PUMA SE is a German-based company engaged in designing, developing, selling, and marketing sports footwear, apparel, and accessories. The company's areas include Europe, the Middle East and Africa, the Americas, and Asia Pacific. Puma offers performance, as well as sport style products across seven business units - Team sport, Running and Training, Basketball, Golf, Motorsport, Sport style, and Accessories and Licensing. The company engages in the sale of products through the wholesale and retail trade, as well as from direct sales to consumers in its retail stores and online stores.
Investment Overview
Muted 2024, with improving 2H prospects. Puma faces geopolitical and macroeconomic headwinds as well as currency volatility in 2024, a continuation of 2023 volatility faced. Across its core markets, Europe consumer sentiment remains muted due to inflationary impact, driving weaker traffic overall. US market also recorded a similar trend, where high promotions continued to impact margin, while traffic remains weaker. Greater China also remains highly promotional, in Puma's view, yet DTC prospects reflects that sales continue to grow steadily. Puma expects DTC to be the main driver, with no time lag between sell-in and sell-out, which reflects a healthy inventory level.
Moderating growth. Puma expects to deliver a mid single digit currency-adjusted sales growth, while EBIT to be in the range of EUR620-670m (2023: EUR622m), implying growth of 0-8% y/y. The Company expects to see a quarter on quarter improvement, with better momentum to be achieved in the second half of the year.
Consistent revenue and EBITDA consistency. Puma has demonstrated consistent revenue and margin growth in the past 7 years. The current macroeconomic challenges and currency headwinds have affected sales and lowered gross profit margin and the short-term liquidity of Puma. On a positive note, the Group's share price volatility and change in short interest is weakening.
A BUY call with a TP of EUR59 per share. Puma's product differentiation, and steady sales and margin track record should enable the Company to restart its growth engines. Our Target Price of EUR59 pegged to 24.9x forward PE multiple, equivalent to 0.5x below its SD multiple. Initiate with BUY.
Key risks:
Prolonged supply chain problems; lower-than-expected customer confidence; intense market competition; resurgence of pandemic in China, etc.
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Europe Equities Analysis
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