German sportswear brand Puma has booked a 69% slide in full-year net earnings as sales were hit by the Covid pandemic but the group says the long-term collaboration with its suppliers proved to be “indispensable” in 2020 and will continue to be a key component of its strategy.
For 2020, net earnings amounted to EUR78.9m (US$95.9m) compared with EUR262.4m a year earlier.
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EBIT came in at EUR209.2m versus EUR440.2m a year earlier. Sales fell 1.4% to EUR5.2m, 4.9% lower on a reported basis with particular weakness in the second quarter.
Puma says while 2020 began strong with a very positive order book and “strong and balanced growth in all regions”, the shutdown of China in the last week of January saw things take a turn for the brand.
“Over the following six weeks, the whole business in China, except for e-commerce, basically disappeared. As China started to recover in mid-March, Covid-19 spread globally and by the end of the month around 80% of Puma’s owned and operated retail stores and the majority of our retail partners’ stores were closed.
“As a result, sales in April declined sharply by 55% compared to the previous year. With an increasing number of stores reopening over the course of May, first in EMEA and Asia/Pacific and later in North America, sales improved in May, but remained 38% below the previous year. More store openings in June and a generally more positive sentiment led to a substantial improvement and a monthly sales decline of only 6%. At the end of June, 85% of Puma’s owned and operated stores were open.”
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By GlobalDataThe third and fourth quarters saw things pick up, but November lockdown measures across multiple countries in Europe once again hit sales.
“2020 was definitely the most difficult year I have ever experienced,” says Bjørn Gulden, CEO of Puma SE. “The Covid-19 pandemic put us in situations we have never seen before. We feel we have manoeuvred through this crisis as well as we could by solving problems day by day without hindering the mid-term momentum of Puma.”
He adds this was possible in part because of “unbelievably strong cooperation” with all suppliers.
In its trading statement, the company adds: “In sourcing, we worked very closely with all our suppliers throughout 2020 and supported each other wherever possible to mitigate the negative consequences of the Covid-19 pandemic. The strong partnership with our suppliers has helped us tremendously in a challenging environment and contributed to a very resilient supply chain situation in 2020. It also enabled us to avoid nearly any disruptions in the delivery of products to our retail partners and consumers around the world. We cancelled very few (less than 1%) orders and we paid our suppliers the costs for those orders we cancelled. The long-term collaboration with our suppliers proved to be indispensable in 2020 and will continue to be a key component of our strategy.”
Meanwhile, Gulden says: “The pandemic is unfortunately still here and impacting our business. We do expect the negative impact to continue through the first and parts of the second quarter but expect to see an improvement in the second half of the year. I am convinced that 2021 will be a better year for us than 2020.”
Outlook
Looking ahead, Puma says it will continue to mitigate the consequences of the pandemic wherever possible but foresees a negative impact on its business especially in the first half of 2021.
“We currently believe that the first quarter and also the beginning of the second quarter will be heavily impacted. However, we believe that we will see a recovery until the end of the second quarter and strong improvements throughout the third and fourth quarter.”
For the full year 2021, it expects at least a moderate increase in sales in constant currency – with an upside potential – and both, operating results and net earnings to show a significant improvement compared to 2020.
The development of gross profit margin and OPEX-ratio for 2021 will depend on the degree and duration of the negative impact of the Covid-19 pandemic on our sales, Puma says.
