German sportswear maker Puma said on Wednesday it expected second-quarter sales to grow at a low- to mid-single-digit percentage rate, below its full-year target, due to high inventory levels as persistently high inflation blunts demand.
However, the firm beat first-quarter revenue expectations, saying strong growth globally, including Greater China, helped offset its weaker performance in the over-inventoried U.S. market.
Puma‘s shares were down 3.4% by 10:58 GMT.
Like other consumer brands and retailers, including rivals Adidas and Nike, Puma has focused on winding down excess inventory amid slowing demand, which has put pressure on margins in the sporting goods sector.
The company is set to normalise its inventory levels by mid-year, it said in a media call, while it expects currency effects, promotional activity and raw material prices to keep weighing on profitability through 2023.
“Recession fears in various markets, persistently high inflation and elevated interest rates are leading to muted consumer sentiment and volatile demand in retail,” it added.
In China, where quarterly sales grew by almost 10%, cleaning up inventories and repositioning the brand is a priority, Chief Executive Arne Freundt said.
He added he was confident on China for the long term, although the return in demand there was not yet as strong as in the U.S. and Europe after the easing of COVID-19 curbs.
In a mid-April note, analysts at Credit Suisse said China e-commerce data for March showed an acceleration in Puma’s share gain in the region, as it outperformed rivals such as Adidas and Nike.
Sales in China represented 5% of the group’s revenue in 2022.
In the U.S., Puma plans to cut its dependency on off-price channels that sell goods in large volumes at discounted prices, and rely more on qualitative growth instead.
First-quarter sales grew 14.4% to 2.19 billion euros ($2.41 billion), despite a drop of 19% in sales in North America.
The figure came above the 2.15 billion forecast by analysts, according to Refinitiv Eikon data.
Puma confirmed its full-year outlook for currency adjusted revenue growth in high single digits, and an operating profit of between 590 million and 670 million euros.