Puma warns of hit from strong dollar

Shares in Puma fell 7.2 per cent in early trading before regaining ground, after the world's third largest sportswear group said that the strong dollar would lead to a steep decline in profits this year.

The German group, which sponsors Jamaican sprinter Usain Bolt, sources most of its products in Asia in contracts paid in dollars, but generates a sizeable portion of its revenues in other currencies.

As a result of the appreciation of the dollar against most other currencies, Puma said that it now expected its operating profit to be between €80m and €100m this year. In 2014, it posted earnings of €128m.

However, the sportswear group stuck by its prediction that sales would grow at a mid single-digit rate, once currency effects had been factored out.

Majority-owned by French luxury group Kering, Puma is a distant third behind rivals Nike and Adidas in sports clothing. It is trying to overhaul its brand reputation after an unsuccessful foray into fashion sportswear.

The company is focused on developing more innovative sports products, improving the way its goods are marketed in stores and increasing its appeal to female customers - to which end it signed pop star Rihanna as a creative director last year.

It is also spending heavily on marketing, and last year struck its largest-ever kit sponsorship deal, with Arsenal football club in London.

Bjorn Gulden, chief executive since 2013, told reporters that the currency setback did not change the group's strategy, which he felt was taking Puma in the right direction. "We are in a turnaround phase," he said, adding that the process was a "marathon, not a sprint".

The profit warning overshadowed a sharp increase in Puma's first-quarter sales, which came in at €821m, 13 per cent higher than in the same period a year earlier. Stripping out the impact of currency moves, sales were up 4.4 per cent. Operating profit came in at €38m, down from €58.6m a year earlier.

The strongest growth came in footwear sales, which rose 7.8 per cent on a currency-neutral basis, helped by the launch of Puma's new "Ignite" running shoe in mid February.

"We are working very hard to improve our product offer, and although we know we have some ways to go, we feel that this growth in footwear confirms that we are on the right path," said Mr Gulden.

Shares in Puma were down 1.7 per cent at €178.05 in midday trading in Frankfurt.

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