Puma's shares slide as lack of guidance upgrade disappoints
Puma's Second-Quarter Results and Market Reaction
By Ozan Ergenay and Linda Pasquini
July 31 (Reuters) - Sportswear maker Puma reported on Friday a narrower-than-expected second-quarter operating loss and confirmed its outlook for the year, as sales continued to fall amid weak demand.
Investor Response to Puma's Results
Puma's shares fell as much as 7% in early trade as investors were disappointed that it did not upgrade its guidance.
Cost-Cutting Measures and Management Changes
The German company has trimmed costs, cut jobs and reshuffled management as it seeks to turnaround its business amid weak demand and a hit to the industry from U.S. tariffs.
Operating Loss and Analyst Expectations
It posted an operating loss (EBIT) of €53.1 million in the second quarter, less than analysts' estimate for a €68.7 million loss in a company-provided poll, helped by cutting expenses related to its cost-efficiency programme and due to U.S. tariff refunds.
Annual Guidance and External Factors
The company confirmed its annual guidance, which now includes a potential hit from the Middle East conflict and possible positive effects from lower tariff rates and tariff refunds worth just above or below €50 million.
Year of Transition for Puma
YEAR OF TRANSITION
Share Price Movement and Market Expectations
Puma shares were trading down nearly 5% at €26.83 at 0905 GMT after paring some earlier losses. They had gained 25% this year on expectations of a turnaround in business.
Analyst Commentary
"Considering the lack of implied positive earnings revisions, we would not rule out some profit taking first thing this morning," Felix Dennl, analyst at Metzler in Frankfurt, wrote in a note to clients.
Competitive Landscape
Puma has faced tough competition from bigger peers Nike and Adidas as well as newer entrants to the market.
JP Morgan's Perspective
Analysts at JP Morgan also said no guidance upgrade at this stage may be slightly disappointing despite broadly in line results and the company being "on the right track in a year of transition."
Sales Performance and Outlook
Quarterly sales fell 9.4% in currency-adjusted terms to €1.69 billion ($1.94 billion) amid lower demand for its sports outfits and sneakers in most of its markets.
The company expects its performance to improve in the current quarter compared with the previous one, although it still anticipates a decline in sales as it progresses in clearing inventories and contends with weak demand, CFO Mark Langer told journalists in a call.
Impact of U.S. Tariff Refunds
The second-quarter profit included a €11.5 million boost from overall tariff refunds of €15.4 million after the U.S. Supreme Court struck down the government's emergency levies in February, the company said in a statement.
Additional Information
($1 = 0.8692 euros)
(Reporting by Ozan Ergenay and by Linda Pasquini in Gdansk; Editing by Susan Fenton)
