UPDATE 2-Puma abandons sailing for running as profit sinks
FRANKFURT, Feb 14 (Reuters) – Sportswear firm Puma said it is pulling out of the sailing market to concentrate on other sports such as soccer and running to rebuild its flagging business, leaving an Americas Cup team seeking a new sponsor.
The German company, which on Thursday reported a 70 percent drop in its annual profit, is going through its biggest reorganisation in 20 years to restore the business and get its products back in fashion in the United States, Europe and China.
The group is closing stores, cutting product lines and last month said it would stop sponsoring rugby union football, no longer providing kit forIreland‘s team after the next season.
Outgoing chief executive Franz Koch, leaving as part of a management shake-up instigated by Puma’s 82 percent owner PPR , told journalists on Thursday it would take “some time” before the restructuring brought visible success.
Sales this year are expected to remain on a level with 2012’s total of 3.27 billion euros. Net earnings, which dropped to 70.2 million euros from 230 million in 2011, are expected to improve significantly this year, Koch said.
Earnings in the final quarter were hit by costs of 98 million euros related to a payout in Spain to reclaim trademark rights from a former licence holder and costs for closing its operations inGreece, Cyprus and Bulgaria. It will continue to distribute products to these countries.
The company also cut its dividend for 2012 to 0.5 euros from 2 euros last time.
Puma’s shares, which have lost 5 percent of their value over the last year, were up 1.2 percent at 234.4 euros by 1424 GMT. “Investors are hoping that Puma can get back to reaching new heights after the restructuring,” said one trader.
DROPPING THE OCEAN RACING
The company has already said it wants to focus more on soccer and running and will now stop sponsoring the Oracle sailing team, current holder of the Americas Cup, after the 2013 season. The team wear race gear supplied by Puma and the company’s jumping cat logo can be seen on the sails.
Puma had also entered a team twice in the Volvo Ocean Race, ending in third place in the final in July 2012, but will not be entering another team.
Brands pay upwards of 10 million euros ($13 million) a year to sponsor the major sailing teams, according to sports market research company Repucom.
Koch declined to provide figures, saying only it had invested a “significant amount”.
Repucom said the sport was interesting to higher-end premium brands like Prada because out of the 331 million sailing enthusiasts worldwide around 19 percent are reckoned to be high earners.
However, for the big sportswear brands like Puma, and larger rivals Nike and Adidas, soccer and basketball are much bigger money-spinners due to the sheer number of people following such sports worldwide.
BACK ON HIS FEET
Koch will leave the group at the end of March, after less than two years as chief executive, and a replacement will be announced in the coming weeks, the 33 year-old said on Thursday.
With a profit warning, tumbling sales and criticism from predecessor Jochen Zeitz, the former professional hockey player said it had been a tough year. “But like a true sportsman, I am used to getting back on my feet again,” he told reporters.
Until a new chief executive is installed Chief Financial Officer Michael Laemmermann and Chief Commercial Officer Stefano Caroti are to lead the company with support from PPR’s Jean-Francois Palus, who chairs the Puma supervisory board.
