Puma Q4 earnings fall

By Rajiv Sekhri

NUREMBERG, Germany (Reuters) - Puma's (PUMG.DE) fourth-quarter earnings fell sharply despite a jump in sales, after costs at the German sports goods firm surged as it spent more to improve marketing and introduce new shoes and clothes.

The company, known for its leaping cat logo, said on Monday it expects 2007 sales to rise by a percentage rate in the mid to high single digits and net profit to rise at least 10 percent.

"We are on track or ahead on all accounts," Jochen Zeitz, chief executive of Puma, said of the firm's Phase IV initiative announced in early 2006, part of which includes plans to spend 500 million euros in five years to make acquisitions, develop new products and break into new territory.

Zeitz said the company saw no acquisitions on the horizon this year and refused to comment on recurring market rumors that bigger rival Nike (NKE.N) is interested in buying Puma.

"An acquisition must make sense and if that is not there, we will not make one," Zeitz told a news conference.

Earnings before interest and tax (EBIT) fell 24 percent to 41.6 million euros ($54.7 million), the Herzogenaurach-based company said in Nuremberg, where its brand center is located.

EBIT lagged an average forecast of 44.9 million euros in a Reuters poll of 11 analysts.

Sales rose 37.6 percent to 480.6 million euros, just slightly below an average forecast of 481.9 million euros.

SWIMWEAR

Sales across all regions rose, with Europe, Middle East and Africa, where it makes more than half of total sales, seeing growth of 13 percent in the quarter.

Net earnings in the fourth quarter fell 25.5 percent to 32.8 million euros, meeting the poll average of 32.7 million euros.

Expenses rose to 187.6 million euros from 128.2 million euros in the fourth quarter of 2005.

Shares in Puma fell after the results and were trading 0.8 percent down at 287.79 euros by 1242 GMT, underperforming solid gains on the midcap MDAX index .MDAXI.

The shares trade at around 14 times 2008 earnings, some analysts calculate, giving it about a 10 percent discount to peers. Some analysts say the shares are supported by increased confidence in the Phase IV plan and ongoing share buybacks.

In 2006, Puma bought back 230,000 of its own shares for 66 million euros. The company holds 6.5 percent, or 1.12 million, of its own shares and has the approval of shareholders to buy back about 10 percent.