PUMSY - Puma stock slips after flagging persistent inventory issues

2023-04-26 10:19:26 ET

Puma SE ( OTCPK:PUMSY ) stock slid on Wednesday as the German sportswear company flagged continued inventory issues clouding its outlook.

The company highlighted strong growth in Q1, with growth in both the wholesale and DTC businesses. CEO Arne Freundt added that “continued brand momentum” in Greater China bolstered performance. Footwear sales rose nearly 29% year over year.

“We benefited from our geographically diversified business, as strong growth in other regions more than offset the decline in North America. The current development of our North American business confirms the importance and necessity of our new strategy to grow more desirable distribution channels and to contain the off-price business in North America as well as to further elevate the brand,” he said. “It is reassuring that we returned to growth in Greater China after more than two years of declining business and we are cautiously optimistic about an ongoing positive development.”

However, he added that 2023 is anticipated to be a “transition year” as margins remain under pressure due to elevated inventory levels. The issue of bloated levels of merchandise has hung over the apparel space since 2022 and Puma ( OTCPK:PMMAF ) projects it to continue to impact results into Q2.

“For the second quarter, we expect low to mid single-digit sales growth due to high inventory levels in the trade and continued headwinds in the market,” Freundt said. “For the full year, we confirm high single-digit sales growth and EBIT of €590M to €670M. With our continued momentum we are fully on track to normalize our inventory levels and to achieve our full-year guidance.”

The inventory issues, adding to macroeconomic concerns, appeared to sting the stock on Wednesday. Frankfurt-listed shares slid 2.52% in afternoon trading on Wednesday.

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