PUMA SE (PUM) Earnings Call Transcript

Thank you. Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Q3 2026 Earnings Call of Puma SE. [Operator Instructions] I would now like to turn the conference over to Manuel Boesing, Director, Investor Relations. Please go ahead.

Thank you, Maura. Hello, everyone, and welcome to Puma's third quarter 2026 earnings call. Joining me today are our CEO Arthur Hoeld and our CFO Mark Langer. Before we begin, please take note of the cautionary statement regarding forward-looking information, which is included on the next slide of the presentations. Arthur and Mark will then take you through today's presentation covering our business recap, financial update, and way forward. Following the presentation, we will open the line for questions. To give as many participants as possible the opportunity to ask questions, we kindly ask you to limit your initial questions to two. And with that, over to you, Arthur.

Manuel, thank you very much. Good afternoon from Herzogenaurach. Mark and myself are looking forward to taking you through our Q3 results in the next few minutes. So let me start that overall our Q3 results reflect the progress we are making in our transition year against the back-to-back challenging market environment, specifically in key markets like Europe and North America. Despite continuous macroeconomic and geopolitical uncertainties, we do remain on track to achieve our plans for this year. Sales are at -6.3% versus last year and that is currency adjusted. That's an improvement versus Q2 as expected but remains below last year mainly due to our continued reset measures. We see weaker consumer demand that's also weighing on sales, but we also see double-digit growth in Asia-Pacific and our e-commerce channel that provided some positive momentum for our results overall. Additionally, strategic growth categories are gaining traction. That's led by a double-digit growth in running and a single-digit growth in training. Our reported EBIT landed at €-11.4 million in Q3 this year. That is a sequential improvement versus the last quarter. Compared with last year, the improvement in gross profit margin was more than offset by a higher OPEX ratio. And finally, we see an improvement in cash flow, landing Q3 at €92 million despite lower profitability. That's supported by an improved working capital management, which Mark will allude to later on. As outlined, we're clearly a sports company, a sports brand, and therefore I'd always like to share the highlights from a sports perspective when we talk about the previous quarter. Clearly on running, we're building our momentum, showing up stronger than ever before at key races like, for example, a recent Berlin and Chicago marathon. With Project3, which is a sub-elite program, we had in both races 300 athletes competing, and more than 100 of those 300 achieved personal bests in Puma gear and equipment. In Berlin, we nearly doubled the share of our runners versus last year, and we're also the number four brand within the top 10 finishers of the race. Activation around the marathons also included shakeout runs, a relay to Berlin, and most importantly, we have had 6,000 visitors during the weekend in our Nitro Lab, where we have an amazing opportunity to showcase not just our innovation, but how Puma is really a leading force in the world of running. And speaking about activation, it's also worth mentioning that our Mediation in Motion campaign generated more than 1.2 billion organic reaches in more than 40 markets globally. And that's an amazing result for us to also demonstrate that the new DVA Pure is really getting consumer traction. Moving from running into track and field, which has always historically been a stronghold of Puma, I'm happy to report that we've been a number two brand when it comes to footwear, gold medals, at the recent European Athletic Championships in Birmingham. Our Swiss athlete, Swiss partner, Odevaro, was definitely standing out, not just at the European Championships, but she has won literally every possible event this year. And she also was nominated the Female European Athlete of the Year, next to Gianmarco Tamberi, our partner in Italy, who was also named Male Athlete of the Year. And last but not least, of course also to mention again, Mondo Duplantis, who was winning the World Athletics Championships, whilst at the same time, he has been clocking his next world record at 6.31, which means the 15th time he has broken that record. Moving on to Formula One, we are very pleased with the performance of our partners. Ferrari is at the moment taking the second place in the Constructors' Championship, both between Ferrari and McLaren. They had multiple podium finishes in Q3. But we have also seen amazing activations around the Monza race weekend, for example, our activation around Charles Leclerc specifically generated more than 15 million online impressions, similar success to in Singapore, where we had in-store activation, Charles Leclerc and Lando Norris, both in-store, but also using TikTok live streams in 6 different countries in Southeast Asia. And last but not least, we've also merged our motorsports activations with culture and fashion. We have celebrated a fashion show recently where we had us joining together with McLaren to celebrate the legacy of Formula One Ayrton, James Hunt. For performance from a sports perspective, last is our DNA category football. So we've seen very good sellout results across all of our major partnerships when it comes to our football clubs with the pre-season activations also happening across the globe. We have also had a very, very significant cultural collaboration with ASAP Rocky, with the likes of Man City and AC Milan that was supported with local activations around those Jersey launches and his European tour. Speaking about European club football, we are also very pleased with the start of the season for our clubs, most notably Galatasaray and Man City, leading the table of their respective local leagues. Closing off the Q3 achievements from our football federations, Portugal and Switzerland opened the UEFA Nations League with four wins in four matches in their respective groups. Portugal has already secured the qualification for the UEFA Nations League quarterfinals. Africa, Morocco and the Ivory Coast have opened the AFCON qualifying with maximum points and both no goals conceded. A lot of highlights on the sporting side of things for Puma and our partners. And in a similar vein, we will now transition into sports style. We are very pleased with the continued success that we have with Speedcat. It does remain our best selling sports style franchise in the third quarter. And we continue momentum with partnerships, specifically for Z and launches we had on the Speedcat Croc for example. Suede we're building up, as the next franchise for us visible in Q3, supported by a global campaign with the tagline, Never Not Suede. We do see significant uplift in our D2C sales for that franchise, which is important for us in the future. Several other partnerships which we have also used to not just highlight our products but to strengthen our brand and strengthen our fashion and culture credibility across the globe. Many things happening in our DNA categories and in our sports to make sure that the brand momentum that we need and want to generate to become a brand-led organization, as we promised last year, is really getting traction. When you look at our three-year plan, 2023 remains a transition year as we build the foundation for a return to growth in 2027. We're encouraged by the progress both in our brand, our products, and most notably also by the execution of our teams locally. At the same time, we expect the recovery to be gradual in a challenging consumer environment. We do remain focused on building a stronger Puma for the long term. And building a stronger Puma also means we have updated our leadership roster. As announced two weeks ago, Arne Ahrends will join us as the Chief Commercial Officer starting middle of next November, next month it is. Arne brings a wealth of experience of more than 25 years in international companies in sporting goods and outdoor industry. We trust that his experience and capabilities will lead our global commercial organization as well as our marketplaces locally. On the brand side, we have also announced that Steve Cagini will be joining us, or is joining us, as the Senior Vice President, Sports Marketing. And Steve will be responsible to shape our global sports marketing strategy, elevate our strategic partnerships, and maximize the impact of our portfolio. Last but not least on the commercial side of things, Fokko de Rooij has joined us also on October 1st as the Managing Director Europe. Fokko will lead the operations of our new European operating model, which I'll talk about in a second, and focus on driving our performance and health revenue growth across all of our European channels. The ongoing transition in our home market Europe has been announced in our full year earnings call 2025, and the operating model has gone live in Q2 this year. Since then, we've established a new regional leadership structure with Fokko leading Europe and all cluster leaderships are now in place. Successfully implemented a new organization and we have affected with that about 600 employees across Europe. We've also made meaningful progress in creating a more unified European product range, supporting greater consistency across the entire geography and efficiencies across clusters and channels. Finally, our warehouse consolidation initiatives across Europe are underway and progressing really well. I would also like to point out something that we are very proud of at Puma. In 2026, while been going for a significant organizational change, maintaining a strong culture and high employee engagement is critical and a key priority for us as a leadership team. We are therefore particularly proud that Puma was recognized by Forbes and Statista as one of the world's top companies for women, ranking number 15 globally and number one in our industry. That ranking is based on feedback from approximately 140,000 women across 61 countries. Recognition reflects the positive experience of our employees and the strength of our culture during a period of transformation. It also demonstrates the progress that Puma has made over time, from number 80th being positioned in 2024 to now in 2026, being the 15th brand globally. And last, before I hand over to Mark, allow me also a quick word on Anta's acquisition of the Puma stake, which is now completed. We're pleased to welcome Anta Sports as Puma's largest shareholder and a long-term strategic partner. This marks the beginning of an exciting new chapter for our company. We're looking forward to welcoming Dennis as the new Chairman of Puma Supervisory Board and Jeanne Huang as the Supervisory Board member. The transition has been very smooth with close collaboration between the outgoing and the incoming Supervisory Board representatives as well as the Puma Executive Board members. At the same time, I would like to sincerely thank Héloïse Temple-Boyer and Jean-Marc Duplay for their commitment, support, and valuable contributions during their tenure on Puma's Supervisory Board. Looking ahead, we're all excited about the opportunities this partnership will create. We are confident that Anta's industry expertise, global experience, and long-term perspective will support Puma's continued growth and transformation. With that, I'm finishing my first part and would hand over for more details to Mark. Thank you.

Thank you, Arthur, and ladies and gentlemen, a warm welcome also from my side. I'm pleased to take you now through the financial update for the third quarter. Let me start with an overview of our key financial indicators for the quarter. Overall, our performance reflects the ongoing transition. Sales improved sequentially versus Q2 as expected, but still declined by 6.3% currency adjusted, mainly due to reset measures and weak consumer demand. EBIT also improved sequentially versus Q2, coming in at €-11.4 million, same Improvement in gross margin was offset by a higher OPEX ratio. Inventories decreased significantly by 24.3% year-on-year. We remain on track to normalize inventories by year end. Free cash flow was positive at €92 million, well above last year's level. And net debt was down €127 million year over year, deleveraging remains clearly a priority for us also going forward. Let us now look at our sales performance by channel. Wholesale sales declined by 9.6%, mainly reflecting the reduction of undesirable business. The comparison against Q3 2025, when we still had substantial mass merchant business, as the reset only started later in that year. We also saw softer underlying demand across wholesale partners, particularly in EMEA and the Americas. Direct-to-consumer sales increased by 1.2%. E-commerce grew even by 7.8%, supported by growth in running, Hyrox, football products in Europe, as well as marketplace expansion in APAC. Sales in our own and operated retail stores declined by 2.3%, reflecting lower traffic and weaker consumer demand. As a result, the D2C share rose significantly from 30.5% in Q3 2025 to 33.1% in Q3 2026. Let us now look at our regional performance. EMEA sales declined by 11.5% currency adjusted. This mainly reflected the reduction of undesirable business and subdued demand in Europe due to spillover effects from the ongoing conflict in the Middle East. On the positive side, we recorded growth in D2C in EMEA, supported by Hyrox and football products. Americas sales declined by 8.1% currency adjusted. North America was down 17.2%, mainly due to weaker consumer demand and a continued reduction of undesirable wholesale business with mass merchants. Latin America grew slightly by 1.4%, supported by a relatively resilient demand for our products in key markets and partial catch-up in Mexico following last quarter's temporary operational challenges. Asia-Pacific delivered a strong performance with sales growing by 10% currency adjusted. Greater China sales were up by 3.5% driven by a double-digit growth in D2C, supported by marketplace expansion and low-profile trend. This was partially offset by weaker wholesale performance as wholesale partners in China have become more cautious following the announcement of Anta Sports' planned acquisition of a stake in Puma. All other markets of APAC grew by 13% currency adjusted, driven by strong wholesale performance. Low profile trend and Hyrox were main drivers of the increase. Turning to our performance by product division, footwear sales declined by 5.1%, mainly reflecting weaker performance in core, football and selected sports-style franchises. This was partially offset by continued momentum in low profile styles and strong growth in running. Apparel sales declined by 9.4%, mainly reflecting softer demand in core and kits. This was partially offset by growth in football, training and motorsport, with training particularly benefiting from strong sales of Hyrox-related products. Accessories sales decreased by 3.2%, mainly due to a decline in golf. Let's now turn to our operating performance. As discussed earlier, sales declined by 6.3% currency adjusted. On a reported base, the decline was at 5%. Currency movements provided a tailwind of around 130 basis points, mainly from the U.S. dollar, Mexican peso, Chinese yuan, and the Argentinian peso. Gross profit margin improved by around 420 basis points to 49.5%. OPEX increased by 6.7% to €900 million and I will explain the drivers of both on the following two slides. Adjusted EBIT excluding one-time effects decreased to €0.4 million. The lower sales base and higher OPEX more than offset the strong improvement in gross profit margin. One-time effects amounted to €-11.7 million. This was mainly related to personal and consulting expenses from the cost efficiency program. Including these effects, EBIT came in at €-11.4 million. Let's now look at what drove the gross profit margin improvements. Overall, our gross profit margin improved by around 420 basis points to 49.5%. This was mainly driven by lower sourcing prices, including tariff refund effects of €29.8 million, which contributed around 170 basis points to the overall margin improvement. Beyond sourcing, our higher D2C share helped improve the margin through more favorable channel mix. We also benefited from the currency effects driven by the U.S. dollar and the Mexican peso, while lower shaping volumes reduced trade expenses and provided further support. Taken together, these gains were partially offset by negative product mix effects. Let us now take a closer look at operating expenses. Excluding one-time effects, OPEX increased by 6.7% to €900 million. The increase was driven by our growing D2C business, higher marketing expenses, higher general and administrative expenses as certain IT investments were recognized as OPEX rather than CAPEX and foreign exchange effects. Savings related to the cost efficiency program partially offset these increase. Together with lower sales, higher OPEX led to an increase in the OPEX ratio from 41.1% last year to 50.7% in Q3 2026. Looking ahead, operating leverage remains essential to improving profitability and is a key management focus. We continue to make progress on our cost efficiency program while reinvesting savings into the brand D2C and our strategic priorities. These investments support our return to growth, but also mean that cost savings will not fully translate into lower operating expenses. The pace of EBIT improvement will therefore depend on both top-line growth and the operating leverage we achieve. Moving on to working capital, inventories decreased by 24.3% to €1.6 billion. This mainly reflected lower purchasing volumes in line with the expected lower sales base for the year. Receivables decreased by 11.8% to €1.1 billion, mainly due to lower sales. Trade payables were down 70% to €1.1 billion, also reflecting lower purchasing volumes. Overall, this resulted in a 24.4% reduction in working capital to around €1.4 billion. Looking specifically at inventory development, inventory levels continue to decline sequentially in the third quarter, supported by lower purchasing volumes and clearance activities. Remain on track towards more normalized inventory levels by the end of fiscal year 2026. Let us now turn to free cash flow. Despite lower profitability, free cash flow was significantly stronger year on year and came in at €92 million. Improvement was mainly driven by improved working capital, including reduced purchasing volumes as discussed earlier, as well as lower tax payments and a decline in CAPEX to €29.9 million, reflecting a more focused approach to investments, particularly in the D2C channel and digital infrastructure. As said previously, we continue to expect free cash flow to be positive in fiscal year. Moving on to net debt development. Net debt amounted to €1.1 billion down year-over-year by €127 million supported by positive free cash regeneration. Our cash position stood at €353 million up 33% year-on-year. In addition, we had unutilized credit lines of €827 million resulting in total financial headroom of €1.2 billion. This provides sufficient flexibility to support our transformation and strategic investments. However, net debt remains elevated despite the year-on-year reduction. Reducing it over the coming years, therefore, remains a clear priority for us. Before I hand it back to Arthur, let me share some positive news on our refinancing progress. In Q3, we began refinancing our €350 million bridge loan. After the quarter end, €100 million were successfully refinanced through a bilateral loan with DBS. We are pleased to welcome DBS as a banking partner. This is a positive step in broadening our banking relationship and improving our debt structure. Further refinancing is underway to replace the remaining bridge loan. This concludes the financial part of today's presentation, and with that, I hand it back to you, Arthur.

Thank you, Mark. For the end of our call, it's now turn to our outlook for full year 2026. With one quarter remaining, we have updated our outlook to reflect our current assessment of business performance and operating environment. Let me take you through the key points. We confirm our full year sales outlook. We continue to expect the currency adjusted decline in the low to mid single digit percentage range. For Q4, we expect a continued improvement in sales performance compared with Q3. Turning to EBIT, we now expect between €-80 million and €-130 million. It narrows our previous range of €-50 million to €-150 million. CAPEX is now expected to be below €150 million compared with around €200 million previously. This reflects two factors, a more focused approach to investments and certain IT investments now being recognized as OPEX rather than CAPEX. Our journey back to the podium started in Q3 2025. We promised at the time to become a more brand-led organization, and certainly a key focus for us is on rebuilding our brand value. Significant changes, not just in our operating model, but also in our leadership lineup. We, just like our new partner, Anta, are very confident. We have a lot of support from our new major shareholder that this is the right way moving forward that gets Puma back into the top three global sports brands. To wrap it up, the three main messages I would like to share with you for Q3 2026. Started to build a stronger brand relevance and momentum in key strategic categories. Our transition journey is progressing well with important achievements being made and challenges being addressed proactively. Our full year 2026 outlook is confirmed for sales and updated for EBIT and CAPEX.

With this, I would like to hand it over to Manuel again. Thank you. Thank you, Arthur. Thank you, Mark. And we're now ready to start the Q&A session. Operator, please open the line for questions.

[Operator Instructions] The first question comes from the line of Monique Pollard from Citi. Please go ahead.

Hi, thank you very much for taking my question. Two, if I can. So the first one, obviously, as you said, Arthur, your guidance implies an improvement in the constant currency sales growth in the fourth quarter as compared to the third quarter. Could you give us a sense of which regions or categories we should particularly expect to drive that improvement as we go through the fourth quarter? And then the second question is particularly on China. You know, you've delivered a 3.5% constant currency growth rate in the third quarter. Obviously, a lot of that D2C driven and given the issues with the wholesale that were well flagged through the year. But how should we think about that growth, particularly as we go into fourth quarter, if we take into account things like the industry backdrop, the consumer environment, inventory levels, etc.?

Thank you. Thank you for the question. From a Q4 overall perspective without going into too much detail, we don't expect the patterns we've seen for Q3 to significantly change. So the markets that we're outlining, we have seen growth in the previous parts of 2026. We do expect to continue majorly in our Asian and Southeast Asian marketplaces. From a category perspective, a similar story here. Running and training will remain our key growth drivers towards the end of 2026. China, a similar pattern. You've asked about the growth trajectory. So we continue to see same conversations that we had with our wholesale partners with the anticipated arrival of Anta, i.e., a slowdown of our wholesale business due to a muted sentiment of our franchise partners who are at the moment either not refurbishing current stores or have moved out of certain retail premises whilst at the same time we are very confident with our future D2C outlook.

Thank you. Thanks very much. The next question comes from the line of Thierry Cota from Bank of America. Please go ahead.

Yes, good afternoon, gentlemen. Thank you very much for taking my questions. In fact, two questions on costs. Given the OPEX inflation X1 that we have seen in Q3, what do you expect for Q4, either in terms of percent of sales or potentially percent of change year on year? And secondly, Mark, you have mentioned that you target a normalized level of inventories at the end of the year. This is not the first time that this guidance is given. Can you tell us what you consider to be a normalized level for the company, potentially as a percentage of sales, please? Thank you.

Thanks, Thierry, for the question. What we gave here is an extension factor on the drivers on the absolute increase, OPEX quarter-after-quarter, barely holds through all through the fourth quarter. We continue to invest into the growth categories that we outlined. We continue to have investment into our D2C business. And also from the CAPEX to OPEX shift, we have seen that there's a particular compared to last year and higher cost base just from the continued investment into our IT infrastructure. As you know from the seasonality of our business, Q4 in terms of top-line contribution is one of the weaker quarters of the year. So OPEX leverage will be even more negative affected for the fourth quarter. And this is basically also if you look at year-to-date EBIT development versus in the year to go based on the guidance that we have updated today, that we expect that OPEX leverage will be a negative contributing factor leading to a negative EBIT development in the fourth quarter. However, we continue to reap the benefits from the full-year effect of cost savings. So there will be a continued prudent approach to the cost management, but this will be partially offset by marketing, D2C, and infrastructure investments. Inventory levels, I think we are very happy with the strong improvement we've seen in the current fiscal year, as we will return to growth with a consecutive improvement already into the fourth quarter. We need to have a sufficient base of inventory for our to run our business. So with a return to growth, we expect that all other things equal inventory performance will follow a more positive sales momentum. However, we expect also with the implementation of further consolidation or warehouse infrastructure that the company will generate further inventory improvement in terms of DIO, but we would refrain to give a specific guidance on DIO inventory as a percentage of sales at this point in time.

Okay, very clear. Thank you very much, Mark.

The next question comes from the line of Wendy Liu from J.P. Morgan. Please go ahead.

Hi, thank you for taking my questions. I have two as well. One is in terms of the growth outlook, I think you previously said that you wanted to grow above industry from 2027. And I see consensus currently at around 4% to 5%. Any early indications about your current order book or your discussions with retail partners that you could maybe help us understand how we should think about 2027 going forward. Then the second question is on OPEX. I think by next year you should have the full benefit of cost savings. I see current consensus expecting a 2% OPEX reduction year over year. Do you see this as a fair assumption? I know that you will be investing across marketing and internal organizations as well. So it would be very helpful to understand how should we think about, you know, the cost going into next year as well. Thank you.

Thank you. Thank you, Wendy. So, as you might understand, we're not providing quantitative guidance for 2027 at this stage and therefore will also not validate in the future individual consensus estimates. We continue to expect in 2027 to mark a return to growth for our brand and for our company globally. We do expect that recovery to be gradual, particularly given the more cautious consumer and retailer environment. We are, of course, in intense discussions with our retail partners around the globe, but also when it comes to our future China operating model with our new shareholder, Anta. Thank you.

Yes, and let me just follow up on, because you correctly asked the OPEX question, not from an absolute, but also from a relative base. So part of that is clearly what we have just outlined and what Arthur just also alluded on is that there are two elements to further OPEX leverage improvement. One is a consecutive improvement that we already see in the current fiscal year and the trend we expect to continue into Q4 and into 2027, a return to top-line growth, which will be clearly helping to improve OPEX leverage. But at the same time, the degree of this top-line growth is something we that we can't comment on yet for 2027. At the same time, you see that we continue to reinvest partially the savings we have generated as part of our optimization into building capabilities and skills. Expect this to continue. So we will update the market basically with our full fiscal year guidance at the balance sheet presentation in March to give you the full picture on top and bottom line development for 2027, but not at this point in time. Right, Anasu. Thank you very much. Thanks, Wendy.

Next question comes from the line of Zain Bourak from StoneX. Please go ahead.

Hi, thank you very much for taking my question. I was hoping you would talk about the underlying demand you saw in the quarter after we removed the effects of reset measures in the third quarter and how that compares to what you saw the past couple of quarters, just to get a better sense of how the business is doing, this is performing and then also what's assumed in the fourth quarter from an underlying demand perspective. And my second question is also on 2027. I understand you did not want to quantify sales targets, but previously you had expressed confidence in Puma's ability to return to above market growth in 2027. Is that still the expectation? Thank you very much.

So let me take the first part of the question and just to reiterate, I think also the past call we have not split it out our OPEX development into kind of like the impact of underlying recurring and the impact of the saving. I think we have given your quantification to the recurring impact from the adjustment in headcounts. We see this effect now be fully materializing, particularly in the second half of this year, and it will be a recurring underlying improvement factor also for 2030. Partially this and Q3 is a testimonial to that one is being offset by investment or continued investment into marketing into the enhancement upgrade of our D2C and IT investments and as I said earlier we do expect with a continuous improvement in top line momentum that we will achieve OPEX leverage, but we would refrain from giving a more specific guidance on OPEX development beyond the current fiscal year.

And on the second part of the question, our ambition to return to above industry growth remains unchanged. However, we see the industry environment has become more cautious with softer consumer sentiment, but also retailers taking a more selective approach. In that environment, we're focused on rebuilding sustainably rather than chasing short-term growth. We see encouraging momentum as described in running, training, and selected sports-style franchises, but converting product momentum to a broader consumer demand and meaningful scale take time. Therefore, we expect the recovery to build progressively rather than assume an immediate setup.

Thank you very much. The next question comes from Victoria Petrova from Barclays. Please go ahead.

Hi, this is Victoria Petrova from Barclays. And I have a question, where do you think Puma sort of longer term has a right to win? Is it more about premium? Is it more about mass and value of performance? And what gross margin OPEX and TURN framework should support a credible margin longer term?

In three years from now. Thank you very much. From a long-term perspective in terms of where we see our growth opportunities, I think we've outlined this in our category focus areas. Definitely running and training do provide for us significant growth opportunities globally. Running specifically with our unmatched proposition in Nitro and in training. We're going to build this around our long-term established partnership with Hyrox, however, not exclusively in Hyrox. We, of course, do intend to broaden our training offer globally. Football will remain a DNA category where we do see globally growth momentum both in growth opportunities in footwear as well. And secondly, from a sports style and core perspective, with a stronger brand momentum, a stronger brand positioning in the years to come, we do expect significant growth opportunities for us in pretty much each and every market. And in terms of gross margin and service of contributors.