DEAR SHAREHOLDERS AND FRIENDS OF PUMA,
2012 was an exceptional year for PUMA in many ways. First of all, I am happy to see that we finished the year with a satisfactory sales growth rate. PUMA’s full year consolidated sales rose by almost 9 percent in Euro terms which enabled us to achieve the record sales mark just short of 3.3 billion Euros. In the light of the continuously challenging business environment, especially in Europe, we are pleased with that sales performance. So let’s delve into some of the highlights from an eventful sports year that fuelled PUMA’s sales growth.
“USAIN BOLT - THE BIGGEST STORY OF THE GAMES”
The success of our Running category was highlighted by the Olympic Games: The outstanding athletic performances of The Fastest Man on Earth, Usain Bolt, who finished his second successive Olympics with three gold medals, was undoubtedly the biggest story of the Games. In the World of Football we once again underlined our ambition to be the clear Number 3 brand. PUMA partnered “Squadra Azzurra” from Italy had an excellent tournament at the 2012 Euro Cup reaching the final.
Our successful season in Formula 1 was crowned by PUMA sponsored Ferrari driver Fernando Alonso. With 278 points in the drivers’ standings the Spaniard belonged to the dominating F1 drivers again falling just short of his third Formula One title. Our Golf category contained many highlights throughout 2012, making the past year a great success for COBRA PUMA GOLF. Ian Poulter was the undisputed player of the prestigious Ryder Cup, and our iconic brand ambassador Rickie Fowler won his first PGA Tour title in May at the Wells Fargo Championship, cementing him as one of the top players of the world.
In our Sailing category, our PUMA Ocean Racing team forged an amazing comeback at the around-the-world Volvo Ocean Race 2011-12, finishing in the third place at the beginning of July. In our Lifestyle business, we did not only successfully introduce the evolution of our PUMA Social Campaign TEAMMATES, but also continued to fuse the influences of Sport and Fashion with some of the world’s leading design houses such as Alexander McQueen and Mihara. We will continue to rejuvenate our Lifestyle category throughout 2013, connecting with a more youthful audience and shifting the focus from brand- to more product oriented marketing campaigns.
In the area of sustainability we continue on our pioneering path. After a sneak peek into our first collection of biodegradable and recyclable products last October, our PUMA InCycle collection hit the stores at the beginning of this year. All these product and marketing initiatives are aimed at increasing PUMA’s brand desirability to make further strides on our mission to become the most desirable and sustainable Sportlifestyle company in the world.
“PUMA’S TRANSFORMATION AND COST REDUCTION PROGRAM IS ALREADY DELIVERING RESULTS”
2012 was also an exceptionally busy year as we continued with the implementation of our Transformation and Cost Reduction Program. I am pleased to see that the program is already delivering its first results. The program entails the set up of a new business model in Europe. To reduce complexity and further harmonize structures, we have lowered the number of reporting entities from 23 countries to seven areas. The newly created Supply Chain Management function is fully up and running and has created new tools to manage supply and demand more efficiently on a regional level, delivering immediate results.
“ANNUAL BOTTOM LINE UNDER PRESSURE”
While our sales performance in 2012 met our expectations, our annual bottom line results, however, took a major hit. PUMA’s lower profitability resulted mainly from increased pressure on our margins after we had to reduce inventory levels through discounting on our products in the second half of the year particularly. Furthermore, costs rose as we continued to make strategic investments into the growth drivers of our business such as Research, Design and Development, Marketing, our supply chain and IT systems as well as the expansion of our retail operations. In addition, the scope of the one-time expenses that we had envisaged in the third quarter of last year increased due to the arbitral award in December related to our trademark rights in Spain, the restructuring of our distribution set-up and operations in Greece, Cyprus and Bulgaria as well as the extended streamlining of our endorsement portfolio. In October last year, we decided to complement our Transformation with a short-term cost reduction program to shape a robust platform for sustainable, profitable growth. This program is necessary to realign our cost structure with market realities. It will make us more competitive and powerful for the future and will enable us to return to profitable growth. One of the key elements of this program is the closure of unprofitable stores mainly in mature markets while we continue to selectively open new profitable stores, primarily in emerging markets. By the end of this year, we expect to operate 540 stores compared with 590 stores at the end of 2012. To reduce costs further, we have also assessed our sponsorship portfolio and we decided to terminate endorsement contracts that are no longer part of PUMA’s core categories or strategic growth plans. Within this context, we have decided to focus our activities in the Sailing category on endorsing the America’s Cup and ORACLE TEAM USA for this year. Beyond 2013, PUMA will cease the production of sailing products. We have also decided to exit all Rugby activities across Europe.
SHARPENING PUMA’S BRAND PROFILE
While we will stay true to our Sportlifestyle positioning as a brand, we want to strengthen each of our divisions through more distinct approaches in terms of product, merchandising, marketing and distribution. Through the establishment of our Nature of Performance platform spanning across all our Performance categories as well as the evolution of PUMA Social in Lifestyle, we are establishing sharper, consumer focused value propositions, which will make us more relevant and competitive in each segment.
It will take some time for all of these measures to bear fruit but we are on the right path. We have every reason to believe in the huge potential of the PUMA brand, as we have taken decisive actions to overcome the challenging market issues we are currently facing.
Fuelled by the repositioning of our brand and a revamped innovation pipeline, and supported by our brand ambassadors such as Marco Reus, Rickie Fowler and Professor Green, I am very confident that we will gradually increase brand heat and re-connect with our youthful target consumers.
“MY HEARTFELT THANKS GOES TO MY TEAM”
I have to say that the close to two years as PUMA’s CEO were as exciting as they were challenging. Despite the fact that we had a tough year in 2012, especially in Europe, which forced us to react immediately by implementing a major restructuring program, I am proud of what we as a team have achieved during my tenure. So I would really like to express my heartfelt thanks to my team, my brilliant colleagues here at PUMA and to everyone, who provided me with constant support throughout these last two years. Together we have laid the foundation, so that PUMA’s management can continue with the implementation of the Transformation Program to exploit the full potential of the brand in the long run. Before leaving the company at the end of March 2013, I would like to thank you, our shareholders, for your continued support and belief in the PUMA brand. It was a pleasure and an honor to be at the helm of this amazing company and I do hope that our paths will cross again in the future.