows. China sales growth of 10%, with mid-teens sell out in Direct to Consumer, is encouraging. Conversely, North America fell c.-19% and we estimate this includes a 30% reduction in wholesale. However, EPS was 10% ahead on lower minority interest charges, reflecting this slowdown of sell-in to the value and off-price channels in the US. There was a large working capital outflow in the quarter also, although most of this looks like timing effects. Q2 and Q3 outlook: spectator sport Management guided low/mid-single digit sales growth for Q2 and indicated the same for Q3. Outside Covid-affected 2020, Puma has delivered double-digit growth every quarter since Q2 16. With an expected gross margin decline in Q2 and costs rising above sales growth, we expect profits to be weak. As we explored in HandM / Puma: Playing for the next 10%, we think the stock lacks catalysts. Tweaking forecasts, remain on the sidelines We trim full year EBIT from EUR 645m to EUR 640m but lift our EPS forecasts by c.2%, largely due to lower minority charges. The stock (at EUR 55.6) trades on CY23 P/E 22.4x and CY24 P/E 17.5x on our forecasts. Our DCF-driven target price assumes long term margins of 10% so we can see a value argument, but see limited near term drivers.
Cat offers something for bulls and bears Puma delivered FY22 results in line with expectations but guided slightly more conservatively than expected for 2023. The main encouragement for bulls is that Puma''s brand momentum remains strong, likely further boosted by a new collaboration with Rihanna, and that management''s 2025 margin guidance is ahead of consensus. However, the near-term looks a little more challenging and Puma has been a multi-year consensus long. Growth is slowing and competition increasing, and trading on 2023 P/E of over 20x we maintain our Neutral rating. Q4 results left us feline underwhelmed Q4 profits were in line with expectations, albeit the quarter is a small contributor to annual profits. Inventory was higher than expected but so too was net cash. Footwear and US/EMEA regions outperformed while China was (unsurprisingly) weak. China was just c.6% of group sales in 2022, compared with almost 14% in 2019. 2023 Guidance: cautious, and there''s work to do Full year guidance of high single-digit sales growth and EBIT EUR 590-670m was a bit light of expectations, perhaps EUR c.20m at the mid-point. On the results conference call, management said its priorities were: 1/ increase brand strength; 2/ build in the US; 3/ rebound in China. Management acknowledging that it needs to improve its wholesale distribution in the US was a bit of a surprise. Let sleeping cats lie: maintain Neutral rating Puma''s brand momentum remains strong, but with a bit less gearing to China than peers we''re not quite sure what will get the fans excited in the very short term. Our 2023 EBIT forecast falls by c.1% while EPS falls c.5%. We trim our DCF-based target price to EUR 66 (from EUR 68). This remains based on a terminal EBIT margin of 10%. We prefer to play sporting goods via JD Sports (+).
A cautious but confident cat Puma''s FY results were all about mgmt''s 2022 guidance since Q4 21 had been pre-released. On balance we felt the full year guidance was quite encouraging from a historically conservative management team. We raise our 2022 EBIT forecasts by c.4%, although we remain a touch below consensus and the top end of guidance, and our EPS forecasts are broadly unchanged. We do see upside risk if the environment remains steady, however, and maintain our Outperform rating. Q4 results: China the only area of weakness Although Q4 headlines had been pre-released, the detail revealed a small EPS miss, a DPS beat, stronger cash generation despite higher inventories (which were largely due to goods in transit) and a notably weak performance in China. Constant currency sales were -27% yoy in China during Q4 as weak footfall caused by Covid lockdowns compounded by the difficulty western brands are having marketing and selling online. Guidance for 2022: couldn''t have hoped for more Management guided for ''at least'' 10% cFX sales growth in 2022 (consensus c.+12%). It said that January was already double-digit and that the wholesale order book was the strongest ever, which implies 30% yoy. EBIT guidance of EUR 600-700m was also quite encouraging, given the company''s historical conservatism, with the top-end of the range in line with consensus (EUR 701m). We raise from EUR 645m to EUR 670m. Our EPS forecasts for 2022 and 2023 remain broadly unchanged, with 2023 EBIT margin a touch under management''s 10% ambition. Valuation: still an undervalued player We continue to see attractive sales and margin potential. Its high near-term multiple (CY22 P/E c.32.6x at EUR 86.9) should fall sharply to CY23 P/E c.24.4x and reverse DCF implies the market is only pricing in 10% EBIT margins in the long term. Our price target is based on DCF valuation which assumes long term margins of 14%; we trim it as we apply the same valuation assumptions to...
PUMA ended the year with both the top line and profitability in line with consensus expectations. The beginning of FY22 continues to be impacted by the disrupted supply chain, inflationary pressure and geopolitical uncertainties, which led the group to release a cautious outlook for FY22. In particular, the “boycott” situation and resurgence of COVID-19 in China continue to weigh on the group’s activity in the country.
Quickly out of the blocks: Puma pre-releases Q4/FY results Puma reported headline results for Q4/FY this morning. Full year EBIT of EUR557m came in 7% ahead of consensus and 10% ahead of our own forecasts. Sales momentum has been stronger than expected despite supply constraints. We bank the FY21 profits but leave FY22 forecasts unchanged. We see upside from here, and maintain our Outperform rating. 2021 personal best: Q4 beats on sales and profits Q4 is typically a small quarter in terms of profitability, but stronger results drove a 7% consensus full year profit beat. Q4 constant currency sales growth of +14% was ahead of consensus (+9%) and driven by continued strength in Americas and EMEA. We estimate APAC to have declined c.3% YoY, with covid restrictions impacting China. Eyes on the 2022 prize: forecasts unchanged We have left our FY22 forecasts unchanged at EBIT (EUR645m). This is below consensus (EUR700m prior to today) and we see upside potential, but we think that management''s guidance (due in February) will be prudent and be in the ball-park of our forecasts. We model cFX sales +7.5% (40% higher than pre-covid), gross margins +75bps and EBIT margins +60bps to 8.8% because growth is likely to be weighted to the lower-margin Americas region. Key debates will be the short-term impact of covid and supply constraints (increasingly related to logistics absenteeism rather than production shortages) and the path of recovery in China. The cash on the balance sheet might begin to be a focus too. Valuation: still an undervalued player We continue to see attractive sales and margin potential. Puma trades on optically high near-term multiples (CY22 P/E c.35x) but we think valuation remains attractive given its growth potential. This is supported by our DCF valuation which assumes long term margins of 14%.
Out in front: another beat Despite ongoing supply chain challenges Puma delivered a record absolute quarterly profit in Q3 and a consensus beat driven by sales. The results leave us more confident about Q4 profits, China, the supply outlook for Q1, and margins for 2022. The risks haven''t gone away, but the company has navigated through them well so far, and we still see Puma as an outperformer. Q3 sets up a full year personal best Q3 EBIT of EUR c.229m was 13% ahead of consensus, driven by a 5% sales beat and good operating leverage. This was despite more than EUR 200m of sales lost to supply constraints and higher sourcing costs. The exit rate from the quarter, on a two-year stacked sales growth rate, was the strongest of the year (see Figure 1) despite continued pressure in China caused by the cotton controversy and boycott of Western brands. The cat''s out of the bag: Q4 guidance is conservative Management raised its guidance for FY EBIT to EUR 450-500m, which would represent record profits. Even the top end implies Q4 profits fall heavily from EUR 63m last year (to EUR 8m this year), which we think is unlikely. We factor in EUR 200m lost sales from supply constraints but land above guidance, on full year EBIT of EUR 518m. Valuation: still an undervalued player We bank the Q3 beat, leaving Q4 unchanged, and our target price rises by 2%. We continue to see attractive sales and margin potential. Puma trades on optically high near-term margins but we think Puma remains attractively valued. This is supported by our DCF valuation which assumes long term margins of 14%, just 200bps higher than Puma achieved this quarter. Inside we set out 15 questions for management and key highlights from the Q3 conference call.
PUMA experienced a better-than-expected Q3 21. The strong demand in the Americas, favourable channel mix and less promotional activity have limited the impact of supply-chain challenges and ongoing COVID-19-related restrictions in Asia. The ongoing industry-wide supply-chain disruptions and the continued challenging trading environment in China have led the group to upgrade conservatively its FY 21 outlook. The current market expectations were already broadly in line with the updated guidance.
PUMA has published its Q2 21 results, in line with the preliminary release. The robust growth in North America and gradual recovery in EMEA have led the top line to exceed the 2019 level. The trading performance in China has been affected by the “boycott over Xinjiang cotton”, sales slid 5% yoy. The gross margin has significantly improved from last year, despite supply chain constraints. However, on the back of the strong quarter, the conservative guidance for FY21 leaves some shadow.
No nap for the cat: Puma pre-releases strong Q2 results Puma today pre-released its Q2 headline results and gave more specific guidance on full year profits, ahead of full publication on 29 July. Q2 profits were EUR c.30m ahead of consensus (c.35%) driven, in particular, by strength in North America. We move our EBIT forecasts to the top of the full year guided range (EUR 500m, +9%) and maintain our outperform rating. Q2: cat and mouse We had raised our Q2 expectations at the pre-close stage but today Puma said Q2 EBIT would be EUR 109m, compared with consensus/Exane forecasts of EUR c.80m. This c.35% beat was driven by substantially stronger sales: +96% cFX growth (cons/Exane +75%) implying a two-year growth rate of +36% (vs +22% expected). We are encouraged to see such strong margins (c.130bps higher than expected, at 6.9%): compared with Q2 2019 sales are 30% higher (in reported currency) and we estimate that costs are c.24% higher, so leverage is coming through nicely. A paws on upgrades? Management gave more specific full year guidance today. It expects full year cFX sales growth of ''at least 20%'' (previously ''mid-teens''), which was already factored in (cons +23.6% and Exane +22.1% prior to today). It also guided full year EBIT of EUR 400-500m (previously only ''a significant improvement''). Prior to today consensus was at EUR 484m and Exane EUR 460m. Management acknowledged the external risks, qualifying the guidance as ''subject to continued manufacturing operations in our key sourcing countries such as Vietnam and China and no major interruptions due to COVID-19''. In recent days the industry has seen Covid-related factory shut-downs in Vietnam. Feline good about the full year We are not discouraged by the guided full year profit range and raise our EBIT forecast to the top of this, at EUR 500m (mostly from banking the Q2 beat). Our TP nudges up to EUR 113 since we maintain our long term margin expectation at 14%. We maintain our...
Puma recorded a strong start to the year. Encouraging sales growth across all régions and all segments confirmed the pandemic-led surge in the consciousness for healthy living and a rekindled trend in athleisure. However, the group’s very cautious view on the trading environment for the rest of the year, highlighting the “boycott on Xinjiang cotton issue” in China has started to weigh visibly on the group’s business since the end of March.
A beat but it''s not enough Puma shares fell today on Q1 results which beat top-end expectations. This was in part because the impact on the brand from political tensions in China appears to be greater than the market had expected. We bank the Q1 beat and see upside risk to earnings, but forecast cautiously given the risks over the next quarter. Another strong quarter Q1 constant currency sales growth of +25.8% was above top-end expectations (Exane +23.1%, Visible Alpha Consensus +19.5%). Q1 EBIT beat by EUR 15m and we bank this, now forecasting full year EBIT of EUR 457m. Our FY20 cFX sales growth of +19% is above ''mid-teens'' guidance. Political risks add to the challenges Puma has c.15% of its stores closed worldwide and shipment delays have also presented a challenge in recent months. In China, 15% of group sales, traffic appears to have slowed by c.30% due to rising political tensions. We take 20%ppts off our China growth rate for the whole of Q2 to reflect the uncertainty of the situation. Thanks to soft comps, we expect Q2 group cFX growth of +64%, though this is ''only'' +14% on a two year basis, slower than Q1''s two-year stack (+24%). Operational leverage We discuss the key takeaways from the analyst call inside and note that operating leverage was a key focus: management acknowledged that the situation was creating unique inefficiencies (closed stores, unusual shift to e-commerce) and were pleased to have returned Q1 EBIT margins to 2019 levels of 10.0%. Our Q2 estimates assume that margins are below 2019 levels because of China. Short term risks but eyes on the prize Puma''s strong brand momentum is not in doubt and the company''s products and initiatives give us confidence that when external factors become more favourable then margin expansion will come through. We maintain our Outperform and EUR 105 target, based on a low-teen long term margin.
Despite the second wave of lockdowns and re-imposed anti-pandemic measures keeping some stores shut, the group achieved top-line and profitability growth in Q4 20. The group expects the ongoing lockdowns in Europe and uncertainty related to the pandemic to continue to weigh on the group’s business until the end of Q2 21, followed by a strong recovery in H2 21.
Cat and mouse on guidance The key today was going to be 2021 guidance and here the short term caution was even louder than anticipated. However, we were reassured by management''s comments on the healthy wholesale order book, more than 30% higher yoy, and to hear that Jan/Feb sales are also in growth. We cut EPS materially, but it feels more precautionary: without new issues emerging the operating leverage could be substantial. The brand remains hot, and we maintain our Outperform Q4 results: good, could have been even better The results were broadly in line with expectations and management proposed the resumption of the dividend. Most notable was the commentary around the US, where supply shortages limited the growth at the end of the quarter. Guidance: cautious, but ready to spring into action in H2 Currently around 50% of doors are closed in Europe and online is not fully compensating for this. Understandably, management guided annual sales cautiously: ''at least a moderate increase in sales at constant currency- with an upside potential''. On the analyst call the colour on Q1 to date, as well as seeing the monthly comps, made it clear that Q1 sales could grow by double-digits, depending on how Puma annualises the weak March 2020. The maths around the comps would still suggest to us that the company can grow sales by healthy double-digits in 2021. Sticking to our Outperform: brand momentum is very strong An order book 30% higher year on year and a strong pipeline of new products and initiatives maintain our confidence that the brand can drive sales growth and margin expansion in 2021 and beyond. We cut our earnings forecasts for this year but are hopeful the company can over-deliver. The stock trades on high near-term multiples (CY22 P/E c.33x) but this reflects margins which are still likely to be single-digit at that stage, with material upside over the medium term.
Out in front: another beat In Q3 Puma delivered its record absolute quarterly profit and a high quality consensus beat. It also pushed forward its strategy by signing Neymar Jr and LaMelo Ball as endorsers, announcing a new women''s platform and continuing to invest in infrastructure. Q4 has started strongly: of course, pandemic risks abound, but we still see Puma as an outperformer. Q3 results: a personal best Q3 EBIT of EUR 189.5m was Puma''s record in a quarter, and beat consensus by 11% despite the bar being raised heading into the results. The quality was high, with sales, EBIT margins, inventory, net cash and earnings all better than expected. Although Asia Pacific was disappointing during the quarter, it is clear that China has been improving since a low point in August. Q4 outlook: up for the challenge The welcome news is that growth in October has been double-digit, the product pipeline is strong, the order book for the next 9-12 months is good, and inventory levels are in a healthy place. If its major territories avoid second lockdowns and retailers don''t cancel orders then the upgrade agenda should continue and the brand looks very well set for 2021. Visibility remains low, however. Valuation: still an undervalued player We nudge up our full year forecasts and target price by 1%, and also set out 15 questions for management. We continue to see attractive sales and margin potential. Puma trades on a CY21 P/E premium to Adidas (c.39.5x vs c.30.2x) but on CY22 forecasts we think Puma remains attractively valued (27.7x vs 24.4x). This is supported by DCF valuation which assumes long term margins of 13%, just 100bps higher than Puma achieved this quarter.
Share: