Performance Second Quarter 2012

• Consolidated sales increase 11.8% in Euro terms
• Gross profit margin remains stable at 49.1%
• EBIT decreases by 15.0% to € 47.1 million
• Net earnings decline by 29.2% to € 26.7 million
• EPS down from € 2.51 to € 1.78
• Scope of Transformation Program will be expanded
  
  

Performance First Six Months of 2012

• Consolidated sales grow 8.8% in Euro terms
• Gross profit margin softens to 50.2%
• EBIT reduced by 10.4% to € 149.1 million
• Net earnings decline by 12.8% to € 100.6 million
• EPS falls from € 7.69 to € 6.72
  
  

Outlook for the Financial Year 2012

• PUMA’s Management has revised its previous guidance for 2012 net sales growth from a high-single digit to a mid-single digit rate.

• Transformation Program to be extended, resulting in one-time costs of up to € 100 million.

• Management expects annual net earnings to decrease significantly after posting € 230.1 million of net earnings last year due to the aforementioned one-time expenses.

“Despite the poor consumer sentiment and challenging business environment particularly in Europe, PUMA achieved respectable sales growth in the second quarter and first half of this year,” said Franz Koch, CEO of PUMA SE. “However, pressure on gross profit margins and further strategic investments related to our ‘Back on the Attack’ plan in combination with a weakening European business impacted second quarter net earnings. We have therefore taken measures to secure sustainable and profitable growth by broadening the scope of our Transformation Program. This program is designed to reduce complexity and establish a more efficient business model, operating on a leaner cost base.”

Americas region and Accessories segment support PUMA’s second quarter sales growth

Net earnings weaker than expected

Sales Performance by Segment

PUMA’s second quarter consolidated sales grew by 11.8% in Euro terms and by 6.0% currency adjusted to € 752.9 million. Whereas Footwear sales were flat currency adjusted at € 370.9 million, with Teamsport and Running balancing the softening sales in the Motorsport and Fitness categories, Apparel sales increased by 7.9% to € 256.4 million, fueled in part by higher demand for fan wear in the Teamsport category on the back of EURO 2012. Accessories jumped by 24.3% to € 125.6 million with strong results in all regions for our Cobra Golf products and our socks business.

In PUMA’s Sportlifestyle business, the Archive Lite, an ultra-light shoe with a contemporary look that derives from the Suede and has been fused with performance technology such as the FAAS Foam and mash, continued to resonate well with consumers.

Over the first half of this year, consolidated sales improved by 8.8% in Euro terms or by 5.1% currency adjusted to € 1.57 billion. Footwear sales slowed down 1.2% currency adjusted. Apparel sales were up 8.0% currency adjusted and Accessories rose 21.5% currency adjusted, with Cobra Golf and the new Accessories joint venture in the US continuing to deliver excellent results.

Sales Performance by Region

Growth continues in the Americas and Asia

In regional terms, PUMA continued its excellent performance in the Americas with sales growing by 15.0% currency adjusted to € 278.7 million in the second quarter. Asia/Pacific posted a gain of 8.6% to € 190.6 million. Sales in EMEA declined by 3.0% to € 283.6 million, due to the difficult market environment in Europe and the weaker performance of the footwear category.

Half-year sales in the Americas rose strongly by 11.8% currency adjusted with good results across nearly all major markets. Asia/Pacific increased by 9.4% currency adjusted, supported by excellent numbers from India and Japan, while EMEA sales were down 2.1% currency adjusted with most markets not performing at the expected level, although Spain and Germany returned satisfying figures.

Sales Performance Retail

Retail posts solid growth

PUMA’s retail operations continue to provide solid growth. Second quarter retail sales were € 150 million, 22.3% ahead of last year’s € 122 million, representing 19.9% of total sales. From January to June, retail sales were up 19% from € 228 million to € 272 million, delivering 17.3% of total sales. Increased volumes at existing stores, new store openings as well as continued growth in our e-commerce business were responsible for this positive development.

Margins, Expenses and Profitability

Gross Profit Margin remains steady in Q2, but falls in H1

PUMA was mostly able to allay the effects of continued input price pressures in the second quarter. The gross profit margin stayed flat at 49.1% in the second quarter of 2012, supported by a favorable hedging impact compared to last year. However, the expected slight increase in margin did not materialize and we were therefore not able to offset higher input cost and margin pressure. Footwear rose slightly from 48.1% to 48.3% and Apparel improved from 48.9% to 49.4%. Accessories, however, fell back from 53.3% to 51.1% compared to 2011.

On a half year basis, the gross profit margin declined 70 basis points from 50.9% to 50.2%. Footwear fell from 49.8% to 48.9%. Apparel rose marginally from 51.4% to 51.5% while Accessories moved lower from 53.7% to 51.5% due to increased golf club business, which carries lower margins.

Operating Expenses increase

Second quarter operating expenses continued to rise as set out in our growth strategy. OPEX rose by 17.0% to € 327.4 million in the second quarter of the year compared to € 279.9 million last year. Increased expenditures were necessary to support the Euro-Cup in Poland and Ukraine and first initiatives for the Olympics in London, while at the same time PUMA has been extending RD&D resources and initiatives in order to strengthen the company’s product pipeline. In addition, PUMA’s increased number of retail stores, currency impacts and the extended scope of consolidation were responsible for a considerable portion of this increase.

For the first half of 2012, OPEX rose by 12.3% or € 71.4 million from € 578.5 million to € 649.9 million, impacted by the same factors as the second quarter figures. In addition, higher costs incurred to build up the groundwork of the Transformation Program, such as standardized ERP-IT-systems and the regional supply chain initiative.

EBIT declines due to lower than expected sales and higher expenses

Operating profit declined by 15.0% to € 47.1 million during the second quarter of 2012. On a half-year basis EBIT fell by 10.4% to € 149.1 million, which represents an EBIT margin of 9.5%.

Financial Result

The financial result declined from € -1.6 million to € -3.7 million due mainly to negative currency developments. Similarly, for the year to date, the financial result moved down from € -1.8 million to € -2.7 million.

Earnings before Taxes

PUMA’s second quarter EBT was down 19.4% to € 43.3 million. The quarterly tax ratio increased from 30.0% to 33.8%.

EBT also fell for the first half of the year from € 164.6 million to € 146.4 million, representing a drop of 11.0%. However, the company reported an improved tax rate of 29.1% compared to last year’s 30.0%.

Net Earnings decline

As a consequence of lower than expected gross profit and increased expenses, consolidated net earnings decreased by 29.2% to € 26.7 million, coming in weaker than Management had anticipated. Earnings per share fell by 29.0% to € 1.78.

For the first half of 2012, net earnings weakened by 12.8% to € 100.6 million and EPS decreased by 12.6% to € 6.72.

Net Assets and Financial Position

Total assets as of June 30, 2012 grew by 10.1% from € 2,343 million to € 2,580 million, mainly due to an increase in inventories. The equity ratio improved strongly from 59.4% to 65.7% when compared to the second quarter of 2011. In absolute figures, shareholders’ equity increased by 21.8% from € 1,392 million to € 1,696 million.

Working Capital related Assets and Liabilities

Looking at assets, inventories rose by 26.1% currency adjusted or 32.3% in Euro terms to € 672.3 million. This is mainly due to the continuing expansion of PUMA’s retail store network and higher average prices per unit on stock. Trade receivables also increased by 7.0% currency adjusted or 11.6% in Euro terms to € 582.7 million, broadly in line with sales growth. On the liabilities side, trade payables increased by 10.4% to € 469.5 million.

Cashflow/ CAPEX

The Free Cashflow (before acquisitions) came in at € -57 million compared to € -9 million for the same period in 2011, with the outflows consisting mostly of working capital increases. The payments for acquisitions relate to the purchase of the outstanding Dobotex shares, effected on January 1, 2012.CAPEX increased by 17.1% to € 34 million and continued for the most part to be related to investments aligned with “Back on the Attack”, such as supply chain initiatives and IT projects.

Cash Position

The total cash position as of June 30, 2012 was reduced by 19.8% from € 352 million to € 282 million, affected by the purchase of the remaining Dobotex shares. Including bank debts, the net cash position decreased 26.6% from € 321 million to € 236 million.
 

PUMA’s Transformation Program aiming at optimizing Business Model and improving Cost Structure

Given the challenges in its European business, coupled with increasing pressure on gross profit margins and the need for continued strategic investments into brand, product and the company’s structure, PUMA’s management has decided to accelerate the Transformation Program, which began in 2011 under the aegis of the company’s five-year growth plan.

This program aims to reduce complexity, increase operational efficiencies, and streamline the company’s cost bases. At the core of the program is the setup of a new regional business model which will initially be rolled out in Europe and will then be extended to the remaining regions.

The European setup will be simplified by consolidating the number of organizational entities within Europe from 23 countries to seven areas. Areas are groupings of countries where operations and back-office functions will be further centralized while each of the individual countries will maintain their commercial functions to enable a stronger focus on the end-consumer.

Another key component of the new regional business model is the establishment of a fully regionalized supply chain, which will significantly improve order management, inventory levels and turns, as well as production flows on the sourcing side. In order to enable and benefit from these new processes, PUMA has decided to roll out a globally harmonized IT systems landscape.

The extended scope of PUMA’s Transformation Program includes the continued optimization of PUMA’s retail portfolio mainly in Europe and North America. PUMA’s retail strategy consists of the selective adding of new stores in profitable locations, particularly in Emerging Markets, while closing those that are underperforming.

In addition, PUMA will further simplify its product portfolio by significantly reducing the overall number of articles developed. In line with the new regional business model, PUMA will develop strong global and regional collections while trimming collections that are created for specific local markets. Furthermore, collaboration and endorsement contracts that are either not viable or in line with PUMA’s long-term strategy will be terminated.

In addition to the above laid-out measures, PUMA will further improve the company’s cost structure by streamlining its global and regional organization setups.

PUMA’s Management estimates that these actions will require one-time costs of up to € 100 million, which will ultimately result in higher cost efficiency and working capital improvements in the upcoming years.

Managing Directors

Klaus Bauer (57), Chief Operating Officer, informed the Administrative Board that he is not planning to extend his current contract beyond 2012 due to his personal life planning. Michael Lämmermann (50), General Manager Finance, will take on the position of Chief Financial Officer, effective January 1, 2013 and will also be responsible for Legal in addition to Finance.

Klaus Bauer joined PUMA in 1989 and became a member of the Board of Management in 2009. As Chief Operating Officer, Klaus Bauer is responsible for Finance, Legal, Human Resources, IT, Logistics and Operations. He will remain in charge of his duties until he leaves the company at the end of the year, hence ensuring a smooth transition and hand-over to both Michael Lämmermann and the successor as COO, who will be announced at a later date.

Michael Lämmermann joined PUMA in 1993 and became the Director of Controlling in 1998. He was then promoted to Chief Financial Officer and Chief Operating Officer of PUMA North America, based in Westford, USA, a role he filled for 10 years, before returning to Germany to take up his current role as General Manager Finance.

Antonio Bertone (39), Chief Marketing Officer, will also be leaving the company at the end of 2012 to pursue other career opportunities after 18 years with PUMA. Antonio Bertone will continue to work for PUMA as a consultant on a project basis, providing his skills and expertise in managing global brand and marketing initiatives to PUMA. As Chief Marketing Officer, he oversees PUMA’s global brand management and will also remain in charge of his duties until the end of the year. His successor will be announced at a later date. Antonio Bertone had been a deputy member of PUMA AG´s Board of Management since 2008.
 

Outlook for the Financial Year 2012

The above laid-out one-time costs of up to € 100 million will be booked in the second half of 2012.

Management expects PUMA’s sales in the upcoming two quarters to grow, albeit at a reduced pace due to the increasingly difficult macro-economic environment and high levels of inventory in the markets.

The Management therefore revises its previous guidance for PUMA’s 2012 net sales growth from a high-single digit to a mid-single digit rate and expects annual Net Earnings to decrease significantly from the € 230.1 million posted last year, impacted by the aforementioned one-off expenses.

“In keeping with our mission of becoming the most desirable and sustainable Sportlifestyle company, PUMA is happy to take this pioneering step forward for the retail industry.”, said Franz Koch, CEO of PUMA. “Establishing a sustainable PUMA Store underlines our commitment to reduce CO2 emissions, energy, water and waste in PUMA offices, stores, warehouses and direct supplier factories by 2015.”

“The building is a true design marvel and incorporates a host of innovative sustainability features to make our sustainable PUMA Store a one-of-a-kind retail experience”, said Rajiv Mehta, Managing Director PUMA South Asia. “We are pleased to be a pioneer in sustainability again with setting new standards for an environmentally-friendly and resource-saving store concept in one of India’s best shopping locations.”

Features that meet the highest criteria for sustainability include:

• Recycled steel from old DVD players, bicycles and tiffin boxes has been used to construct the building of the PUMA Store.
• The surface layout of the building has been designed in a way that more than 90% of the interior spaces in this store have direct access to natural daylight so that less artificial light is needed.
• The artificial lighting used in this store is energy efficient with fewer watts being consumed for the same lumen output.
• The recessed first and second floor volume generates a stack-effect for natural cooling.
• The highly insulated building shell allows for cooling without an air conditioning. Soil temperature, at a depth of about 12 feet or more stays fairly constant throughout the year and is approximately equal to the average annual ambient air temperature. The ground will be used as a heat sink for cooling in the summer and as a heat source for heating in the winter. A simple method used in this store is to pass air through the underground air tunnel.
• By maintaining the temperature at a comfortable 24 degrees Celsius, PUMA leaves it warmer than in usual retail stores and thus conserves energy.
• The sustainable PUMA Store is 100% solar-powered as solar photovoltaic cells provide 10,384 kwh units of energy a year.
• The porotherm blocks used to construct the shell of the building have been made using silt from the lakes in Kunigal. These lakes are the only source of water for villages in Kunigal and hence are desilted every year to increase the water table. The silt usually ends up as waste, but has now been used as a valuable resource in the sustainable PUMA Store.
• Under Floor Air Distribution helps to save further energy. Floor Air Distribution works on the principle that air in any particular space needs to be cooled only for the first eight feet from the floor because convection currents cause hot air to rise automatically while cool air remains at the bottom.
• The furniture and fixture in this store were made of recycled wood while low volatile organic compound paint has been used to paint the Store’s walls.
• The Store’s roof garden keeps the building insulated from the direct heat of the sun and the plants keep the temperature lower at all times.
• A special insulation foam has been implemented in the roof which cuts down heat gains by reducing conduction.
• Occupancy sensors provide automatic on/ off control so that lights are used when the room is occupied. When the space is unoccupied, the lights are automatically turned off.

The store will retail a range of products made from organic cotton as well as PUMA’s Wilderness Collection – a collection primarily sourced and produced in Africa using sustainable materials. For the first time in India, the sustainable PUMA Store also introduces PUMA’s global ‘Bring Me Back” Program – an in-store recycling program for footwear, apparel and soft accessories.

The launch event was carbon-neutral with all the energy consumed during the party being produced by customers and invitees through pedal power. This is a novel initiative whereby people pedal on a special bicycle generator that feeds into the main power source. In this way, power can be created and stored in a battery bank thereby eliminating reliance on traditional power sources.

To generate awareness and appreciation for sustainability amongst the citizens of Bangalore, PUMA has embarked upon an ambitious initiative to involve the art and design community. The brand has partnered with Trapeze Design Studio as well as young installation artists from the city to create large-format installations using waste material. These will then be put up in key locations around Bangalore city later this month as a strong message to highlight the glaring need to reuse, reduce and recycle – the cornerstone of waste minimization strategies. The aesthetic and utilitarian installations will be donated to the Bangalore Municipality and remain as permanent artworks to beautify the city-scape.

Jean-François Palus became Group Managing Director of PPR SA in 2008, and joined the Supervisory Board of PUMA in 2007 and the PPR SA Board in 2009. He was Chief Financial Officer of PPR SA, the main shareholder of PUMA, for six years. A graduate of France’s HEC business school, Jean-François Palus began his career with Arthur Andersen as an auditor and financial adviser. He joined the PPR group in 1991.

“I have come to value PUMA highly over the last five years of successful cooperation and I would like to thank Jochen Zeitz for his invaluable contribution to PUMA’s outstanding development for more than 20 years”, said Jean-François Palus. “PUMA is a fantastic brand and company with highly committed people. I am looking forward to working with management to tap into the huge potential alongside Franz Koch and his PUMA team to become the most desirable and sustainable sportlifestyle company in the world.”

Performance Third Quarter 2012

• Consolidated sales increase 6.0% in Euro terms
• EBIT before special items decreases by 16.7% to € 98.8 million
• Special items € 80 million due to Transformation and cost reduction program
• EPS down from € 5.45 to € 0.81

Performance First Nine Months of 2012

• Consolidated sales grow 7.8% in Euro terms
• EBIT before special items reduced by 13.0% to € 247.9 million
• EBIT including special items € 168.6 million
• EPS declines from € 13.15 to € 7.53
• Equity ratio improves from 62.9% to 65.2%

Outlook for the Financial Year 2012

PUMA’s Management maintains its 2012 sales guidance at a mid-single digit rate in Euro terms.

• Transformation Program complemented by immediate cost cutting measures as the difficult business environment in particular in Europe required short-term adjustments.
• Management expects annual net earnings to be significantly below those of 2011, impacted in particular by the one-time expenses.

“PUMA posted a moderate increase in sales in the third quarter despite the challenging business climate in Europe,” said Franz Koch, CEO of PUMA SE. “We have taken decisive actions to overcome the issues we are currently facing in particular in Europe. Our Transformation Program 2010-2015 in combination with immediate cost cutting measures and a strengthened product pipeline in Performance and Lifestyle for next year will provide a solid basis for sustainable and desirable growth.”

Challenging Business Climate in Europe continues to slow down sales growth

 Sales Performance by Segment

PUMA’s third quarter consolidated sales grew by 6.0% in Euro terms and by 0.5% currency adjusted to € 892.2 million.

Footwear sales rose by 2.5% to € 441.9 million, supported by continuing demand for the lightweight running footwear range PUMA Faas and also Heritage styles such as the evergreen Suede Classics and our Archive Lite Mid and Low designs. PUMA’s success in its running footwear range was underlined by the Olympic Summer Games that saw PUMA’s blend of Sportlifestyle at its best: Outstanding athletic performances, combined with cool events in town. However, the positive performance in our Running category was dampened by declines in the Fitness & Training and Motorsport categories in PUMA’s mature markets.

Apparel sales increased by 5.6% to € 311.2 million, fueled not only by continued strength in our Cobra PUMA Golf division, but also by sales of replica jerseys as part of our Teamsport category. PUMA has had tremendous success with Borussia Dortmund replica and fan wear, which has played an important part in our sales performance in Germany this year.

Accessories continued to climb strongly, up 20.1% to € 139.1 million with strong results in our American sock and bodywear business and also in Golf. In September, PUMA was part of a sensational finish at the 2012 Ryder Cup when Cobra PUMA Golf athlete Ian Poulter, the undisputed player of the tournament, won all four matches he played in the prestigious competition between the best golfers from Europe and the USA.

Over the first nine months of this year, consolidated sales improved by 7.8% in Euro terms or by 3.3% currency adjusted to € 2.46 billion. Footwear sales rose 2.2% in Euro terms, Apparel sales were up 9.8% supported by strong sales in Running and other performance items, and Accessories rose 23.4%, with Cobra PUMA Golf products resonating well with consumers.

Sales Performance by Region

 Growth continues in the Americas

In regional terms, sales in EMEA declined by 3.4% to € 396.7 million as the economic slow-down in Europe and restrained consumer spending continued to have a severe impact on PUMA’s business performance. Strong numbers from Germany and Russia could not completely offset the slowdown elsewhere. However, PUMA continued its excellent performance in the Americas with sales growing by 20.5% in Euro terms (10.6% currency adjusted) to € 283.2 million in the third quarter, with Argentina, Brazil and Mexico all providing strong double digit increases and continued growth in North America. Asia/Pacific posted a gain of 8.3% in Euro terms to € 212.3 million with good numbers from Korea and India in particular. Growth in China has slowed down due to a challenging overall market environment and high inventory levels in the market.

First-nine-month sales in EMEA were down 2.5% with most markets in Western Europe continuing to face challenges, although Germany returned satisfying figures, as did Turkey. Conversely, sales in the Americas rose strongly by 18.3% with good results across both North and Latin America. North America benefitted in particular from continued growth in our socks and bodywear subsidiary as well as Cobra PUMA Golf. Asia/Pacific increased by 14.9%, supported again by excellent numbers from India and also Japan.

Sales Performance Retail

 Retail continues to grow

PUMA’s owned and operated retail operations generated higher sales numbers. Third-quarter retail sales were € 165.0 million, an increase of 22.7% compared to € 134.0 million for the third quarter of 2011 and equal to 18.5% of total sales. For the first nine months to the end of September, retail sales were up 20.4% from € 363.0 million to € 437.0 million, delivering 17.7% of total sales compared to 15.8% at the same stage last year. Comparable sales rose at existing stores and PUMA continues to open new selective stores in profitable locations. However, a considerable amount of retail stores in mature markets are not generating satisfying contributions and will be part of the retail store network optimization. PUMA’s e-commerce business is growing and has contributed positively.

Margins, Expenses and Profitability

 Gross Profit Margin fell in Q3 and for the first nine months of 2012

The gross profit margin declined to 48.2% in the third quarter of 2012, under pressure from input costs and unfavorable trading conditions in Europe. Footwear fell from 49.8% to 46.1%, mainly impacted by inventory clearances which have led to a stock reduction in the footwear category in the third quarter, ahead of the launch of our new ranges for Spring/Summer 2013. Apparel fell marginally from 50.3% to 50.1%. Accessories, however, rose from 50.0% to 50.6% compared to 2011.

On a nine-month basis, the gross profit margin declined 110 basis points from 50.6% to 49.5%. Footwear fell from 49.8% to 47.9%. Apparel remained steady at 50.9% while Accessories moved lower from 52.4% to 51.2% due to higher input costs and the competitive Teamsport business.

Operating Expenses increase

Third-quarter operating expenses rose by 9.5% to € 336.1 million in the third quarter of the year compared to € 307.0 million last year. Retail costs have continued to rise as PUMA has increased the number of retail stores it owns and operates, whilst the Olympics and associated costs meant that marketing was significantly higher than over the same period in 2011. As well as continuing to invest steadily in RD&D in order to further strengthen our product portfolio, we are continuing to enhance our supply chain and IT-systems.

For the first nine months of 2012, OPEX rose by 11.3% or € 100.5 million from € 885.5 million to € 986.0 million, impacted as above by increased marketing, retail and RD&D expenditures as well as investments in line with the accelerated Transformation Program. The OPEX has also been impacted by currency effects which alone led to an increase of 450 basis points.

Operating result before Special Items

As a result of the lower gross profit margin and increased operating costs related to the Transformation Program, the operating result before special items declined by 16.7% to € 98.8 million during the third quarter of 2012. On a nine months basis EBIT before special items fell by 13.0% to € 247.9 million, an EBIT margin of 10.1%

Special Items

PUMA recorded a total of € 80 million in special items that are related to the Transformation Program during the third quarter. These have been mainly incurred by restructuring the European region, optimizing the retail portfolio and reorganizing its global operations and functions.

EBIT after special items

EBIT including special items were equal to € 19.6 million for the third quarter and € 168.6 million for the nine months to the end of September.

Financial Result

The financial result was positive at € 1.7 million compared to € -2.1 million in the third quarter of 2011, due mainly to positive currency developments. Similarly, for the year to date, the financial result improved from € -3.9 million to € -0.9 million.

Earnings before Taxes

PUMA’s third-quarter EBT was down 81.7% to € 21.3 million. The quarterly tax ratio decreased from 30.0% to 27.7%.

EBT also fell for the first nine months of the year from € 281.1 million to € 167.7 million after special items, a drop of 40.3%. The company reported an improved tax rate of 28.9% compared to last year’s 30.0%.

Net Earnings decline

As a consequence of continued pressure on the gross profit margin, increased expenditures and the special items in particular, consolidated net earnings fell by 85.1% to € 12.2 million. Earnings per share therefore fell to € 0.81.
For the first nine months of 2012, net earnings weakened by 42.8% to € 112.8 million and EPS decreased to € 7.53.
Net Assets and Financial Position

Equity

Total assets as of September 30, 2012 grew by 6.5% from € 2,423 million to € 2,580 million, mainly due to an increase in inventories. The equity ratio improved from 62.9% to 65.2% when compared to the third quarter of 2011. In absolute figures, shareholders’ equity increased by 10.3% from € 1,524 million to € 1,682 million.

Working Capital related Assets and Liabilities

Looking at assets, inventories rose by 21.3% in Euro terms to € 646.0 million or 16.8% currency adjusted. This increase is significantly lower than in previous quarters and testament that our efforts to reduce the current over-stock levels have been successful in the quarter. Inventories have generally advanced in the wake of continued retail expansion as well as higher average prices per unit on stock. Trade receivables rose only slightly to € 623.7 million, which is due to a sharper focus and reflects PUMA’s dedication to improve outstanding days. On the liabilities side, trade payables fell slightly to € 382.9 million.

Cashflow/ CAPEX

The Free Cashflow (before acquisitions) came in at € -82.7 million compared to € -89.4 million for the same period in 2011, with working capital increases offset by lower tax payments. The payments for acquisitions relate to the purchase of the outstanding Dobotex shares, effected on January 1, 2012.
CAPEX increased by 21.4% to € 54.2 million and continued for the most part to be related to investments aligned with the “Back on the Attack” growth plan, such as supply chain initiatives, IT projects and profitable retail store extension.

Cash Position

The total cash position as of September 30, 2012 was reduced by 9.4% from € 289.5 million to € 262.2 million, affected by the purchase of the remaining Dobotex shares. Including bank debts, the net cash position decreased 19.5% from € 255.1 million to € 205.4 million.

Implementation Status of PUMA’s Transformation Program and Cost Reduction Measures

PUMA has progressed with and has already begun to implement major parts of its Transformation Program which was introduced in 2010 as a new development phase with the aim to reduce complexity and increase operational efficiencies in the long run. In addition, immediate cost reduction measures were initiated to improve the overall current financial performance.

New Regional Business Model: At the core of the program is the setup of a new regional business model which will initially be rolled out in Europe and then gradually be extended to the remaining regions. The European organizational structure has now also been expanded to include several central and eastern European Union member states (Czech Republic, Poland, Hungary, Slovakia and the Baltic nations). Furthermore, PUMA has reduced the number of organizational entities from 23 countries to seven areas in order to reduce complexity of the business. Each area has a full management team and P&L responsibility, while each country will focus its activities on the commercial side of the business. The seven areas are: DACH (Germany, Austria, Switzerland), IBERIA (Spain, Portugal), UKIB (Belgium, Ireland, Luxemburg, Netherlands, UK), NORDICS (Denmark, Finland, Norway, Sweden) EASTERN EUROPE (Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovakia), FRANCE and ITALY.

Consolidation of Warehouse Portfolio: Correspondingly, PUMA has initiated the consolidation process of its warehouse portfolio across Europe in order to generate further efficiencies and cost savings with the long-term objective to align the warehouse network with the new area structure.

Optimization of Retail Portfolio: PUMA has decided to close a total of approximately 80 unprofitable stores with the focus on mature markets, while the company will continue to open new selected stores in profitable locations primarily in emerging markets. By the end of December 2013, PUMA aims to operate around 540 stores worldwide, compared to its current 590 stores.

Termination of Collaboration and Endorsement Contracts: PUMA has decided to divest unprofitable collaborations and endorsement contracts in line with the overall consolidation of its product portfolio.

Reducing Product Collections: PUMA is planning to downsize its overall product palette by 30% by the end of 2015. The number of articles has already been aligned with the company’s core categories. The major portion of the article reduction will come from streamlining regional and local ranges. The first significant results of this rationalization and simplification will be visible in Spring/Summer 2013.

Establishment of Business Units: PUMA will evolve its international organization establishing seven Business Units (Teamsport; Running, Training and Fitness; Golf; Fundamentals; Motorsport; Lifestyle; Accessories and Licensing). Product management, design, development and product-specific marketing will be clustered under each Business Unit. Establishing the Business Unit structure will help PUMA to press ahead with its sharpened focus on Performance as well as Lifestyle categories.

Further actions are currently under investigation, to be put in place during the fourth quarter of the year.

Outlook for the Financial Year 2012

Against the backdrop of a difficult business environment in particular in Europe, PUMA’s management has complemented its 2010-2015 Transformation Program with immediate cost reduction measures. The above actions require one-time costs of € 80 million which were booked in the third quarter. PUMA expects that these one-time expenses will be amortized within two to three years.

PUMA’s management continues to forecast annual sales rising by mid-single digits in Euro terms and net earnings significantly decreasing from last year’s level due to the aforementioned one-off expenses.

Franz Koch will remain CEO of PUMA until the end of March, and work in close collaboration with the new Chairman of the Administrative Board, Jean-François Palus, also PPR Group Managing Director, in order to secure PUMA’s on-going operational transformation and generate profitable growth.

Jean-François Palus, Chairman of the Administrative Board of PUMA SE, stated:

“Together with Jochen Zeitz, Franz Koch has been the driver of strategic key initiatives and has strongly contributed to PUMA’s development over the past few years. I would like to warmly thank Franz for his efforts, commitment and dedication to PUMA, as well as his contribution to evolving the organization and management team. Going forward with the future CEO, who we aim to hire by spring 2013, we will pursue the reorganization of the company, focus on product innovation and marketing, and will continue to devote the necessary resources to the development of the brand. We are now going to write a new chapter for PUMA and thanks to the commitment and enthusiasm of the teams I’ve been meeting around the world, I am fully confident in our ability to realize the huge potential of this iconic brand”.

“The agreement requires PUMA to underwrite the costs and to cut off business with any factory that refuses to make necessary safety upgrades. It gives workers and their unions a role in the process according to the non-profit Worker Rights Consortium,” said Caroti at PUMA’s stakeholder meeting at the Banz monastery in Bad Staffelstein in front of 67 participants from non-governmental organizations, academia, suppliers and corporations.

PUMA sources 11% of its apparel products from six supplier factories in Bangladesh. All PUMA suppliers in Bangladesh were A to B+-rated after having been audited by PUMA’s audit team.

PUMA has defined clear mandatory standards for all suppliers in the “PUMA.Safe Handbook of Occupational Health and Safety,” which includes specifications on working safety as well as the architecture and structural engineering aspects of their buildings (See Chapter 9 on about.puma.com/en/Sustainability/Codes-and-Handbooks). Following the building collapse in Bangladesh in April, we immediately contacted all PUMA suppliers to receive confirmation from the suppliers that they are following these regulations and to request the structural engineering certificates for all buildings. Future audits of supplier factories will be carried out with a renewed focus on these aspects.

A special guest at PUMA’s 10th annual stakeholder meeting – that focussed on the question “How to let Consumers live and support Sustainability” – was Nazma Akter, President of the Bangladesh Combined Garment Workers Federation and a former child worker in an apparel factory, who elaborated on the working conditions in Bangladesh supplier factories and called upon PUMA to increase the sourcing volumes from Bangladesh in order to support the important apparel industry of the country.

PUMA’s stakeholder meeting took place from June 3 to 4, 2013.

A full list of PUMA suppliers is available on:

The Joint Roadmap, Version 2, presents the ZDHC Group’s long term vision, interim 2015 milestones and 2020 goals. It builds on the previous Joint Roadmap document and sets out a new plan, incorporating and reflecting comments received from a wide range of stakeholders, including textile industry suppliers and associations, government agencies in Asia, Europe and the United States, non-governmental organisations, international development organisations and the chemical industry.

“To achieve the goal of systemic change and commercialisation of new, preferred alternative chemistries, we will need to transform the industry’s manufacturing inputs and processes. This requires full collaboration amongst thousands of organisations,” said Jessica Wollmuth, ZDHC Programme Manager. “Good progress has been achieved thus far, and the Joint Roadmap, Version 2, lays a firm foundation for creating an apparel and footwear industry that delivers high quality products using safe chemistries.”

ZDHC Group achievements in the past year include having:

• Completed chemical use and management surveys, and wastewater testing for approximately 150 analytes at 20 facilities in Bangladesh, China, India, Taiwan China and Vietnam
• Completed a chemical inventory that is the most complete, publicly available compilation of information on chemicals used in the textile industry
• Developed training materials in English and Chinese
• Developed and delivered training to suppliers
• Engaged with more than 350 potential stakeholders
• Completed system mapping, critical to the understanding of the interconnected issues, leverage points and stakeholders involved.
• Agreed to timelines for the phase out of C8 chemistry by no later than January 1, 2015
• Worked with suppliers to address the most pressing chemicals of concern, starting with APEOS, and will continue to do so in 2013
• Worked to identify safer chemistries and mechanisms to incentivise chemical suppliers to invest in these alternatives

“Building on the knowledge gained during the first full year of implementation, the Joint Roadmap, Version 2 provides an overview of the guiding principles and long-term vision of the ZDHC group, and defines key activities that will catalyse industry change,” said Wollmuth. By implementing tasks in seven workstreams defined in the Roadmap, specifically Chemical Hazard Assessment, Prioritisation and Action, Training, Right to Know, Assessment and Auditing, Management Systems Approach, Structure and Documentation Stakeholder Partnering, and Chemicals Management Best Practices Pilot. The ZDHC Group will develop and promote industry best practices to deliver a safer and cleaner environment. “Our goal is ambitious, and the ZDHC Group and partners are fully committed to working together to achieve it, “ said Wollmuth.

“Torsten Hochstetter is a proven expert in the sporting goods and fashion design industry,” said Björn Gulden, CEO of PUMA. “I am pleased that with Torsten we have a long-standing design expert coming onboard of PUMA bringing an extensive experience and know how to our company.”

German-native Hochstetter has a broad international experience in the sports and fashion industry. Before joining PUMA, he was Creative Director at American surfwear company O’Neill. Prior to that, he used to work for Adidas in Germany, USA and Japan, holding positions such as Creative Director Sport Performance and Creative Director Sport Style. He started off his professional career at German fashion company S. Oliver in 1993. Hochstetter has a Fashion Design degree from Ent-Art Polimoda in Florence and completed a tailoring apprenticeship. He is fluent in English, Italian, Dutch and Japanese.

2013 Second Quarter Facts

• Consolidated sales decline by 4.0% currency adjusted to € 692 million
• Strong sales growth in the UK, India and Russia
• Southern Europe and the Far East remain challenging
• Ongoing Transformation and Cost Reduction Program implementation leads to lower operating expenses
• EPS retreats from € 1.78 to € 1.17
• New CEO, COO and Global Creative Director have taken up office
• Multi-award winning Mobium Elite running shoe is gathering momentum

2013 First Six Months Facts

• Consolidated sales decrease by 3.1% currency adjusted to € 1.47 billion
• Gross profit margin equal to 47.7%
• EPS amounts to € 4.54

Michael Laemmermann, Chief Financial Officer of PUMA SE: “Despite sluggish performances in Southern Europe and the Far East as well as currency headwinds impacting sales, PUMA’s second quarter performance was in line with our full-year guidance. We have pushed forward with our Transformation and Cost Reduction Program and continued to reduce the number of underperforming retail stores. With our new Chief Executive and Chief Operating Officers as well as Global Creative Director onboard, we are well positioned to secure profitable, long term growth.”

Sales Performance by Region

PUMA’s consolidated sales declined by 4.0% currency adjusted from € 753 million to € 692 million as a result of lower sales in all regions during the second quarter of 2013. Sales in Euro terms fell by 8.0% due to negative currency effects in various countries, notably in Japan, Argentina and South Africa.

Eastern European growth boosted by Russian Market

The EMEA region recorded a decline of 4.7% currency adjusted with sales of € 266 million in the second quarter. PUMA’s sales performance in Eastern Europe bucked the current sluggish business trend in Europe, delivering mid-single digit sales growth currency adjusted. Russia in particular rose strongly, delivering strong double-digit currency adjusted growth against a background of continuing retail portfolio optimization. Sales in Turkey rose likewise, driven in particular by an improved retail performance. However, these excellent performances were more than offset by slowing sales in Western and Southern Europe with France and Italy in particular not meeting expectations within the region.

In the Americas sales softened by 1.3% currency adjusted to € 267 million in the second quarter of 2013, including strong comparables. While sales in the US market decreased slightly and performance in Chile slowed, Canada and Argentina improved significantly. Golf products resonated particularly well with consumers in Canada, while in Argentina improved product availability due to increased local production underpinned strong sales growth.

Sales in the Asia/Pacific region fell by 7.2% currency adjusted to € 159 million, declining in nearly all markets. Although India continues to deliver another excellent quarterly performance, where our cricket offering continues to perform, and sales in Japan were positive on a currency adjusted basis, this was compensated by slow-downs in Korea and China, where some wholesalers have consolidated and high inventories persist within the market.

Mixed half-year regional performance

During the first six months of 2013, sales in EMEA declined by 4.8% currency adjusted to € 614 million as major markets continued to underperform. However, the Americas performed much better, with sales being up slightly by 0.2% currency adjusted to € 527 million. Asia/Pacific finished down by 5.0% currency adjusted at € 333 million for the first half of the year.

Retail Business continues to grow as Transformation Program takes effect

PUMA has continued to optimize its retail portfolio, notably by closing non-performing stores in line with the Transformation and Cost Reduction Program. This, combined with the opening of new, profitable stores and an improved e-commerce platform, has helped to propel PUMA’s retail performance. Retail Sales increased by 3.4% currency adjusted in the second quarter to € 149 million and by 8.1% during the first six months of the year to € 284 million, which represents 19.3% of our total sales.

Sales Performance by Segment

Innovative Running Shoe Mobium is making Strides

Currency adjusted Footwear sales moved down by 7.3% to € 330 million in the second quarter of 2013. Although our Lifestyle category continues to perform well, Motorsport did not meet expectations and Teamsport was lower due to high comparables from last year’s sales triggered by the Euro 2012. However, PUMA’s top-selling adaptive running shoe Mobium Elite has won multiple awards. It has garnered accolades across the globe, including Most Innovative (Competitor Magazine/US), Best New Technology (Go Multi/South Africa) and Best Debut (Runner’s World China). PUMA’s Mobium Elite will continue to evolve and thrive with new colors and hues available in the coming seasons. The new evoSPEED football boot, which was launched in the second quarter, is also off to a good start with positive sell-through rates at major football specialty retailers.

Sales in the Apparel segment declined by 6.8% currency adjusted to € 227 million. While the Lifestyle and Fitness categories remained below expectations in the second quarter, PUMA’s football category benefitted from Borussia Dortmund’s outstanding performances in the Champions League.

Accessories climbed by 10.9% currency adjusted to € 136 million, as our joint ventures for socks and bodywear continued to outperform. Cobra PUMA Golf – one of PUMA’s currently most successful categories – grew by double digits. Golf professional and PUMA partner Jonas Blixt recently underscored Cobra PUMA Golf’s burgeoning reputation, winning the Greenbrier Classic, his first US PGA tournament of the year. With his Cobra Clubs and PUMA Apparel and Footwear, Jonas cleared up the field to win by two strokes.

Varied half yearly segment sales

Footwear sales in the first half of the year were down by 7.5% currency adjusted to € 703 million. Likewise Apparel, where sales retreated by 3.8% currency adjusted to € 483 million. Accessories, however, advanced by 11.4% currency adjusted to € 288 million.

PUMA has had great successes with its partnered athletes and teams in the first half of the year. The focus now turns to the Track & Field World Championships in Moscow in August, where PUMA will be partnering eight national teams in the competition. Their performances will not only further improve PUMA’s brand visibility but also our product expertise in the Running category.

Transformation and Cost Reduction Program in line with plan

PUMA continued to realize its quarterly objectives in effecting the Transformation and Cost Reduction Program during the second quarter of 2013. The company’s retail portfolio delivered growth whilst being optimized, as unprofitable stores were closed and at the same time new, profitable stores opened in the second quarter. PUMA has now closed 60 stores within the Transformation Program since the beginning of the year, which also impacted the total sales number.

In line with the Transformation and Cost Reduction Program, PUMA has also continued with its divestiture of non-core marketing and sponsorship assets and will continue to do so in the second half of the year. In addition, there has been further streamlining within PUMA’s European operations, as the organization follows its path towards a more efficient, fully regional setup, and also amongst our business unit structure, both helping us to become a more market and consumer focused organization.

This is all part of the management’s clear aim of invigorating the brand desirability and rejuvenating the product offering, with a sharp focus on core markets and categories. PUMA continues to foster an entrepreneurial culture and cultivate strong sales forces in its markets, thriving on the high motivation of its employees.

Margin, Expenses and Profitability

Gross Profit Margin abates

The expected pressure on margins continued during the second quarter of 2013, pushing PUMA’s gross profit margin down from 49.1% to 46.0%. Ongoing currency headwinds arising from negative hedging positions compared to the same period last year, increased promotional activity as well as the regional and Footwear product mix combined to exert pressure on the margin. Footwear margin dropped from 48.3% to 44.1%, further impacted by discounts. Apparel fell from 49.4% to 47.0% and Accessories fell from 51.1% to 49.2%

The gross profit margin also declined over the first six months of the year from 50.2% to 47.7%. Footwear moved down from 48.9% to 45.1%, Apparel retreated from 51.5% to 49.4% and Accessories ebbed from 51.5% to 51.0%.

Maintained OPEX focus delivers an improved OPEX ratio

As PUMA continues to implement the Transformation and Cost Reduction Program laid out last year, the Company continues to benefit in terms of reduced operating expenditure throughout the firm. Operating expenditures declined by almost 11% from € 327 million to € 292 million during the second quarter of 2013, underpinning our efforts to further improve the overall efficiency of our organization. This OPEX reduction has resulted in a decrease in the OPEX ratio by 130bps year-on-year to 42.2% in the second quarter.

OPEX also fell during the first half of 2013 compared to 2012 and improved from € 650 million to € 602 million, with OPEX ratio decreasing to 40.8%.

Operating Result (EBIT) weakens

Although, and as mentioned above, PUMA continues to achieve significant savings through the Cost Reduction Program, those could not offset the decline in sales and gross profit margin. As a result, EBIT declined from € 47 million to € 31 million in the second quarter. Similarly, half-year EBIT declined from € 149 million to € 110 million, equal to an EBIT margin of 7.5%.

Financial Result

The second quarter financial result was broadly stable at € -4 million. Currency fluctuations during the first half of the year moved the financial result down from € -3 million to € -8 million compared to last year.

Earnings before Taxes (EBT) soften

EBT for the second quarter was down from € 43 million to € 27 million with tax expenses also declining, reflecting a lower tax rate of 24.5% in the quarter. PUMA’s half-year EBT also fell from € 146 million to € 102 million, with the tax rate improving to 28.0%.

Net Earnings / Earnings per share decline

PUMA’s consolidated net earnings retreated from € 27 million to € 18 million during the second quarter of 2013. Earnings per share fell from € 1.78 to € 1.17. Net earnings also declined during the first half of 2013 from € 101 million to € 68 million with EPS decreasing from € 6.72 to € 4.54.

Net Assets and Financial Position

Working Capital improves

As a result of PUMA’s continued emphasis on tight inventory management, inventories as of June 30th were 5.6% lower at € 635 million compared to last year. Group trade receivables were also 11.9% lower at € 513 million compared to last year. The Group’sworking capital has therefore developed positively from € 707 million to € 685 million at the end of June 2013.

Cashflow / Capex

PUMA’s Free Cashflow continued to improve during the first half of the year, moving from € -147 million to € -112 million. This is a result of lower payments for acquisitions and reduced Capex in 2013. The Free Cashflow (before acquisitions) came in at € -92 million compared to € -57 million for the same period in 2012.

Capex significantly declined from € 34 million to € 19 million, with lower investments in retail stores and other equipment.

Cash Position

As a consequence of the elements mentioned above, PUMA’s net cash position improved from € 236 million to € 291 million at the end of the second quarter.

General Matters

New Chief Operating Officer and Global Creative Director appointed

PUMA has appointed Andy Koehler as Chief Operating Officer (COO), who took up his position on June 1st. Andy, who succeeds former COO Klaus Bauer, is part of PUMA’s new management team built around PUMA’s new CEO Bjoern Gulden. Andy takes control of the Operations, Supply Chain Management, Logistics and IT functions.

To strengthen product and design, PUMA has created the new position of Global Creative Director as part of its Transformation Program and appointed to it Torsten Hochstetter. Torsten is responsible for designing, creating and developing the Sport Performance and Sport Lifestyle collections of the brand, touching on all product categories including Footwear, Apparel and Accessories. Torsten will work hands-on with all respective PUMA design teams worldwide.

Outlook for the Financial Year 2013

Full-year guidance remains unchanged from the first quarter

Following PUMA’s sales performance for the first half year 2013, Management continues to expect a low to mid single-digit decline in currency adjusted full-year net sales as well as pressure on the gross profit margin during the second half. As a consequence, and also based on continued OPEX improvements, Management reiterates its first quarter guidance and expects an increase in net earnings compared to 2012.