In the light of PUMA’s ongoing and long-term commitment for the African football as the official supplier to eleven national teams across the continent, PUMA launched the African-themed fashion collections “From the PUMA Archives”, “Africa United” and African Football Fan Wear in the run-up to the World Cup 2010 in South Africa which is a great starting position for the tournament. From July 2009 on, the collections will be available in PUMA stores worldwide. The products such as T-shirts and sweatshirts will carry the „Cotton Made in Africa“ label.

In the second half of the year 2009, PUMA will produce 2% of its entire apparel collection with “Cotton Made in Africa” – including fan jerseys for the African National teams.

“We are proud that our African-themed collections have been created with African involvement which makes them much more authentic and more desirable,” said Jochen Zeitz, Chairman and CEO of PUMA. “PUMA’s commitment to Africa now goes beyond our position as the leading supplier for African Football Teams. Following our vision of creating a better world, we do our part to improve quality of life and environmental standards in Africa by supporting “Cotton Made in Africa”.

Cotton in Africa is produced without artificial irrigation due to the poverty, the lack of infrastructure and low water reserves. An efficient use of rainfall is therefore all the more important. The „Cotton Made in Africa“ project wants to create an efficient management of farms by offering training and advice. Techniques such as mulching to keep the soil covered and to prevent such a high-level of evaporation or balanced fertilisation are crucial. Farmers participating in the „Cotton made in Africa“ project are taught the relevant skills in facilities such as „Farmer Field Schools“.

PUMA is striving to integrate the idea of eco-efficiency into its product cycle, in order to harmonise business practice and the availability of natural resources. PUMA, for example, was the first sports goods company to ban PVC from its product range. Although PVC has very good technical characteristics, PUMA decided to take this step as the production and disposal of PVC can cause damage to the environment.

The documentary about environmental issues, which was filmed across fifty countries and shot entirely from the sky in high definition, offers a powerful commentary on the major environmental and social issues challenging our world and calls for a new awareness that protecting the earth is indispensable. It is the result of a collaboration between the photographer Yann Arthus-Bertrand, the producer and director Luc Besson and Francois-Henri Pinault, the Chief Executive of the French luxury group PPR – the majority shareholder of PUMA and the world exclusive partner of HOME.

“Creating awareness of our environment’s emergency state is crucial and the first step for an improved handling of our natural resources,” said Jochen Zeitz, Chairman and CEO of PUMA. “In line with our PUMAVision concept, PUMA has implemented numerous environmental initiatives through various programs that aim at reducing our “paw print” — the effects that PUMA’s operations and actions have on the environment. The HOME film inspires us to work towards making a positive contribution to our planet. We hope that it will inspire audiences everywhere,” he added.

puma.creative funds the screening of HOME at the Planetarium in Cape Town in South Africa, at the National Museum of Nairobi in Kenya and at the Institute of Contemporary Art (ICA) in Boston, organized in cooperation with the French Cultural Service amongst others.

It is the first movie to be released simultaneously across all media and all continents. The simultaneous worldwide release provides as many people as possible with the opportunity to watch this profound documentary as a global collective. Any proceeds from the sale of merchandising products related to the film will be donated to the organization www.goodplanet.org.

PUMAVision unites all PUMA initiatives that come under the heading ‘Corporate Social Responsibility’, giving them a coherent direction and framework. It comes from a vision of a world that is better than the one we know now—a world that is safer, more peaceful and more creative. The PUMAVision programs puma.safe, puma.peace and puma.creative reflect PUMA’s commitment to social and environmental responsibility and define the partnerships and initiatives PUMA will support and pursue.

For more information about the film, visit http://www.home-2009.com.

• Consolidated sales up slightly by almost 1% currency neutral
• Gross profit margin at 52%
• Operational result before special items at € 114 million representing 16% of sales, a decline of 9%
• First quarter result impacted by restructuring cost of € 110 million
• EPS before restructuring at € 5.36 compared to € 5.76

Market environment expected to remain difficult in 2009. Management takes further actions to act accordingly within the currently difficult market environment, in order to protect profitability and ensure profitable growth in the future.

GLOBAL BRANDED SALES

PUMA’s worldwide branded sales, which include consolidated and license sales, decreased currency neutral 3.1%. In Euro terms, sales are only slightly down 0.5% reaching € 737.7 million in a challenging environment versus € 741.2 million in last year’s quarter.

On a currency neutral basis, Footwear sales were down by 0.8% to € 407.1 million and Apparel 8.1% to € 237.4 million. Accessories increased by 0.6% to € 93.2 million.

LICENSED BUSINESS

Due to the take-over of a former licensee, the licensed business was down 41.6% on a currency neutral basis. Based on the licensed business, the company realized a royalty and commission income of € 5.0 million in the first quarter versus € 7.1 million in the prior year.

CONSOLIDATED SALES UP

In the first quarter, consolidated sales were up 0.8% on a currency neutral basis and 3.6% in Euro terms to € 697.4 million. Americas increased by double-digit rates whereas EMEA and Asia/Pacific were below last year. Currency adjusted, sales in Footwear were slightly down 0.8% representing € 397.1 million. Apparel sales decreased 8.1% to € 222.4 million due to high comparables which resulted from replica sales relating to the Football Euro Cup last year. Accessories were up a strong 56.7% to € 77.9 million which stems mainly from first time consolidation effects.

GROSS PROFIT ABOVE 52% 

In the first quarter, gross profit margin reached 52.1% compared to 53.4% last year. The decline was mainly due to the regional mix. Footwear reported 50.4% versus 53.4%, Apparel 53.7% compared to 53.4% and Accessories 55.6% versus 53.7% last year.

OTHER OPERATING EXPENSES

Other operating expenses increased by 5.4%, rising from € 241.0 million to € 254.1 million, or from 35.8% to 36.4% as a percentage of sales. Operating Expenses include depreciations of € 15.8 million, up 19.9% compared to last year.

OPERATIONAL RESULT

Operational result before special items amounts to € 114.0 million versus € 125.8 million last year, a decline of 9.4%. As a percentage of sales this relates to a margin of 16.3% versus 18.7%.

SPECIAL ITEMS – RESTRUCTURING CHARGE

PUMA has taken further actions to ensure long-term profitable growth in the future given the currently challenging economic environment and an unpredictable outlook. Management has implemented a cost reduction program which will reduce originally planned costs annually and lead to cost savings of up to € 150 million in FY2011. With the resulting one-time expenses of € 110 million (net of taxes € 75.2 million) in the first quarter, PUMA will optimize its retail portfolio, the global organizational structure and the operating processes. The number of employees in PUMA’s global workforce is expected to remain at previous year’s level while ensuring an even better alignment of resources with key business opportunities. The program was initiated as a proactive step in order to ensure an even leaner and more efficient platform that will help PUMA to focus even stronger on the numerous opportunities that arise in the sportlifestyle market in a challenging market environment accordingly. After adjustment for special items, EBIT amounted to € 4.0 million compared to € 125.8 million last year.

EARNINGS

Before restructuring costs, the company’s pre tax profit (EBT) accounts for € 112.4 million versus € 126.8 million and net earnings to € 80.8 million versus € 90.1 million, a decline of 10.3%. This results in earnings per share of € 5.36 compared to € 5.76. The operational tax ratio came in at 28.5% versus 28.9% last year. Taking into account the restructuring costs, earnings before taxes declined from last year’s € 126.8 million to € 2.4 million this year. Net earnings amounted to € 5.6 million versus € 90.1 and earnings per share as well as diluted earnings per share were at € 0.37 versus € 5.76 in last year’s quarter.

REGIONAL DEVELOPMENT

Marketing/Retail expenses remained unchanged to last year’s level and totaled € 127.2 million whereas Marketing was below last year and Retail increased due to full year effects. The cost ratio decreased from 19.0% to 18.2% of sales. Other selling expenses increased 20.0% to € 84.5 million, or from 10.5% to 12.1% of sales, mainly due to first time consolidations and currency impacts. Expenses for product development and design were up 23.9% to € 14.6 million, or as a percentage of sales from 1.8% to 2.1% as major development costs occurred in US-Dollars with the US $ strengthening on a like-for-like basis. Other general and administration expenses were down 10.5% and totaled 27.8 million, representing 4.0% of sales versus 4.6%. Sales in the EMEA region decreased currency adjusted by 3.0% reaching € 366.1 million versus € 391.1 million last year. Sales in last year’s quarter were impacted positively by major sport events. The region now represents 52.5% of consolidated sales. Gross profit margin increased to 55.1% compared to 54.7% last year.

Sales in the Americas were up currency neutral by 11.5% to € 178.1 million. The region now accounts for 25.5% of consolidated sales. Gross profit margin stood at 46.7% compared to 50.4% last year. In the US market, sales increased by 3.4% to $ 138.7 million in the first quarter.

Asia/Pacific sales decreased by 1.2% currency neutral but increased by 14.8% in Euro terms to € 153.3 million. The total region accounts for 22.0% of sales.

Gross profit margin reached 51.0% versus 53.0% last year.

NET ASSETS AND FINANCIAL POSITION EQUITY 

As of March 31, 2009, total assets climbed by 16.4% to € 2,108.0 million and the equity ratio reached 56.6% after 60.4% in the previous year.

WORKING CAPITAL

Inventories grew 22.6% to € 446.7 million and accounts receivable 5.3% reaching € 533.1 million. Adjusted by acquisitions and currencies, inventories were up 16.6% and accounts receivables by 1.3%. Due to lower liabilities at the end of March, working capital totaled € 596.9 million (ex acquisition € 581.2 million) compared to € 521.1 million last year.

CAPEX/CASHFLOW

For Capex, the company spent € 11.6 million in the first quarter versus € 24.3 million in last year’s quarter. In addition, an outflow of € 54.7 million (last year: € 16.6 million) related to acquisition cost. Due to the aforementioned investments and the higher working capital, free cashflow amounted to € -118.0 million compared to € -49.7 million last year. Excluding investment for acquisitions, free cashflow was € -63.3 million versus € -33.0 million. The decline compared to last year is mainly due to the aforementioned lower liabilities.

CASH POSITION

Total cash end of March stood at € 267.6 versus € 357.2 million last year. Bank debts were down from € 67.1 million to € 63.2 million. As a result, the net cash position decreased from € 290.0 million to € 204.5 million year over year, mainly due to the aforementioned acquisitions and a lower free cashflow in the first quarter.

SHARE BUYBACK

PUMA did not purchase own shares during the first three months. At quarter-end, 950,000 shares were held as treasury stock in the balance sheet, accounting for 5.9% of total share capital. Effective April 29, 2009 all own shares were cancelled and share capital was reduced accordingly. As of today, subscribed capital consists of 15,082,464 shares or € 38.6 million.

During the first quarter, sales came in better than the order books at the end of the fourth quarter 2008 had indicated. Due to seasonability, the current shift in future orders to at-once business in the current market environment, as well as the own retail business which is not included in the order books, quarterly orders are losing significance as an indicator of future sales. As a result, PUMA will not release future orders as of the first quarter 2009. After 14 years of consecutive growth, the year 2009 will be taken as a year of consolidation with a clear focus on adjusting the cost basis in alignment to the current business environment. First positive signs are not expected before 2010, the year that is highlighted by the upcoming Football World Cup in South Africa, where PUMA will once again be one of the most dominant brands. It currently outfits eleven African Football Federations including Egypt, the African Cup of Nations winner 2008, as well as the reigning World Champion, Italy. Furthermore, additional focus for 2009 is on working capital improvements to strengthen the cash position and therefore the return on capital employed by year-end. With all the implemented measures, PUMA plans to protect its industry-leading key financial parameters.

JOCHEN ZEITZ, CEO:

“Despite an ongoing slowdown in the global consumer’s environment, PUMA managed to post a solid sales and earnings performance before one time expenses in the first quarter. Due to the worldwide recession, we plan for business to remain challenging in 2009 and have therefore decided to implement further measures to align our cost structure with the current market environment, ensuring a platform for profitable growth in the future. The measures are expected to accelerate our operational processes, make the organization even more efficient and to further reduce time-to-market for our products. In addition to the opportunities that arise in the different sportlifestyle segments, PUMA will be particularly focused on the Football segment, in which we plan to further grow our market share with the first World Cup ever played on African soil, tapping into the significant growth opportunities offered by the market.”

Photo Credits: Robert Ashcroft/ PUMA

Through PUMA’s membership of the Network, its suppliers will benefit from capacity building through GRI certified training to prepare a GRI sustainability report. PUMA has nominated five suppliers in Portugal, Turkey and Pakistan to receive training on the transparent measurement and reporting on their sustainability performance using the GRI G3 Guidelines – the world’s most widely-used framework for sustainability reporting.

“We are pleased that GRI provides another opportunity for PUMA to increase capacity building in our global supply chain through its Global Action Network,” said Reiner Hengstmann, Global Head Environmental and Social Affairs at PUMA. “Through our participation in a previous GRI sustainability reporting project, we enhanced the understanding of and commitment to sustainability at PUMA suppliers in South Africa significantly with one supplier even winning an award for their first sustainability report.”

The Global Action Network for Transparency in the Supply Chain is based upon the success of a recent project in which GRI partnered with the German Development Agency (GTZ) and the German Federal Ministry for Economic Cooperation and Development (BMZ). The project brought four multinational companies – including PUMA – together with twelve of their suppliers across five countries to teach the suppliers to understand, monitor and report on their sustainability impacts.

Gregory Elders, SME and Supply Chain Program Manager at GRI said: “We are delighted that PUMA has become the first member of The Network and has taken this bold step in embedding the practice of sustainability reporting within companies in its supply chain. The process of sustainability reporting is an essential step in enabling companies – large or small – to take ownership of their economic, environmental and social performance. Since small and medium enterprises – often within the supply chain of larger firms – provide the majority of employment globally: it is crucial that they measure and manage their sustainability impacts”

GRI has a strong track record in working with both multinational enterprises and smaller firms in driving the sustainability agenda forward through transparent public reporting.

“We are pleased to welcome PUMA back to build upon the success of the previous project, through which the company supported apparel suppliers from South Africa through the sustainability reporting journey,” added Elders.

As the new COO, Klaus Bauer will take over responsibility for Finance, Controlling, Legal, Operations, Logistics, IT, and Human Resources on August 1, 2009. Bauer, who has a degree in business administration, has been working for PUMA for 20 years in different positions. In his current role as Senior Executive Vice President he is responsible for IT, Operations, Logistics and regional as well as strategic projects related to company expansion. Dieter Bock will remain in charge of Finance until he leaves the company on July 31, 2009, hence ensuring a smooth transition and hand-over to his successor.

Jochen Zeitz, Chairman and CEO of PUMA AG: „We are pleased to welcome Klaus Bauer as a new Member to the Board of Management of PUMA AG in August this year. He brings along an extensive experience in different management positions within PUMA and has an outstanding knowledge of organizing, leading and managing the full range of operational business processes.

We regret that Dieter Bock has made the decision to leave the Company and are grateful for his successful work at PUMA for many years. In more than 30 years that he has been with the company, he achieved a great track record and contributed significantly to the company’s financial performance in the last years and PUMA’s current solid financial position.”

Photo Credits: Robert Ashcroft/ PUMA