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May 8, 2009
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Puma to cut further costs after weak Q1

By
Reuters
Published
May 8, 2009

FRANKFURT, May 8 (Reuters) - Puma (PUMG.DE) intensified cost cutting measures on Friday 8 May which nearly collapsed its first quarter earnings as it battles the financial crisis.


Photo : AFP

The world's No. 3 sporting goods group has been hit by the recession and said it would slim down the variety of its shoe and apparel offerings and streamline operations.

"We plan for business to remain challenging in 2009 and have therefore decided to implement further measures to align our cost structure with the current market environment, ensuring a platform for profitable growth in the future," said Chief Executive Jochen Zeitz.

"One hopes that the situation will improve, but one cannot count on it," the CEO said.

Puma aims to save costs of up to 150 million euros ($201 million) in 2011. These restructuring efforts took 110 million euros out of its first-quarter earnings before interest and tax (EBIT), leaving just 4 million euros, 97 percent less than last year.

Puma already booked 25 million euros in restructuring charges in the fourth quarter to mitigate the impact from the global economic downturn, which has also hit rivals Nike (NKE.N), the No. 1 sporting goods maker and Adidas (ADSG.DE), No. 2.

The CEO said in a conference call that he expected no further cost-cutting charges in the quarters ahead.

Puma has already cut this year's investments and is looking into closing unprofitable stores, writing down the value of inventory and renegotiating athletes' promotion deals.

Bankhaus Lampe analyst Christoph Schlienkamp cut Puma to "sell" from "hold", saying though Puma fared better than its peers there was a risk Puma might surprise markets negatively with further restructuring charges.

Shares in Puma which have risen about 15 percent this year, fell up to 6.2 percent and were down 5.5 percent at 153.10 euros by 1230 GMT, underperforming a 1.2 percent gain in Germany's mid-cap index .MDAXI.

Puma, owned by French retailer and Gucci owner PPR (PTRP.PA), declined to give a 2009 forecast. However, Zeitz said he does not expect a "dramatic" decline in sales. He expects to generate a significant profit this year.

The cost cutting programme is expected to show first positive effects from 2010.

Puma shares trade at about 11.3 times 12-month forecast earnings, at a slight discount to Adidas, which has a multiple of 13.3, according to Thomson Reuters StarMine.

Both trade at a discount to Nike's multiple of 14.6, which it earns from its market-leading position. (Reporting by Eva Kuehnen; Editing by Sharon Lindores) ($1=.7462 Euro)

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