Puma shares plunge after profit warning highlights Adidas’ lead

(Bloomberg) — German sportswear company Puma SE posted a disappointing earnings report and pushed back its profit target, contrasting with crosstown rival Adidas AG and sending its shares tumbling.

Puma announced cost cuts on Wednesday and lowered its profit margin guidance. The stock fell as much as 19% in Frankfurt trading, its biggest drop in more than two decades.

Chief Executive Arne Freundt is trying to usher in another era of rapid growth.

In the five years before Freund took over as CEO, Puma’s revenue doubled, thanks in part to the smart return of sports like basketball and the coolness of brand ambassadors like rapper Jay-Z. Show off.

But since Freundt took charge in late 2022, Puma’s brand popularity has stagnated. The turn of fortune coincides with the departure of Bjorn Gulden, who leaves for crisis-ridden Adidas after nearly a decade at the helm of Puma.

Earlier this week, Adidas reported surprisingly strong fourth-quarter earnings, driven by demand for retro sneakers.

At the same time, Puma announced cost cuts to achieve its target of 8.5% EBIT margin by 2027. That’s a downward revision from previous guidance, which sought to reach that level as early as 2025, said Morgan Stanley analyst Grace Smalley.

The company listed “personnel expenses” as part of the cost-cutting plan, hinting at potential layoffs but providing no details.

Several factors help explain the divergent trajectories of Puma and Adidas. On the one hand, Freund is trying to move the Puma brand upmarket by focusing on selling higher-priced football, basketball and running gear. In doing so, he sacrificed some sales by phasing out some cheaper items.

Before taking over from Goulden, Freund was not well-known among investors and consumers. Goulden has earned a reputation in the industry as a savvy marketer and brand manager over decades.

Perhaps Goulden’s most important early decision at Adidas was recognizing growing consumer interest in retro sneakers like the Samba and ramping up production. This shoe, along with similar models such as the Spezial and Campus, continues to be the best-selling shoe in the industry.

Although Puma has similar silhouettes to the Palermo, it has been slow to capitalize on the trend. The Speedcat, a thin-soled retro shoe, has struggled to gain momentum.

Morgan Stanley’s Smalley noted that Puma’s downbeat outlook contrasted with its November message. She said this was likely the result of lower-than-expected results in Latin America, a stronger U.S. dollar, increased risk of tariffs on China and Puma’s continued efforts to build brand momentum.

Fourth-quarter earnings before interest and taxes rose to 109 million euros ($114 million), below analysts’ average estimate of 131 million euros. Net profit of €24 million for the period was also disappointing.

Puma shares have fallen 19% in the past 12 months, while Adidas shares have risen more than 50%.

Wall Street analysts are now likely to significantly lower their 2025 earnings estimates, which would weigh on the stock, Jefferies analyst James Grzinic wrote in a note.

—With help from Joe Easton.

(Update from Adidas comparison in first paragraph)

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