Puma plunges as profit warning highlights Adidas lead

(Bloomberg) — Shares of Puma SE plunged after the German sportswear company reported disappointing financial results and boosted its profitability targets in a painful contrast to city rival Adidas.

Puma on Wednesday announced efforts to strengthen its belt and lowered its profit margin outlook. Shares fell as much as 19% in Frankfurt trading, the biggest decline in more than 20 years.

CEO Arne Freund is struggling to usher in a new era of rapid growth.

In the five years before Mr. Freund took over as CEO, PUMA had doubled its revenue, thanks in part to a smart comeback in sports like basketball and the accumulation of cool points from brand ambassadors like rapper Jay-Z. , shed tears.

However, since Freund took over the reins at the end of 2022, buzz around the Puma brand has stagnated. The change in fortunes coincided with the departure of Björn Gulden, who left for Adidas in crisis after nearly a decade at the helm of Puma.

Earlier this week, Adidas reported surprisingly strong fourth-quarter profits, buoyed by demand for retro sneakers.

Meanwhile, Puma announced cost reductions to achieve its target of 8.5% profit margin before interest and tax by 2027. This is a downward revision from previous guidance, which had aimed to reach that level by as early as 2025, Morgan analyst Grace Smalley said. Stanley.

The company cited “labor costs” as part of its cost-cutting program and hinted at the possibility of layoffs, but did not provide details.

Several factors help explain the different trajectories of Puma and Adidas. First, Freund is trying to shift the Puma brand toward the luxury market by focusing on selling more expensive soccer, basketball and running gear. In doing so, the company sacrificed some of its sales by phasing out some of its cheaper products.

Mr. Freund also was relatively unknown among investors and consumers before taking over from Mr. Gulden, who had earned a reputation as a savvy marketer and brand manager over decades in the industry. .

Perhaps Gruden’s most important early decision at Adidas was to recognize the growing consumer interest in retro sneakers like the Samba and speed up production. This shoe, and similar models such as Spezial and Campus, are some of the top sellers in the industry.

Puma was slow to capitalize on this trend, despite owning similar models like the Palermo. The thin-soled retro model Speed ​​Cat struggled to gain traction.

Morgan Stanley’s Smalley said Puma’s gloomy outlook stands in stark contrast to its message in November. She said this is likely a result of weaker-than-expected performance in Latin America, a stronger U.S. dollar, increased tariff risk with China and Puma’s continued struggle to build brand momentum.

Earnings before interest and taxes rose to 109 million euros ($114 million) in the fourth quarter, missing the average analyst estimate of 131 million euros. Net income of 24 million euros was also disappointing.

Puma’s share price has fallen 19% in value over the past 12 months, while Adidas has gained more than 50%.

Jefferies analyst James Gruzinich wrote in a note that Wall Street analysts will likely lower their 2025 earnings estimates, which will weigh on the stock.

–With assistance from Joe Easton.

(Updated with Adidas contrast from first paragraph)

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