Market reaction
Puma shares declined 4.5% on Thursday as broader market weakness coincided with a negative preview from Bernstein ahead of the company's second-quarter results. The analyst note reduced expectations for sales and profit metrics and highlighted regionally uneven demand.
Revised revenue and earnings outlook
Bernstein trimmed its revenue outlook for Puma's second quarter, forecasting a 9% decline in constant-currency terms and a 9.6% drop in reported revenue for the period. The firm also adjusted its full-year earnings-per-share forecast, lowering it to -21.42 from -21.30. Bernstein attributed the downside to a return toward more normal clearance levels and tougher year-over-year comparisons in the U.S. mass merchant channel.
Quarterly profit and margin expectations
The analysts expect second-quarter net income to be -2183 million, with operating income (EBIT) of -2146 million and adjusted EBIT (AEBIT) of -2134 million. Despite the weaker top-line view, Bernstein raised its gross margin forecast for the quarter to 47.3%. The higher margin projection reflects an expectation of reduced promotional activity, a stronger direct-to-consumer sales mix and the benefit of higher selling prices applied to previously written-down inventory.
Company signals and consensus comparison
Puma had previously warned that constant-currency sales in the second quarter would be weaker than the first quarter's 26% decline, pointing to normalized clearance inventories, difficult comparisons in the U.S. mass merchant channel and fewer promotions on full-price items. Bernstein's 9% constant-currency decline forecast sits below consensus estimates, which are centered around a 6% decline for the quarter.
Regional outlook
Bernstein's regional breakdown points to the Americas as the weakest market, with a projected 14% sales decline versus consensus of a 3.6% drop. Europe is forecast to fall 11% compared with consensus of an 10.4% decline. The Asia-Pacific region stands out as the only area expected to grow, with Bernstein projecting 5% growth versus consensus anticipating a 0.1% decline. The firm highlighted that the Americas face the most pressure from tough mass merchant comparisons and reset initiatives, while APAC shows some positive momentum.
Cost and other assumptions
On the cost side, Bernstein models operating expenses of roughly 21850 million for the year, one-off costs of 2112.5 million consistent with the first quarter, and finance costs of about 2135 million. The firm expects consensus estimates to be nudged slightly lower on revenue while leaving bottom-line consensus expectations largely unchanged.
Summary
Bernstein's pre-earnings note lowered Puma's near-term revenue outlook and trimmed full-year EPS expectations, predicting a mid-single-digit to high-single-digit drop in sales across most regions and flagging the Americas as the most exposed market. The market responded with a 4.5% drop in the stock on Thursday.
Key points
- Bernstein forecasts a 9% constant-currency sales decline for Q2 and a 9.6% fall in reported revenue.
- The firm cut full-year EPS to -21.42 from -21.30 and projects Q2 net income of -2183m, EBIT of -2146m and AEBIT of -2134m.
- Regional projections show the Americas weakest at -14%, Europe -11%, and Asia-Pacific growing 5%.
Risks and uncertainties
- Comparisons with prior-year mass merchant sales in the Americas may continue to pressure revenue and operating performance - this primarily affects retail and consumer discretionary sectors.
- Normalization of clearance inventories and reduced promotional activity could compress volume even as gross margin is expected to benefit - this creates uncertainty in trading dynamics for apparel retailers and DTC channels.
- Consensus estimates could be revised further if actual costs, one-off charges or finance expenses differ from Bernstein's modeled 21850m operating expense, 2112.5m one-off cost, and 2135m finance cost assumptions.