PUMA's consolidated sales in the second quarter of 2014 were in line with expectations, rising by 0.6% currency adjusted to € 652 million. However, due to continued currency weakness in Turkey, Russia, South Africa, India, Japan and the Americas, sales declined by 5.8% in Euro terms.
PUMA's gross profit margin increased from 46.0% to 46.7% for the second quarter of 2014 as promotional activities declined compared to the same period last year. Footwear gross profit margin decreased from 44.1% to 42.7% due to the product and category mix. Apparel margins rose from 47.0% to 48.2% and the margins for accessories increased from 49.2% to 52.4%.
Operating expenditures were broadly unchanged for the quarter at € 297 million, despite increased marketing expenditures associated with the World Cup in Brazil.
The negative currency impact on sales and gross profit led to a decline in PUMA's operating profit (EBIT) from € 31 million to € 13 million for the second quarter of 2014. The EBIT ratio decreased from 4.5% to 1.9%.
The financial result improved from € -4.1 million to € -1.3 million in the second quarter. The result remained negative due mainly to currency conversion impacts.
PUMA's consolidated net earnings declined from € 18 million to € 4 million impacted in part by a slightly higher tax rate in the quarter due to tax expenses related to prior years. As a result, earnings per share decreased from € 1.17 to € 0.28 in the second quarter of the year.
In the EMEA region, sales declined by 1.4% currency adjusted to € 256 million as strong performances in the United Kingdom and Switzerland could not entirely offset a decline in French and Scandinavian wholesale revenues.
Sales in the Americas increased by 4.6% currency adjusted to € 251 million, as key account initiatives like the PUMA Labs at Footlocker contributed to the performance improvement in North America, and Latin America benefited from increased Teamsport sales, particularly in Chile and Mexico.
Sales in the Asia/Pacific region declined by 2.3% currency adjusted to € 146 million despite solid growth in Korea and India, as performance in Japan was pressured by the sales tax increase at the beginning of the quarter which led to a decline across categories.
Apparel sales, however, improved by 12.8% currency adjusted to €241 million as the World Cup supported strong performances in replica jerseys as well as training and fan wear, particularly for the Italian, Chilean and African teams.
Accessories sales also improved by 3.4% currency adjusted to € 134 million due to continued demand for PUMA's socks and bodywear. However, Golf equipment sales declined during the quarter due to the weaker golfing environment.
PUMA's continued emphasis on the balance sheet delivered positive results. Inventories declined by 7.9% to € 584 million and trade receivables also decreased by 9.8% to € 463 million. As trade payables remained stable, the Group's working capital improved by 13.0% to € 596 million.
PUMA's free cashflow improved from € -112 million to € -72 million for the first six months of 2014. This was mainly due to lower working capital requirements. Capital expenditure rose from € 19 million to € 31 million as PUMA continued to invest in the opening and refurbishment of selected retail stores, as well as office and IT equipment.
PUMA's net cash position at the end of the first half of the year improved from € 233 million to € 267 million.
Bjørn Gulden, Chief Executive Officer of PUMA SE says, "PUMA's second quarter sales and operating profit developed in line with our expectations. I was very happy with PUMA's visibility during the World Cup in Brazil.”
He adds, “But, as I have said all along, we know that the repositioning of PUMA and the turnaround of the business will take time. However, I feel we are making progress on all our key strategic priorities and we have initiated the right projects to make 2014 the start of the turnaround."
2014 continues to be a turnaround year for PUMA and it will continue to invest strongly in marketing and sports assets, while maintaining tight control on other operating expenditures. PUMA continues to expect flat full year currency adjusted net sales and a slight increase in the gross profit margin, as PUMA replaces lower tier distribution with higher tier distribution channels.
