GERMANY: Puma Q3 profit plunges on restructuring costs
Sportswear brand Puma saw third-quarter net earnings plunge as the company invested in its transformation plan and faced a challenging environment in Europe.
Net income fell 85.1% to EUR167.7m over the quarter ended 30 September. The decline came as the company booked EUR80m in one-off costs relating to the transformation plan, particularly around restructuring its European operations, rationalising its retail portfolio and reorganising global operations and functions.
However sales grew 6% on a euro basis to EUR892.2m, rising 0.5% in constant currency terms. EMEA sales declined 3.4% to EUR396.7m, while sales in the Americas rose 20.5% to EUR283.2m and Asia Pacific sales increased 8.3% to EUR212.3m.
The company attributed the European decline to the "severe impact" of the economic slowdown and restrained consumer spending.
As part of the transformation plan, the company is in the process of rolling out a new regional business model in Europe, reducing the number of organisational entities from 23 countries to seven areas. It has also begun consolidating its warehouse portfolio across Europe to generate further efficiencies and cost savings.
Over the quarter, the company decided to close approximately 80 unprofitable stores, mainly in mature markets. It will continue to open new stores in "profitable locations primarily in emerging markets". By the end of December 2013, Puma aims to operate 540 stores globally, down on its current store count of 590.
It is also planning to downsize its product range by 30% before the end of 2015. The majority of the reduction will come from streamlining regional and local ranges.
"PUMA posted a moderate increase in sales in the third quarter despite the challenging business climate in Europe," said Puma CEO Franz Koch.
"We have taken decisive actions to overcome the issues we are currently facing in particular in Europe. Our Transformation Program 2010-2015 in combination with immediate cost cutting measures and a strengthened product pipeline in Performance and Lifestyle for next year will provide a solid basis for sustainable and desirable growth."
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