Puma enjoys 'best ever' quarter as it ramps up stocks

BERLIN/MUNICH (Reuters) - German sportswear group Puma said it managed to avoid supply chain problems that have crimped sales growth at local rival Adidas by increasing inventories, as it posted a record quarter of sales and earnings on Friday.

FILE PHOTO: Boards with Puma store logo are seen on a shopping center at the outlet village Belaya Dacha outside Moscow, Russia, April 23, 2016. REUTERS/Grigory Dukor

Adidas said last month that its suppliers - mostly in Asia - have not been able to keep up with demand and it expects sales growth to slow to between 5 and 8 percent in 2019.

Puma Chief Executive Bjorn Gulden told reporters the company had consciously decided to increase stocks in its warehouses by 19 percent to avoid delays in getting products to market in upcoming quarters.

“We carried a little bit more of the inventory to actually make sure we don’t run into capacity issues that will hurt our sales,” he said.

In addition, Gulden said U.S.-China trade tensions had turned out to be “a little bit of a gift” as by moving some of its production to Vietnam and Bangladesh, Puma had freed up capacity in China to get products to customers more quickly.

“We were a little bit lucky because we had enormous growth in China and were quicker because we could produce quicker,” he said.

Puma’s first-quarter sales rose a currency-adjusted 15.3 percent to 1.32 billion euros ($1.47 billion), versus an analyst consensus for 1.3 billion, as it saw strong demand for its chunky RS-X sneakers and clothing for women.

Operating profit came in at 143 million euros versus a consensus forecast of 139 million.

Gulden said revenues and operating profit were the highest Puma has “ever achieved” in a quarter, but held off raising the company’s guidance - which analysts regard as conservative - saying upgrading after just three months was not in its culture.

Puma has forecast currency-adjusted sales growth of about 10 percent and operating profit of 395-415 million euros.

Shares in Puma, which have gained over 20 percent so far this year, were flat at 528.5 euros by 0856 GMT.

Puma has been growing faster than its bigger German rival Adidas and market leader Nike, helped by savvy social media campaigns and partnerships with celebrities like singers Selena Gomez and Rihanna and rap mogul Jay-Z.

Nike last month reported quarterly revenue that failed to beat Wall Street estimates for the first time in more than a year, as sales fell short of expectations in its biggest market of North America, sending its shares tumbling 5 percent.

Puma’s first-quarter sales rose a currency-adjusted 28.6 percent in Asia, and 16.3 percent in the Americas, helped by Puma’s launch of its first basketball shoe in 20 years in September.

Reporting by Caroline Copley; editing by Jason Neely and Elaine Hardcastle