Puma narrows FY profit outlook on high freight costs, muted China
Updates share move and adds comments from media call, analyst throughout
By Linda Pasquini and Isabel Demetz
Aug 7 (Reuters) -German sportswear maker Puma PUMG.DE on Wednesday narrowed its outlook for full-year core profit, sending its shares briefly to 2018 lows,citing higher freight costs, currency headwinds, and continued muted consumer sentiment in China.
Puma, which has launched new marketing initiatives to compete better with bigger rivals like AdidasADSGn.DE and Nike NKE.N, as well as rising brands, has been grappling with negative currency effects amid weaker consumer demand.
It now expects operating profit (EBIT) to come in a range of 620million to 670million euros ($676-$731 million) compared to between 620 million and 700million euros previously.
"Freight market has become more challenging than anticipated at the beginning of the year, resulting in higher costs for the second half," CEO Arne Freundt said on a media call.
He said capacity constraints due to the Red Sea crisis added to high-season surcharges and new freight contracts.
Puma's shares sank 12% to 36.37 euros at 0931 GMT, after briefly hitting their lowest in six years earlier in the morning.
For the second quarter, Puma reported currency-adjusted sales rose 2.1% to 2.12 billion euros.
However, in the Europe/Middle East and Africa region, currency-adjusted sales dropped by 4.3% as a return to growth in Europe was offset by a decline Eastern Europe, the Middle East, and Africa after a strong quarter in the previous year.
"These results provide context for Adidas' results and demonstrate just how strong Adidas' current momentum is," analysts at J.P. Morgan wrote in a note, noting that Puma's comments on softness in Europe and uncertainty in China compare to growth in most regions and a better performance in footwear at its German rival.
Greater China grew 7.6% on the year driven by online sales, despite overall weaker consumer spending, Puma said.
It expected sentiment in the region to remain muted for the year.
($1 = 0.9168 euros)
Reporting by Linda Pasquini and Isabel Demetz; editing by David Evans and Sharon Singleton
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