German sneaker maker Puma SE raised its earnings outlook after reporting profit that topped analysts’ estimates, helped by street shoes promoted by pop-star Rihanna and British model Cara Delevingne. Earnings before interest and taxes rose 47 percent to 60 million euros ($66 million) in the third quarter, Puma said Thursday. Analysts estimated 54.5 million euros. The company forecast full-year Ebit will be in the upper half of its forecast range of 115 million euros to 125 million euros, sending the stock up as much as 3.2 percent in Frankfurt.
Chief Executive Officer Bjoern Gulden is getting a lift from woven Ignite running shoes and sneakers with unconventional designs called Fenty and Fierce, promoted by a stable of celebrities that also include reality-TV star Kylie Jenner. Together with track star Usain Bolt, they’re helping Puma capture more retail shelf space, with footwear sales rising for a ninth straight quarter. “Fashion and sports are merging into a big business,” Gulden said in an interview with Bloomberg Television. “You can’t do one or the other -- you have to do both.”
Puma, based in Herzogenaurach, Germany, said consumers are more willing to pay full price for new products, making retailers keener to order. Sales rose 11 percent excluding currency shifts to 990 million euros. The figures “show the quality of brand’s growth coming from the important footwear category,” Zuzanna Pusz, an analyst at Berenberg, said in a note. “Puma’s new strategy is bearing results.”
The shares were up 3.2 percent at 223.90 euros at 11:23 a.m. in Frankfurt, extending their year-to-date gain to 13 percent. Boosting profitability over time may prove trickier than increasing sales, especially as promotional spending rises. Operating expenses rose 4.1 percent during the quarter due to marketing costs tied to the Olympics in Brazil this summer and new retail stores.
Puma’s operating margin this year will be 3.4 percent, according to analysts’ estimates compiled by Bloomberg -- about a quarter of that of industry leader Nike Inc. and half the margin delivered by resurgent cross-town rival Adidas AG.
Puma needs to achieve margins in line with the industry, or majority owner Kering SA – parent also to Gucci, Yves Saint Laurent, Balenciaga, and Bottega Veneta, among other brands – might consider selling its controlling stake, said Cedric Lecasble, an analyst at Raymond James.