Puma shares plunge 23% after Q4 profit misses Street estimates, stock hits lowest level in two decades | Stock Market News

Puma lost more than a fifth of its market value on Thursday after the German sportswear brand reported lower than expected fourth-quarter sales and a drop in annual profit, raising questions about its ability to compete with bigger rivals Adidas and Nike.

The poor results late on Wednesday came after Adidas reported strong sales and profitability, highlighting the work Puma still faces to boost its brand and take a bigger slice of the $400 billion global sportswear market.

Puma shares ended the day down 22.8% at 32.3 euros, their worst day ever and hitting their lowest level since February 2018.

Shares in Puma plunged on Thursday after the Herzogenaurach, Bavaria-based company reported disappointing fourth-quarter earnings and pushed back profitability targets. That took its drop to almost 40% since its former chief executive officer Gulden took the reins at its cross-town rival about two years ago, with Adidas shares more than doubling in the same period.

Adidas reported better-than-expected preliminary results on Wednesday, amid the sustained boom in demand for retro sneakers. The broad-based strength provided a stark contrast to Puma’s update, JPMorgan analyst Olivia Townsend said in a note published on Thursday.

Puma has been relaunching shoes such as the 1999 motor racing-inspired “Speedcat” as it tries to muscle into a market dominated by Adidas’ retro Samba soccer sneakers, but JPMorgan analysts said sales trends for the Speedcat have been weaker than expected so far.

Newer, fast-growing brands such as On Running and Hoka have shaken up the sportswear industry, eroding the dominance of Nike , which has seen slowing sales, and creating more competition for shelf space at top sporting goods retailers.

“This will make investors question what the competitive advantage of Puma is,” said Deutsche Bank Research analyst Adam Cochrane.

“If Puma is not really taking market share, at a time when its biggest competitor (Nike) is weak, is the customer not accepting the brand premiumisation it is trying to put through?”

Puma has increased spending on marketing to boost its brand perception, and the Speedcat is priced at 109.95 euros ($114.44) on its website, on par with Adidas’ Samba – whereas Puma shoes have traditionally been cheaper than Adidas and Nike.

Puma has said it aims to sell between 4 million and 6 million pairs of the Speedcat in 2025.

Puma’s fourth-quarter sales rose 9.8% in currency-adjusted terms, below the 12% growth expected by analysts. Net profit last year fell to 282 million euros ($293 million) from 305 million, in part due to higher interest payments on its debt.

The company did not explain what led to its weaker than expected sales. CEO Arne Freundt had said in November he was confident about demand heading into the year-end shopping season.

The strength of the U.S. dollar poses a problem for Puma, which pays its Asian suppliers in dollars but makes a big share of revenues in euros.

On the back of the weak profit, Puma launched a cost-cutting programme aiming to reach an earnings before interest and tax (EBIT) margin of 8.5% by 2027, up from 7.1% in 2024.

“While we achieved solid sales growth in 2024 and made meaningful progress on our strategic initiatives, we are not satisfied with our profitability,” Freundt said in a statement.

Puma said it would continue to make “strategic investments” in its brand to boost growth.

But Barclays analysts said there was a risk the cost-cutting drive would take management’s focus away from increasing sales.

“At this stage, we see more questions than answers about the path that Puma will take in the next three years to 2027,” they said in a note.

Puma is scheduled to provide more detailed guidance when it publishes its full-year report on March 12. 

Puma SE shares plunged after the German sportswear company reported disappointing earnings and pushed back profitability targets in a painful contrast to cross-town rival Adidas AG.

Puma announced belt-tightening efforts on Wednesday and downgraded its profit margin guidance. The stock fell as much as 19% in Frankfurt trading, the biggest drop in more than two decades.

Chief Executive Officer Arne Freundt is struggling to touch off another era of fast growth at the footwear maker. In the half-decade before he took over as CEO, Puma was on a tear, doubling its revenues thanks, in part, to a clever comeback in sports like basketball and cool points piling up with brand ambassadors like the rapper Jay-Z.

But since Freundt assumed control in late 2022, Puma’s brand buzz has stagnated. The shift in fortunes coincided with the departure of Bjorn Gulden, who left for crisis-rattled Adidas after having led Puma for almost a decade.

Earlier this week, Adidas reported surprisingly robust fourth-quarter earnings, fueled by demand for its retro sneakers. The company’s shares have advanced more than 50% in the past 12 months, while those of Puma have tumbled 19% in that period.

Puma announced cost cuts to reach a goal for its earnings margin before interest and taxes of 8.5% by 2027. That’s a downgrade from the previous guidance, which sought to reach that level as early as 2025, said Grace Smalley, an analyst at Morgan Stanley.

The company cited “personnel expenses” as part of the cost-cutting program, suggesting there could be job reductions, but it didn’t offer details.

Several factors help explain Puma’s and Adidas’ divergent trajectories. For one thing, Freundt has tried to shift the Puma brand upmarket by focusing on selling higher-priced soccer, basketball and running gear. In doing so, he sacrificed some sales by phasing out its offerings of some cheaper merchandise.

Freundt was also not well known among investors and consumers before taking over from Gulden, who has earned a reputation as a savvy marketer and brand manager over decades in the industry.

Perhaps Gulden’s most important early decisions at Adidas were recognizing growing consumer interest for retro sneakers like the Samba and expediting production. That shoe and similar models like the Spezial and Campus have been some of the industry’s top sellers.

Puma was slow to capitalize on the trend, despite the fact that it owns similar models like the Palermo. A thinner-soled retro model, the Speedcat, struggled to gain momentum.

The gloomier outlook for Puma is a stark contrast from its messaging in November, Morgan Stanley’s Smalley noted. It’s probably a result of a worse-than-expected performance in Latin America, a stronger US dollar, the increased risk of tariffs with China and Puma’s ongoing struggles to build brand momentum, she said.

Earnings before interest and taxes rose to €109 million ($114 million) in the fourth quarter, short of the €131-million average of analyst estimates. Net income of €24 million for the period also disappointed.