UPDATE 1-Puma feels pinch of higher wage, commodity costs

Tue Feb 15, 2011 7:46am EST

* 2010 adj EBIT 337.8 mln euros vs Rtrs poll avg 343 million

* Sees net profit growing more slowly than sales in 2011

* Shares down 1.8 percent

(Recasts with price rises, adds details, shares)

By Victoria Bryan

HERZOGENAURACH, Germany, Feb 15 (Reuters) - German sportswear maker Puma (PUMG.DE) joined rivals Adidas (ADSGn.DE) and Nike (NKE.N) in warning of price rises for its products as a result of rising commodity and wage costs.

Puma, the world's No.3 sporting goods maker after Nike and Adidas, said the rising costs meant net profit would not grow as fast as sales in 2011, and margins would be lower.

Outgoing Chief Executive Jochen Zeitz told reporters the group would definitely increase prices in 2012 and possibly sooner.

Adidas and Nike have both said they are considering price rises to offset the impact of rising commodity prices, such as cotton. [ID:nLDE7170D4] [ID:nN21269397]

Puma forecast a mid single digit rate of growth for profit in both 2011 and 2012 and a mid to high single digit rate of growth in sales as it reported 2010 results on Tuesday.

That compares with 2010 sales growth of 10.6 percent and a jump in net profits of 154 percent to 202 million euros ($272.8 million).

Shares in the group fell after the results, losing 1.8 percent to 216.35 euros by 1155 GMT.

"The results are moderate. The outlook is worse than expected because they've decided to invest more in the brand," said one analyst who declined to be named.

The group, which sponsors the world's fastest man, Usain Bolt, also decided to keep its dividend at 1.80 euros per share, confounding expectations for an increase to 3.11 euros, according to a Reuters poll.

The company said maintaining its dividend at 1.80 euros per share reflected the restatement of the 2009 results after fraud was uncovered at its Greek joint venture. [ID:nLDE69O0C4]

Zeitz said investors could expect a significantly higher dividend in the coming year.

Shares in the group have lost about 17 percent of their value since Zeitz said in October he would stand down from the day-to-day running of the company after 18 years at the helm for a new role at French parent PPR (PRTP.PA).

He said that Puma was interested in buying companies with turnover of up to 500 million euros but ruled out any interest in German outdoor brand Jack Wolfskin.

"It is not on our shopping list," he told journalists.

Zeitz's role at PPR will also see him on the hunt for acquisitions as part of the French luxury group's drive to expand its sports lifestyle portfolio. [ID:nLDE69H0HW]

For 2010 as a whole, Puma reported adjusted earnings before interest and tax of 337.8 million euros and sales of 2.71 billion. Analysts in a Reuters poll had forecast adjusted EBIT of 343 million euros and sales of 2.64 billion. [ID:nLDE7190PF]

PPR (PRTP.PA), which owns just over 70 percent of Puma, reports results on Thursday.

($1=.7404 Euro)

(Additional reporting by Michelle Martin; editing by Elaine Hardcastle)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.