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Business

Strong Order Book Buoys Puma's Confidence

Thanks to increased orders, the German sportswear maker forecast full-year sales growth of at least 20 percent and double-digit growth in pretax profit, yet some analysts considered this a cautious outlook.

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Jochen Zeitz, Puma's CEO, laughing all the way to the bank

German sportswear maker Puma AG said on Wednesday that it expects sales to rise by at least 20 percent this year, and pretax profit to rise by a double-digit percentage.

"Within the next five years, our sales will break through the billion euros boundary," said Chief Executive Jochen Zeitz.

He said the group would achieve the growth internally, and no acquisitions were planned for the time being. Zeitz's upbeat assessment of the group's prospects derives from its order-book situation.

At the end of 2001, its orders in hand stood at $360 million, up 55 percent on the year. This trend had continued throughout January and February.

But he said it is too early to start revising up its profit outlook. Analysts were disappointed at the sales outlook.

"Sales growth of 20 percent would mean a clear downturn in the second half of the year," said Volker Hergert at Bankgesellschaft Berlin.

Zeitz declared himself unable to understand such disappointment. "Who, I would like to know, is prepared to commit themselves to at least 20 percent sales growth at a time when the economy is in such a difficult position?"

Style over sports

By moving into fashion garments that are not necessarily used for sports, Puma is growing faster than the market.

It has chosen the right time to diversify, since the Puma brand is currently considered highly desirable by younger consumers.

Zeitz does not share analysts' fears that the group will fall victim to fashion's inbuilt chain of action and reaction, where the corollary of being 'in' today is being 'out' tomorrow.

"The risk attached to being fashionable is one that (fashion house) Hugo Boss has to live with, and we can too," he said. "What staying in fashion is about is recognizing trends early."

Brand is everything

Puma is about to open eight new concept stores in urban centers – a move that will raise the brand's profile globally.

It already has six of these stores, and they currently contribute 4 percent of group sales revenue. In 2001, Puma generated sales revenue of 598 million euro ($528 million), a 29 percent advance on the year.

Earnings before interest and taxes were up 159 percent to 59 million euro.

Unlike its larger rival Adidas-Salomon, it has no gearing problems. Shareholders are set to share in the group's success.

The group will propose to its annual general meeting a dividend of 0.30 euro for 2001, up from 0.10 euro for 2000.

Puma shares on Wednesday rose to a new 52-week high of 47.13 euro intraday before losing ground to close with a gain of 1.32 percent at 46.00 euro.

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