OVERVIEW 2017
In keeping with PUMA’s goal of becoming the fastest sports brand in the world, our focus was to strengthen our credibility as a sports brand through partnerships with some of the world’s most successful athletes, such as athletics legend Usain Bolt, star striker Antoine Griezmann, golf star Rickie Fowler as well as teams such as Arsenal FC and Borussia Dortmund, to name just a few. In the Sportstyle business, we continued our collaboration with mega star and style icon Rihanna as well as with top model Cara Delevingne. Through their individuality and their commitment to the PUMA brand, all of our brand ambassadors played a major role in increasing our sell-through in 2017. We further strengthened our position as a sports brand and further increased our brand heat by signing contracts with new sports stars and culturally relevant influencers. We were extremely proud to welcome singer, actress and producer Selena Gomez as brand ambassador for our women’s segment in 2017. We have also expanded our portfolio of brand ambassadors in the men’s segment and started a collaboration with the musicians The Weeknd and Big Sean. In addition, we have further strengthened our cooperation with Formula One world champion Lewis Hamilton through our new campaign 24/7, which redefines the brand’s performance philosophy at a time when workouts are no longer constricted to the gym.
Overall, the strong demand for PUMA’s Performance and Sportstyle product offerings proved that we have successfully managed to increase the commercial appeal of our products. Our new product lines such as PUMA ONE, NETFIT, TSUGI and the latest FENTY PUMA by Rihanna collections received very positive feedback both from our retail partners and our consumers. This is clear proof that PUMA is on the right path.
PUMA’s Teamsport category looks back on a successful year with exciting product launches and sporting achievements. Our partnered teams grabbed some of the world’s biggest football trophies at the end of the 2016/17 football season: Borussia Dortmund snatched the German DFB Cup, while Arsenal FC claimed the FA Cup and Mexico’s Chivas won the 2017 Liga MX Clausura title. PUMA’s roster of individual players also reached new heights: Arsenal’s Olivier Giroud was honored with the FIFA best goal award, while Sergio Agüero broke the goal scoring record for Manchester City. On the product side, innovative products and technologies hit the shelves. A strategic launch for the Teamsport category being the first PUMA ONE football boot, which excels in FIT. FAST. FEEL.
In the Running category, the past year was marked by a major sporting event, the 2017 IAAF World Championships, which also marked the end of Usain Bolt’s active career. The competition put the spotlight on some of the new generation of PUMA athletes, one of them being the 800 meter gold medalist Pierre-Ambroise Bosse. PUMA took performance footwear to the next level with the unveiling of its revolutionary NETFIT range, whose uniquely customizable lacing system offers infinite performance and style options in one shoe.
PUMA’s Motorsport category was driven by a fantastic season in Formula One, which was once again dominated by our sponsored teams: MERCEDES AMG PETRONAS, Scuderia FERRARI and RED BULL RACING formed the Top 3 of the Constructors’ Championship, while Lewis Hamilton was crowned F1 world champion for a fourth time.
PUMA’s golf business continued to deliver stylish, performance-ready golf apparel, footwear and accessories to the market while COBRA PUMA Golf supplied the market with technologically advanced golf equipment. COBRA is particularly proud of the launch of its smart drivers KING F7 & F7+, which allow golfers to automatically track the distance and accuracy of each drive.
Our Women’s business was one of the highest performers of 2017. We have taken our successful and ongoing DO YOU campaign to the next round, aiming to inspire confidence in women around the world with powerful female ambassadors such as Cara Delevingne and the New York City Ballet. Meanwhile, the FENTY PUMA by Rihanna collections have established themselves among the world’s most anticipated fashion shows. For Autumn-Winter ’17, PUMA’s women’s Creative Director Rihanna presented her FENTY University collection with great success at the Bibliothèque Nationale de France in Paris. While for her Spring-Summer ’18 collection she returned to New York Fashion Week in autumn, introducing her latest daredevil styles at the majestic Park Armory among dunes of illustrious pink sand and motocross riders in the air.
With the Run the Streets campaign, innovative footwear silhouettes debuted throughout the year and elevated our sports-inspired streetwear game in 2017. With an innovative and progressive look amped up with new technologies, the all-new TSUGI range pushed our design to the next level. The highly anticipated debut of the PUMA x XO collection which was designed in collaboration with The Weeknd caused a worldwide sensation toward the end of the year.
On the distribution side, we focused on strengthening our relationship with key retailers. It is important to us to be a reliable partner and to maximize our contribution to their business. We also established new partnerships with strong retailers both in mature and emerging markets. PUMA’s improved sell-through has enabled us to gain more shelf space for our products in our partner’s retail stores in 2017. In addition, we continued to upgrade our owned-and-operated retail store network with the Forever Faster look and feel. We gained further momentum in the eCommerce business, while working on the relaunch of www.PUMA.com into a more modern and mobile-friendly format that went live in Europe last summer.
Operationally, we continued to make progress in key areas including further enhancements of our International Trading Organization, which manages global order and invoice flows centrally, the roll-out of new product development tools, further standardization of ERP systems and improvements to the overall IT infrastructure.
With the expansion of our headquarters, which will be completed this spring, PUMA set out a clear commitment to our roots in Herzogenaurach. After its completion, the new administrative building will provide space for up to 550 employees. This will enable us to reunite our workforce in Herzogenaurach for faster decision-making at this location. The 37-meter pylon of the PUMA bridge, which connects both buildings, also represents a new landmark for Herzogenaurach as a true gateway to the city.
The consistent implementation of the Forever Faster company strategy contributed to PUMA being able to exceed the sales mark of four billion euros for the first time in company history in financial year 2017. This proves that, with regard to increasing our brand heat and improving our product range, we are on the right path. Sales growth was especially driven by the footwear segment, which has already been showing increasing sales for 14 quarters in a row and which is the main driver of PUMA sales growth. Accordingly, consolidated sales increased by 15.9% currency-adjusted in 2017. Therefore, the currency-adjusted sales growth in a high single-digit percentage rate prospected in the previous Annual Report for 2017 was considerably exceeded. The forecast of currency-adjusted sales growth of 14% to 16%, that was adjusted upwards during the year, was achieved at the upper end. In the reporting currency, the euro, this corresponds to an increase in sales of 14.0% from approximately € 3.6 billion in the previous year to approximately € 4.1 billion in 2017.
Despite ongoing negative currency effects, the gross profit margin improved in 2017 by 160 basis points to 47.3% because PUMA was able to compensate for more than the negative effects of the weakness of individual currencies against the US dollar due to improvements in sourcing, higher sales with new products with a higher margin, a higher share of own retail sales and selective price adjustments. Other operating income and expenses increased in 2017 by only 11.7%. In terms of sales, this represents a decline in the cost ratio from 42.6% to 41.7% and reflects the operating leverage achieved. Overall, both the increase in sales, the improvement of the gross profit margin and the only moderate growth of other operating income and expenses in comparison to sales significantly contributed to the increase in the operating result (EBIT) in financial year 2017.
The operating result increased in 2017 by 91.7% from € 127.6 million to € 244.6 million and was therefore considerably above the forecast from the previous Annual Report which had originally forecast an operating result within a range of € 170 million and € 190 million. Due to this better-than-expected business development, the forecast for the 2017 operating result saw an upward increase several times throughout the year. The adjusted forecast of an operating result within a range of between € 235 million and € 245 million could be achieved at the upper end.
The considerable increase in profitability in 2017 is also reflected in the development of net earnings and earnings per share, each of which more than doubled. Net earnings increased in 2017 by 117.7% to € 135.8 million (previous year: € 62.4 million) and the earnings per share increased accordingly from € 4.17 in the previous year to € 9.09.
Due to the very successful business development in 2017 with a considerable increase in profitability and free cash flow, the Managing Directors and the Administrative Board will propose to the Annual General Meeting on Thursday, April 12, 2018 to distribute a one-off dividend of € 12.50 per share for 2017 (previous year: regular dividend € 0.75).
The PUMA share developed very positively in 2017 and was listed at year-end at € 363.00, a 45.5% increase over the share price at the end of the previous year (€ 249.65). This means that PUMA Group market capitalization has risen to around € 5.4 billion (previous year: € 3.7 billion).