Drop Kick: Puma’s World Cup Campaign Sinks Q2 Profits 15%

Puma’s World Cup Marketing Expenditures Kick Dent In Company’s Bottom Line

Puma AG’s profit fell 15% in Q2 as the company “spent more on advertising and research” during the FIFA World Cup, according to Sheahan & Bhatia of BLOOMBERG NEWS. Net income dropped to US$64M, or US$3.88 per share, from US$75.4M, or US$4.62 per share, a year earlier. A survey of eight analysts “showed a median estimate” of US$62.6M. Puma said that profit will decline this year “because of costs for investing in its brand.” The World Cup “contributed to a 38[%] gain in quarterly revenue.” Puma shares have gained 14% this year, the “sixth-biggest climb in the 17-member Bloomberg Europe Apparel Index, which has added” 9.9% (BLOOMBERG NEWS, 8/3). Bankhaus Lampe analyst Roland Koenen said that Puma’s Q2 figures “met expectations on the whole.” He added that the “significant rise in sales reflects the company’s expansion efforts, ... but noted this had a somewhat dilutive effect on the margins.” Munich-based bank HVB said that in addition to higher marketing expenses, investments in retail expansion and infrastructure also “had a negative impact on EBIT.” HVB also noted that “order backlog momentum remains at a high level” (DOW JONES NEWSWIRES, 8/3). Shares of Puma fell US$9.33, or 3.3%, to US$277.28M on the Frankfurt Stock Exchange today.

ADIDAS: adidas has “doubled sales in China for each of the past four years and expects revenue there to exceed” US$1.27B by 2010. BLOOMBERG NEWS’ Allen Cheng notes adidas on June 29 agreed to buy the distribution and licensing rights for Reebok products in China. adidas Chair & CEO Herbert Hainer said, “We’re on target to replace Nike as No. 1 in China in the coming two years.” Cheng notes China, where adidas plans to double its 2,500 stores by 2010, may become the company’s third-largest market after the U.S. and Japan by the ’08 Beijing Olympics (BLOOMBERG NEWS, 8/3).