Puma's profitability takes a hit, shares plummet

Investing.com -- Puma SE (ETR:PUMG) shares tumbled on Wednesday after the company reported disappointing second-quarter results and slashed its full-year profit outlook.

At 3:52 am (0752 GMT), Puma SE was trading 12.6% lower at €36.34.

As per RBC Capital Markets, Puma's second quarter revenues grew by just 2.1% year-over-year to €2.12 billion, falling short of the consensus estimate of 3.7%. 

The company's EBIT came in at €117 million, 3% below the expected €120 million. The results were adversely impacted by a decline in financial performance, with net income and EPS missing expectations due to higher financial expenses.

The revenue miss was driven by weaker-than-anticipated performance in the EMEA and APAC regions, which posted declines of 4.3% and 1.9%, respectively. In contrast, the Americas region exceeded expectations with a notable 9% growth. 

Puma's footwear segment remained flat, while its apparel revenues grew by 9.2%, surpassing forecasts. Despite this, the overall revenue performance fell short of market expectations.

“With view to our strong orderbook for the second half of the year, we reiterate our sales growth outlook in the MSD range and are narrowing our full-year EBIT outlook range to € 620-670m EBIT in light of these external factors,” said Arne Freundt, chief executive at Puma SE. 

Adding to the negative sentiment, Puma has lowered the top end of its full-year EBIT guidance range to €670 million from €700 million, implying a 2% reduction at the midpoint compared to the previous consensus estimate of €657 million. 

“We would expect to see consensus reduction of low- to mid-single digit,” analysts at RBC said.

“Guidance and consensus expectations for revenues and earnings are 4Q24 weighted supported by wholesale order book according to management, but which does increase back end risk in our view,” they added. 

RBC Capital Markets highlighted that Puma's gross margin of 46.8% was better than anticipated, driven by favorable product and channel mix and cost efficiencies, despite material FX headwinds. 

However, the higher operating expenses and lower royalty income contributed to the overall earnings shortfall. EPS of €0.28 was significantly below the consensus estimate, impacted by a higher-than-expected net financial result of €43 million in losses.