Puma ups guidance despite U.S. tariffs on China

BERLIN (Reuters) – German sportswear group Puma (DE:) cautioned on Thursday that it would take a hit from U.S. tariffs on China in the fourth quarter but still raised its sales forecast and narrowed its profit target after a strong third quarter in all regions.

Without price increases, U.S. tariffs on goods produced in China are putting pressure on operating earnings in the short-term, Chief Executive Bjorn Gulden said. He has previously said he expects to have to raise prices to compensate.

Puma has also been moving production out of China to countries like Vietnam, cutting the proportion of products produced in China for the U.S. market to under 25% from more than 50% five years ago.

Third quarter sales rose by a currency adjusted 17% to 1.48 billion euros ($1.65 billion), beating average analyst forecasts for 1.45 billion, while operating earnings were up 25% to 162 million euros, in line with analyst expectations.

Puma’s shares, which have risen by almost three quarters in the last year, were indicated down 1.1%

Puma’s growth has been outpacing rivals like Adidas (DE:) and Nike (N:), which recently reported that its quarterly revenue and profit beat market expectations as a push to sell sneakers direct to consumers gained pace, boosting margins.

Puma’s sales rose at double-digit rates in Asia/Pacific and the Americas and recovered in Europe, Middle East and Africa to 9.7%.

Puma said it now expects currency-adjusted sales to rise around 15% for the full year, up from a previous forecast for 13%, while operating earnings will come in at 420 million euros to 430 million euros, versus a previous 410-430 million range.

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