The following explanations refer to the impact of the first-time application of the new accounting standard IFRS 16 Leases as of 1 January 2019. As part of the transition to the new accounting for leases, PUMA elected to use the partial exemption provision and has not performed a retrospective adjustment of previous years' numbers. The comparative numbers presented in the IFRS Income Statement above for the financial year 2018 remained unchanged and have been calculated based on the previous accounting standard for leases in accordance with IAS 17.
We will therefore present below the impact of the first-time application of IFRS 16 on the results of operations of the PUMA Group in the financial year 2019 to ensure in this way a full comparability with the reported numbers in the previous year.
The first-time application of IFRS 16 in the financial year 2019 had a positive effect on the operating result (EBIT) in the amount of € +19.2 million. This was caused by a decrease in rental expenses by € 167.3 million and an increase in depreciation relating to the rights of use recognized in the balance sheet of € 148.1 million. Taking the interest effects (€ -29.7 million) and deferred tax effects (€ +2.8 million) into account, there was overall a slightly negative effect on the consolidated net earnings in the amount of € -7.7 million in the financial year 2019. In relation to the earnings per share and the diluted earnings per share, this corresponds to a decrease of € -0.05.
Please refer to the Notes to the Consolidated Financial Statements, chapter 1 General for a detailed description of the new accounting standards and the effects of the first-time application of IFRS 16 Leases.

Illustration of Earnings Development in 2019 Compared to the Outlook

In the outlook of the 2018 Annual Report, PUMA forecasted a slight improvement in the gross profit margin for the financial year 2019. PUMA expected a slightly weaker increase of other operating income and expenses (OPEX) compared to net sales. The forecast for the operating result (EBIT) was within a range of between € 395 million and € 415 million. This forecast already included the impact of the application of the new accounting rules for leases in accordance with IFRS 16. In addition, a significant improvement in net earnings was expected for the financial year 2019.
The forecasts for the operating result were adjusted upward several times throughout the year, and PUMA now expected an operating result (EBIT) within a range of between € 420 million and € 430 million. In accordance with previous forecasts, the Management Board continued to expect a significant improvement in net earnings for the financial year 2019.

PUMA was able to fully achieve the increased forecasts in 2019, and even slightly exceed them with regard to the operating result. This means that PUMA slightly exceeded the originally targeted improvement in operating result for 2019. More details on earnings development are provided below.

Gross profit margin

PUMA's gross profit in the financial year 2019 increased by 19.4% from € 2,249.4 million to € 2,686.4 million. The gross profit margin improved by 40 basis points from 48.4% to 48.8%. The main drivers for the development of the gross profit margin were the product mix and the regional mix and a higher proportion of our own retail sales. A slightly positive currency effect also contributed to the improved gross profit margin.
The gross profit margin in the Footwear division increased from 45.8% in the previous year to 46.4% in 2019. The Apparel gross profit margin improved from 50.9% to 51.1% and in Accessories, it also increased from 50.3% to 50.5%.

In the financial year 2019, further targeted expenditures were made for marketing and investments in our own retail to position PUMA as the fastest sports brand in the world and to increase PUMA’s brand heat. Investments in retail were also made to have an even more attractive presentation of PUMA products and related innovations and technologies. In addition to investments in the modernization of our own retail stores, many additional retail stores were also opened at select locations across the globe in 2019, such as on Fifth Avenue in New York. Moreover, further progress was made in modernizing our IT infrastructure. The strong increase in sales has also caused an increase in sales-related costs, particularly in the logistics area. This led to an increase in operating income and expenses in the financial year 2019 of 17.8% from € 1,928.4 million to € 2,271.3 million. As a percentage of sales, the cost ratio improved from 41.5% to 41.3% due to the slightly lower increase of those expenses. The consistent focus on the strict cost control continued to be a top priority for PUMA, and the achieved operating leverage, reflected in the decrease of the cost ratio by 0.2%, significantly contributed to the improved profitability and achievement of the financial goals in 2019.

Within sales expenses, the expenses for marketing/retail grew by 19.4% from € 931.2 million to € 1,112.1 million. This development is primarily connected to the consistent implementation of the “Forever Faster” brand campaign and the increased number of own retail stores. At 20.2% of sales, the cost ratio remained almost unchanged compared to the previous year. Other sales expenses, which mainly include sales-related costs and transport costs, increased by 19.7% to € 709.2 million. This increase is primarily due to a higher number of own retail stores and higher sales-related expenses in the e-commerce area. The cost ratio of the other sales expenses was 12.9% of sales in 2019.

Research and development/ product management expenses increased by 16.9% to € 114.3 million compared to the previous year and the cost ratio remained stable at 2.1%. Other operating income in the past financial year amounted to € 4.2 million and consisted primarily of income arising from the release of provisions for purchase price liabilities and income from the sale of non-current assets. Administrative and general expenses increased in 2019 by 3.6% from € 328.1 million to € 340.0 million. The cost ratio of administrative and general expenses decreased accordingly from 7.1% to 6.2%. Depreciation and amortization is included in the relevant costs and total € 246.4 million (previous year: € 81.5 million). The increase year-on-year is mainly the result from the depreciation of rights of use assets in relation with the first-time application of IFRS 16 Leases.

Result before interest, taxes, depreciation and amortization (EBITDA)

The result before interest (= financial result), taxes, depreciation and amortization increased by 63.7% in the financial year 2019 from € 419.5 million to € 686.6 million. The increase was positively impacted in the amount of € 167.2 million by the first-time application of the new accounting standard for leases (IFRS 16). Without this effect from the first-time application of IFRS 16, PUMA's EBITDA would have improved by around € 100 million or 23.8% to € 519.4 million year-on-year.

Operating result (EBIT)

In the financial year 2019, the operating result increased by 30.5% from € 337.4 million in the previous year to € 440.2 million. This result is slightly above the adjusted EBIT forecast within a range of between € 420 million and € 430 million. The significant improvement in profitability in 2019 resulted from the strong sales growth combined with the slight improvement in gross profit margin and the slightly lower increase in other operating income and expenses compared to sales. The EBIT margin rose accordingly from 7.3% in the previous year to 8.0%.

Financial Result

The financial result improved from overall € -24.0 million in the previous year to € -22.6 million in 2019, despite the additional interest expense of € 29.7 million from the compounding of lease liabilities in connection with the new accounting standard for leases (IFRS 16). This positive development is primarily the result of gains from currency conversion differences of € 10.2 million in 2019, compared to a loss from the currency conversion of € -14.4 million in the previous year. In addition, interest income of € 4.0 million in the previous year increased to € 7.2 million in 2019, and interest expenses fell from € 14.6 million in the previous year to € 13.9 million this year.