Munich Even after the change from CEO Björn Gulden to Adidas, Puma wants to further reduce the gap to the ailing arch-rival. “We have accelerated our growth worldwide and across all product categories, despite a volatile market environment,” said Gulden successor Arne Freundt on Wednesday in Herzogenaurach.
Adidas is in a deep crisis: The China sales of the world’s number two have collapsed, the end of the cooperation with scandal rapper Kanye West costs billions in sales, investors complain about deficits in brand strength.
In terms of earning power, Puma 2022 has recently been better against this background. The operating result rose – somewhat weaker than sales – by 15 percent to a record value of 641 million euros. In the fourth quarter, however, it declined. The bottom line is that profits improved last year from 310 to 354 million euros.
On the other hand, Adidas’ profit from continuing operations collapsed from 1.5 billion euros to 254 million euros. This fell far short of the original expectations, which were lowered several times during the year.
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As a consequence, Adidas boss Kasper Rorsted had to resign prematurely. In a step that was unusual in view of the great rivalry, the Norwegian guilder moved directly to the top of the competitor at the turn of the year. Freundt, who has been with Puma since 2011 and has long been considered the crown prince, took over at Puma.
The passionate runner used to be responsible for strategy and direct consumer business, among other things. Before moving to the top, he was Chief Commercial Officer.
The footsteps of the predecessor are big
“In the short term, the chances that Puma will remain on the road to success are not bad,” said Thomas Jökel, portfolio manager at Union Investment. After all, Freundt worked closely with Gulden for many years. In the long term, it remains to be seen whether he will make similar good decisions as Gulden, for example when he enters US basketball.
The task is not easy for Freundt. “Anyone who stands on the summit takes a step down with every step, no matter in which direction they go,” says Andreas Föller, founder of the Comites personnel consultancy. “And Gulden has probably brought Puma to the top.” If Freundt doesn’t change much, everyone will ask why this new boss is needed. But if he changes too much, questions would arise as to why he is leaving the path to success.
Freundt now had to convey internally that the success under Gulden was primarily due to employee performance. Now we can show together that we can get even better without the Norwegian.
If he then makes it clear that in a volatile world “not everything that was right yesterday has to be right today”, he could make changes in one place or another that “are important in order to have your own signature ‘ says Foeller.
Pent-up demand in China and the USA
It is already becoming apparent where the new Puma boss wants to set his accents. “We are focusing in particular on further strengthening our brand desirability and gaining market share in the USA and China,” said Freundt when the balance sheet was presented.
In the Greater China region, Puma achieved only six percent of the group’s revenues last year. In the corona pandemic, the rather weak presence during the lockdowns was more of an advantage, but there is undoubtedly a lot of catching up to do compared to competitors such as Adidas and Nike. This also applies to the USA, the largest sporting goods market in the world. On the other hand, Puma has a strong position in Europe and India, where it is number one.
There is also further potential for improvement in the brands. “It remains important to continue to fill the innovation pipeline and to give the brand a lasting positive charge, especially for the younger generations,” says Michael Lichtinger, Director at the management consultancy Atreus.
Experts see further potential for improvement in the Group’s brands.
(Photo: Bloomberg)
Above all, the consumer goods expert sees the appointment of Maria Valdes to the board as a signal. The 38-year-old was previously responsible for the Sportstyle division and now acts as Chief Product Officer. “This appointment can certainly be seen as an indication that Freundt is pursuing an innovative product focus,” says Lichtinger.
Brand strength is the key issue in the sporting goods industry. Genuine revolutionary product innovations are rare, which makes marketing and branding all the more important. According to experts, Puma needs to work out even more clearly what the brand stands for.
Operating profit could fall in 2023
In the current year, however, Puma should first make up more ground on Adidas. On Wednesday, Freundt forecast currency-adjusted sales growth in the high single-digit percentage range. The operating result should be between 590 and 670 million euros. A drop in profit is therefore possible. Puma justifies this with the higher freight rates and raw material prices, among other things.
Meanwhile, Adidas is expecting another difficult year. As the first official act at Adidas, the new CEO Gulden warned that currency-adjusted sales this year will probably fall in the high single-digit percentage range. An operating loss of up to 700 million euros is also possible. “2023 will be a year of transition to create the basis for becoming a growing and profitable company again,” said Gulden.
On the stock exchange, Puma was only able to benefit to a limited extent from the better performance. In the past twelve months, the price has fallen by 20 percent to around 60 euros. At Adidas, the minus was about 28 percent. The overall good annual figures on Wednesday did not impress the financial markets either: the Puma share was a good three percent down on Wednesday morning.
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