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Puma expects cost pressure on margins to persist in 2023
Global Banking & Finance Review®
Company
By Linda Pasquini
(Reuters) -German sportswear maker Puma on Wednesday gave a forecast for 2023 profit with a midpoint below last year’s number, expecting some impact from currency effects and higher freight and raw material costs.
Rising materials and freight costs along with a stronger U.S. dollar, inventory markdowns and higher promotion expenses have pressured margins in the sporting goods sector.
The company forecast annual operating profit (EBIT) in a range of 590 million to 670 million euros ($626 million to $711 million), with currency-adjusted sales expected to grow in a high-single-digit percentage rate.
“We presume this guidance assumes limited benefit from a reopening of China,” Jefferies analysts wrote in a note to clients.
The guidance midpoint of 630 million euros compares to EBIT of 641 million euros Puma reported for 2022, which was up 15% from 2021 but slightly below analysts’ estimate of 644 million euro in Refinitiv Eikon data.
Gross profit margin decreased by 420 basis points to 44% in the fourth quarter, the company said, citing an industry-wide increase in promotional activity amid high inventory levels.
“We expect the gross profit margin to be under more pressure in the first half of the year than in the second half,” Puma said in a statement.
The company expected market conditions in the U.S. and China to normalize this year.
The stock was down 1.9% in morning trading, having fallen as much as 4% after the market opened.
($1 = 0.9425 euros)
(Reporting by Linda Pasquini and Ozan Ergenay in Gdansk, additional reporting by Alexander Hübner; Editing by Milla Nissi and Bernadette Baum)
Operating profit, or EBIT (Earnings Before Interest and Taxes), is a measure of a company's profitability that excludes interest and income tax expenses. It reflects the earnings generated from operations.
Inventory markdowns refer to the reduction in the selling price of unsold inventory. This is often done to clear out excess stock and can impact a company's profit margins.
Currency effects refer to the impact of exchange rate fluctuations on a company's financial performance, particularly for businesses that operate internationally or deal in multiple currencies.
Promotional expenses are costs incurred by a company to promote its products or services. This can include advertising, discounts, and marketing campaigns aimed at increasing sales.
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