Puma raises forecast as shoe demand offsets supply issues

MUNICH (BLOOMBERG) – Puma raised its sales and profit guidance for the year as the company overcame supply chain hurdles in Asia to meet strong demand for sneakers and sportswear in Europe and in the Americas.

The German sports company expects currency-adjusted sales to rise 25 percent this year, from a previous target of at least 20 percent, according to a statement released on Wednesday. Third quarter sales exceeded estimates.

Shares rose as much as 4.1% in early German trading.

Puma offers the latest view on how brands are handling the roller coaster supply situation in Asia, where the delta strain of Covid-19 has caused plant closures and labor shortages.

This has driven up shipping rates and raised concerns about the ability of companies to produce enough computer chips, raw materials and finished consumer goods, including sneakers, clothing and automobiles. Vietnam has been a particular bottleneck, having attracted investment in recent years from global companies seeking an alternative to China as a production base, a trend that has accelerated with trade tensions between countries. United States and China.

Nike lowered its sales forecast last month, while Urban Outfitters and Abercrombie & Fitch warned of holiday season deficits. “A production blockage linked to Covid-19 in South Vietnam, an overheated global freight market with high rates and a lack of capacity, port congestion and a very difficult market situation in China have been obstacles that we had to overcome during the quarter, ”said the managing director. Bjorn Gulden said in the statement.

These challenges have restricted Puma’s product offering and limited inventory levels, the company said. Gulden expects supply constraints to remain an issue for the remainder of the year.

Despite this, Puma was able to keep up with growing demand in the west, with third-quarter sales up 31% in the Americas and 22% in Europe. Revenue from shoes and clothing both increased by around 21%, the company said.

Puma now expects earnings before interest and taxes to reach 450-500 million euros this year, up from a previous target of 400-500 million euros. The top of the new forecast range is slightly lower than analysts’ average estimate.

The supply situation in Asia is changing, with Puma saying last month that some factories in southern Vietnam have reopened. But fears quickly returned amid reports that millions of migrant workers in Vietnam could flee the heart of the country’s factories and return to their home provinces amid the continuing threat of Covid-19.

Mr Gulden said in July that the company was trying to source more from China to offset the decline in Vietnam. German rival Adidas has said it is temporarily reallocating production to other countries.