Puma, the German apparel company, saw its shares decline after the release of its 2023 net profit and 2024 guidance, both of which fell below expectations.
Lower-than-Expected Net Profit for 2023
Puma reported a net profit of approximately 305 million euros ($331.1 million) for 2023, according to preliminary results. This figure fell short of the anticipated 342 million euros predicted by a Factset poll of 21 analysts. The company attributed its earnings decline to significant inflation resulting from the devaluation of the Argentine peso.
Disappointing 2024 Guidance
Puma provided its earnings before interest and taxes (EBIT) outlook for the current year. The company expects to achieve between 620 million euros and 700 million euros, which contrasts with the consensus estimate of 726 million euros from Citi analysts. Puma acknowledged the persisting challenges posed by geopolitics, macroeconomics, and highly volatile currencies, which continue to impact consumer sentiment and demand, particularly in the first half of 2024.
Sales Growth Expectations and Forecasts for 2024
Puma projected mid-single-digit currency-adjusted sales growth for the year 2024. Citi analysts noted that the deceleration in sales growth expectations was the primary driver behind the lower EBIT target, rather than the devaluation of the Argentine peso. They anticipated a negative market reaction to these results, given the significant downgrade forecast for FY24.
Decrease in Q4 Sales
In the fourth quarter, Puma experienced a decline in sales of around 9.8%, but this decreased to approximately 4% on a currency-adjusted basis. Sales for the quarter amounted to roughly 1.98 billion euros, compared to 2.2 billion euros in the prior year. However, on a full-year basis, sales totaled 8.60 billion euros, representing an 8% currency-adjusted growth and aligning with the company’s target of high single-digit percent range sales growth.
EBIT Figures and Conclusion
In terms of earnings before interest and taxes, Puma achieved approximately 94 million euros in EBIT for the fourth quarter, a significant increase from the 41 million euros reported in the same period the previous year. For the entire year of 2023, EBIT amounted to around 622 million euros, falling within Puma’s target range of 590 million euros to 670 million euros but below the 2022 result of 640.6 million euros.
Puma’s disappointing net profit and guidance update have impacted its shares negatively in the market. Moving forward, the company recognizes the ongoing challenges posed by geopolitical events, macroeconomic factors, and volatile currencies. However, Puma remains committed to achieving sales growth in 2024 and addressing the concerns surrounding consumer sentiment and demand.