With Adidas reaching new all time highs last week following an excellent quarter that saw the company report 18% increase in sales and a raised guidance, the retro shoe trend is in full swing. While well covered by Leverage Equity Research, Adidas’ North American turnaround is no longer a secret. This trend also bodes well for a lesser talked about company, whose stock has been flying high despite staying under the radar.
Recent trends shifting toward retro styles in the shoe industry have greatly benefitted Puma AG Rudolf Dassler Sport. With its extensive portfolio of classic styles, shares have appreciated over 50 percent in the last year. Compare this to Nike Inc, which has been over-indexed in basketball and performance styles — two categories that have been underperforming recently. As a result, Nike was one of two negative performing DOW stocks in 2016.
Puma’s Turnaround, Year 3
Puma has been sparking a turnaround since 2013, and the company is really starting to hit its stride, with sales up 45 percent in 2016 in the United States.
“The interesting thing about retro is there are so many styles in all of these brands vaults that they can bring back. Puma has never really been recognized as a technical performance brand in the United States, so when we are in a period where performance is not selling well, they are really benefitting,” shoe industry expert Matthew Powell told Benzinga in January. Powell believes Puma will continue its run into 2017.
Amid the turnaround, Puma has been focusing on developing its brand identity and doubling down on what it does best, positioning itself as a sports brand with sportstyle collections that are rooted in sports performance.
“By the end of 2013, we recognized that we were not going in the right direction to turn around, we were getting very scattered. So, we had to define who we are, better use our assets and our brand ambassadors. By focusing on the athletes, reacting to new trends and innovating in certain areas, we have become successful again,” Puma’s chief financial officer Michael Lämmerman told Benzinga in an exclusive interview.
A Footwear Company For The 21st Century
Puma’s presence with social media influencers has brought the company greater visibility, better sell through and more shelf space, key metrics for a retail brand. Key endorsements from Rihanna and Kylie Jenner, have really helped propel the women’s segment, one that is growing faster than the men’s side for Puma.
“Having Rihanna and Kylie Jenner as endorsers on the womens side has been a key cornerstone of success, we have seen a strong boost in sales in our womens category,” said Lämmerman.
The company grew revenue at over 10 percent in 2016, while achieving sales of 3.6 billion euros and improving gross profit margins. Puma is also increasing its operating expenses as it continues to invest in marketing looking towards additional key endorsements. It looks to achieve high single-digit growth in 2017 with improving gross margins.
“What we have [been] seeing is not a fly-by-night success, we are confident if we do what we are supposed to do, then I think the brand and the story we are telling continue to resonate with consumers. You will not hear over aggressive targets, we will continue to under commit and over deliver.”
Next week we will be conducting an exclusive interview with the President of Adidas Group North America, Mark King. Stay tuned for more coverage.