Puma’s Market Value Drops 20% Amid Profit Decline, Cost-Cuts

Puma’s market value has dropped by over 20% following a report of lower-than-expected fourth-quarter sales and a decline in annual profits, raising concerns about its competitiveness in the US$400 billion global sportswear industry. The German sportswear company announced a cost-cutting program to improve profitability as it faces increasing competition from rivals like Adidas and Nike, as well as emerging brands such as On Running and Hoka.

Puma's shares fell 22.8% to €32.30 (US$33.89), marking their worst performance since February 2018. Fourth-quarter sales rose 9.8% in currency-adjusted terms to €2.29 billion, falling short of analysts' expectations for 12% growth. Total sales for 2024 increased by 4.4% in currency-adjusted terms to €8.82 billion. Despite growth in key regions such as Europe, the Middle East, and Africa (14.3%) and Greater China (7.4%), net profit for the year declined to €282 million, down from €305 million in 2023.

CEO Arne Freundt attributed the profit decline to higher interest payments on debt and the impact of non-controlling interests from Puma's joint venture with United Legwear & Apparel Co. (ULAC), which retained 49% of the profit. Freundt acknowledged progress in strategic initiatives but emphasized the need for stronger profitability. “While we achieved solid sales growth in 2024 and made meaningful progress on our strategic initiatives, we are not satisfied with our profitability,” he said in the company’s financial statement. 

During the fourth quarter, all regions contributed to sales growth, with notable increases in EMEA (+14.3%), Europe (+10.3%), Greater China (+7.4%), and Asia-Pacific (+19.0%). However, North America posted a modest rise of 2.6%, while Latin America saw softer growth at 7.0%.

Across product segments, Puma's footwear division grew by 9.2%, apparel sales increased by 8.8%, and accessories posted the strongest growth at 14.5%. The wholesale business expanded by 6.9%, and direct-to-consumer (DTC) sales grew significantly by 16.1%. However, the company's full-year EBIT remained flat at €622 million, resulting in an EBIT margin of 7.1%.

Puma is working to enhance its brand through increased marketing investments and new product launches, such as the revival of the 1999 motor racing-inspired Speedcat shoe. However, sales for the Speedcat have been weaker than expected, despite its competitive pricing at €109.95—similar to Adidas' popular Samba sneakers. Puma aims to sell between 4 million and 6 million pairs of the Speedcat by 2025.

“This will make investors question what the competitive advantage of Puma is,” said Adam Cochrane, analyst, Deutsche Bank Research, in comments to Reuters. Barclays analysts also expressed concerns, warning that the focus on cost-cutting could detract from sales growth efforts. “At this stage, we see more questions than answers about the path that Puma will take in the next three years to 2027,” they stated.

Puma plans to provide further details on its financial performance and strategic outlook when it releases its full-year report on Mar.12.