ChinaPuma sees sales hit from China backlash and freight delays

ReutersEmma Thomasson
4 minute read

The logo of German sports goods firm Puma is seen at the entrance of one of its stores in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger

German sportswear company Puma (PUMG.DE) expects a consumer backlash against Western brands in China and congestion at ports to hit its sales though it gave an upbeat outlook for 2021 following a strong first quarter.

Brands including Puma and rivals Nike (NKE.N) and Adidas (ADSGn.DE) faced online attacks in China last month over statements about their sourcing of cotton from Xinjiang after reports of human rights abuses against Uyghur Muslims. read more

"We can still see that trend is continuing. There is less activity in the Western brand stores than there would have been if tension wasn't there," Puma Chief Executive Bjorn Gulden told reporters.

Before the backlash, Puma's sales in greater China had been growing strongly, rising 40% in the first quarter.

Western governments and rights groups have accused authorities in the western region of Xinjiang of detaining and torturing Uyghurs in camps. Beijing denies the accusations.

Puma has previously said it has no direct or indirect business relationship with any manufacturer in Xinjiang.

Overall, Puma reported a 26% rise in first-quarter sales to 1.549 billion euros ($1.9 billion) after adjustments for currency fluctuations, while net profit jumped to 109 million euros, both beating average analyst estimates.

Puma's shares, up two-thirds in the last year, were down 2.9% at 0940 GMT.

It expects full-year sales to increase by a "mid-teens" percentage and significantly better profitability than last year.

Puma is benefiting from people doing more sport as they try to lose weight after coronavirus lockdowns, a trend it hopes will get another boost after the Tokyo Olympics and the European soccer championships, Gulden said.

However, Puma faces problems getting products made in Asia to key markets due to container shortages and port congestion, especially in North America, following COVID-19 outbreaks among dockworkers and safety restrictions.

While the situation has improved somewhat in the last month or so, Gulden said Puma was still seeing delays of two to three weeks on many shipments, while the cost of freight had doubled and prices were locked in for the next 12 months.

Nike last month reported quarterly sales below estimates due to shipping issues and the pandemic-related slump at stores, forecasting "low-to-mid-teens" full-year revenue growth. read more

Puma said the pandemic would continue to weigh on its business throughout 2021 with about 30% of stores selling its products in Europe and Latin America still closed and new restrictions expected in India, Canada and Turkey.

($1 = 0.8284 euros)

Our Standards: The Thomson Reuters Trust Principles.