Puma Lifts Forecast as Demand for Shoes Offsets Supply Snags

Puma lifts forecast as demand for shoes offsets supply snags. Shutterstock.

Puma SE raised its sales and profit forecasts for the year as the company overcame supply chain hurdles in Asia to meet strong demand for sneakers and sports apparel in Europe and the Americas.

The German sports company expects currency-adjusted sales to rise by 25 percent this year, up from a previous target of at least 20 percent, according to a statement Wednesday. Third quarter sales topped estimates.

The shares rose as much as 4.1 percent in early German trading.

Puma offers the latest view into how brands are handling the roller-coaster supply situation in Asia, where the delta strain of Covid-19 has caused factory shutdowns and labor shortages. That’s driven shipping rates up and raised concerns about the ability of companies to produce enough computer chips, raw materials and finished consumer goods including sneakers, apparel and automobiles.

Vietnam has been a particular bottleneck of concern, having attracted investments in recent years from global companies seeking an alternative to China as a production base, a trend that accelerated with the US-China trade tensions.

Last month, Nike Inc. lowered its sales forecast, while Urban Outfitters Inc. and Abercrombie & Fitch have cautioned of holiday-season shortfalls.

“A Covid-19 related lockdown of production in South Vietnam, an overheated global freight market with high rates and a lack of capacity, port congestion and a very difficult market situation in China were hurdles we had to overcome in the quarter,” chief executive officer Bjorn Gulden said in the release.

Supply Constraints

Those challenges have restricted Puma’s supply of products and limited inventory levels, the company said. Gulden expects supply constraints to remain a problem for the rest of the year.

Despite that, Puma has managed to meet surging demand across the West, with third quarter sales rising by 31 percent in the Americas and 22 percent in Europe. Footwear and apparel revenue both increased by about 21 percent, the company said.

Puma now expects earnings before interest and taxes this year to reach €450 million to €500 million ($522 million to $580 million), up from the previous target of €400 million to €500 million. The top of the new forecast range is slightly lower than the average analyst estimate.

The supply situation in Asia has been in flux, with Puma saying last month that some factories in southern Vietnam had reopened. But fears soon returned amid reports that millions of migrant workers in Vietnam could flee the country’s factory heartland and return to their home provinces amid the continued threat of Covid-19.

Gulden said in July the company was trying to source more from China to make up for the drop in Vietnam. German rival Adidas AG has said it’s been temporarily reallocating production to other countries.

By Tim Loh

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