Puma Shares Plummet 11% Amid Profit Drop; Cost-Cutting Program Afoot

Puma shares took a significant hit on Thursday, falling by 11% in pre-market trading after the German sportswear maker announced a decline in earnings for the full year 2024. The company's net profit came in at €282 million, compared to €305 million in 2023, missing expectations. In response to the disappointing results, Puma has initiated a cost-cutting program aimed at improving its earnings before interest and tax (EBIT) margin to 8.5% by 2027.

The decline in Puma's full-year profit was primarily driven by higher net interest expenses and higher non-controlling interests. The company's CEO, Arne Freundt, expressed dissatisfaction with the profitability, stating that while Puma achieved solid sales growth in 2024, it fell short of expectations. Puma's EBIT margin for 2024 was 7.1%, and the company aims to reach an EBIT margin of 8.5% by 2027 through its cost-cutting program, "nextlevel."

Puma's cost-cutting program, "nextlevel," is designed to optimize direct and indirect costs, including personnel expenses, through better resource allocation aligned with the company's strategic growth areas. This program complements Puma's brand elevation strategy, which focuses on building a foundation for sustainable and accelerated growth. The company expects that the "nextlevel" program, combined with its brand elevation strategy, will improve its underlying operating result starting in 2025.

In the fourth quarter, Puma's sales grew by 9.8% in currency-adjusted terms, to €2.289 billion. Over the full year 2024, sales were up by 4.4% in currency-adjusted terms, to €8.817 billion. All regions contributed to the sales growth in the fourth quarter, with EMEA (+14.3%), Europe (+10.3%), Greater China (+7.4%), Other APAC (+19.0%), and North America (+2.6%) performing well. Puma's Footwear business grew 9.2%, Apparel was up 8.8%, and Accessories increased 14.5%.

Puma's full-year 2024 operating result (EBIT) came in at €622 million, which was in line with the EBIT outlook for the full year 2024. The company's net income for the year was €282 million, which was below the prior year's level of €305 million and expectations. This was mainly caused by higher net interest expenses and higher non-controlling interests.

Puma's joint venture with United Legwear & Apparel Co (ULAC) performed well, but the company could only book 51% of the profit, with the remainder going to ULAC. Puma aims to keep its headcount stable and has no global target for layoffs. Instead, the company will focus on allocating resources where they are needed to drive growth.

Puma will release its full fourth-quarter and annual sales on March 12, providing more detailed guidance on its financial performance and the impact of the "nextlevel" cost-cutting program. Investors will be closely watching the company's progress as it works to improve its profitability and achieve its long-term growth targets.