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Puma Sticks to Full-Year Profit Forecast Despite Drop in Q3 Earnings 

Products of the Puma brand are on display at a store of the largest Russian sports retailer Sportmaster, in Moscow, Russia, 19 October 2023. (EPA)
Products of the Puma brand are on display at a store of the largest Russian sports retailer Sportmaster, in Moscow, Russia, 19 October 2023. (EPA)
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Puma Sticks to Full-Year Profit Forecast Despite Drop in Q3 Earnings 

Products of the Puma brand are on display at a store of the largest Russian sports retailer Sportmaster, in Moscow, Russia, 19 October 2023. (EPA)
Products of the Puma brand are on display at a store of the largest Russian sports retailer Sportmaster, in Moscow, Russia, 19 October 2023. (EPA)

Shares in German sportswear brand Puma were expected to rise on Tuesday after it stood by its full-year profit forecast despite an 8.3% drop in its third-quarter earnings caused in part by a stronger euro.

Puma said it still expected "strong improvement in profitability" in the fourth quarter helped by lower marketing, sourcing and freight costs, despite a gloomy backdrop for consumer demand. Shares in Puma were expected to rise around 3%.

"While the market continues to experience significant macroeconomic headwinds and 2023 remains a transition year, we outgrew the market," Puma CEO Arne Freundt said in a statement.

Sportswear giant Nike had also flagged negative currency exchange effects in September.

Puma reported an operating profit of 236.3 million euros ($252.3 million) for the quarter, down from 257.7 million a year earlier. The company confirmed its target for an annual operating profit of between 590 million and 670 million euros.

Puma, which gets most of its revenues through wholesale, said its wholesale business increased by 3.1% in currency-adjusted terms, while sales from its own stores and websites grew by 17.4%.

Puma had taken shelf space in shops from Adidas and Nike when those two brands were pulling back from the wholesale channel to focus on their own stores, UBS analyst Zuzanna Pusz said, but now that the two bigger companies were turning their focus back onto wholesale, competition was more intense.

"Puma is a great company, but I'm just aware of the fact the industry dynamics are changing for them," she said.

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Fashion

LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
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LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights

Shares in LVMH (LVMH.PA) fell as much as 6.5% in early Wednesday trade and were on track for their biggest one-day drop since October 2023 after second-quarter sales growth at the French luxury goods giant missed analysts' consensus estimate.

The world's biggest luxury group said late Tuesday its quarterly sales rose 1% year on year to 20.98 billion euros ($22.76 billion), undershooting the 21.6 billion expected on average by analysts polled by LSEG.

At 1000 GMT, LVMH's shares were down 4.5%.

The earnings miss weighed on other luxury stocks, with Hermes (HRMS.PA), down around 2% and Kering (PRTP.PA), off 3%.

Kering is scheduled to report second-quarter sales after the market close and Hermes reports on Thursday, Reuters reported.

Jittery investors are looking for evidence that the industry will pick up from a recent slowdown, as inflation-hit shoppers hold off from splashing out on designer fashion.

JPMorgan analyst Chiara Battistini cut full year profit forecasts by 2-3% for the group, citing softer trends at LVMH's fashion and leather goods division, home to Louis Vuitton and Dior.

"The soft print is likely to add to ongoing investors’ concerns on the sector more broadly in our view, confirming that even best-in-class players like LVMH cannot be immune from the challenging backdrop," said Battistini in a note to clients.

The weakness of the yen, which has prompted a flood of Chinese shoppers to Japan seeking bargains on luxury goods, added pressure to margins, another source of concern.

Equita cut 2024 sales estimates for LVMH by 3% - attributing 1% to currency fluctuations - and lowered its second half organic sales estimate to 7% growth from 10% growth previously.

The lack of visibility for the second half beyond the easing of comparative figures - as the Chinese post-pandemic lockdown bounce tapered off a year ago - is unlikely to improve investor sentiment to the luxury sector, Citi analyst Thomas Chauvet said in an email to clients.

"No miracle with the luxury bellwether; sector likely to remain out of favour," he wrote.

Jefferies analysts said the miss came as investors eye Chinese shoppers for their potential to "resume their pre-COVID role as the locomotive of industry growth and debate when Western consumers will have fully digested their COVID overspend".

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20% over the past year, with middle-class shoppers in China, the world's No. 2 economy, a key focus as they rein in purchases at home amid a property slump and job insecurity.

LVMH offered some reassurance, with finance chief Jean-Jacques Guiony telling analysts during a call on Tuesday that Chinese customers were "holding up quite well," while business with US and European customers was "slightly better".