Helen Reid
(Reuters) - German sportswear brand Puma reported lower-than-expected fourth-quarter sales and a drop in annual profit, raising questions about its ability to compete with larger rivals Adidas and Nike. , the company's stock price fell more than 18% on Thursday.
Adidas' weak results late Wednesday came after it reported strong sales and profitability, underscoring the difficulties Puma still faces in boosting its brand and grabbing a bigger share of the $400 billion global sportswear market.
Puma shares were down 18.7% at 34 euros by 1120 GMT, on track for their worst day ever and touching their lowest level since March 2018.
Puma has been marketing new shoes, such as the racing-inspired Speedcat, in an attempt to break into a market dominated by Adidas' retro Samba football sneakers, but analysts at JPMorgan said sales trends for the Speedcat were weaker than expected.
Newer, fast-growing brands like On Running and Hoka are shaking up the sportswear industry, chipping away at the dominance of Nike, which has seen slowing sales, and creating more competition for shelf space at top sporting goods retailers.
"This will make investors question what Puma's competitive advantage is," said Adam Cochrane, a research analyst at Deutsche Bank.
"If Puma doesn't really take market share while its biggest competitor is weaker, then won't customers accept the premiumization it's trying to achieve with the brand?" he said.
Puma has increased marketing spending to boost its brand awareness, and the Speedcat sells for 109.95 euros ($114.44) on its website, which is comparable to Adidas' Samba, while Puma shoes are traditionally cheaper than Adidas and Nike.
On a currency-adjusted basis, Puma's fourth-quarter sales grew 9.8%, below analysts' expectations of 12%. Net profit fell to 282 million euros ($293 million) last year from 305 million euros, partly due to higher interest payments on debt.
The company did not explain what caused its sales to fall short of expectations. Chief Executive Arne Freundt said in November that he was confident about demand during the year-end shopping season.
A stronger dollar poses problems for Puma, which pays Asian suppliers in dollars but has a large portion of its revenue denominated in euros.
Amid weak profits, Puma launched a cost-cutting program aimed at increasing earnings before interest and tax (EBIT) margins to 8.5% by 2027 from 7.1% in 2024.
"While we delivered solid sales growth in 2024 and made meaningful progress on strategic initiatives, we are not satisfied with our profitability," Front said in a statement.
Analysts at Barclays said the cost-cutting move could divert management's attention away from growing sales.
"At this stage, we see more questions than answers about the path Puma will take over the next three years, until 2027," they said in a report.
Puma plans to provide more detailed guidance when it releases its full-year report on March 12.
(1 USD = 0.9610 Euro)
(1 USD = 0.9608 Euro)
(Reporting by Paolo Laudani; Editing by Ludwig Burger, David Goodman, Jason Neely, Emelia Sithole-Matarise and Tomasz Janowski)