London, (Reuters) .- Puma faces a dilemma in the United States: after hurrying shipments from Asia to anticipate the imposition of new tariffs, the German sportswear brand is now offering discounts to liquidate inventory, while planning to increase prices this year to compensate for cost rise.
The contradictory pressures reflect a broader challenge for retailers, who seek to ensure the supply on the US shelves for the crucial seasons back to classes and parties, while trying to raise prices despite the fact that the demand weakens.
Puma, which on Thursday warned about an annual loss, said it is reducing orders and plans to increase prices in the fourth quarter to mitigate the impact of tariffs, which estimates will subtract 80 million euros (93.78 million dollars) to its annual gross gain.
“High levels of inventory in our balance are causing a lower realization of complete prices,” said financial director Markus Neubrand to journalists on Friday. “In response, we have adjusted our future orders to align better with the expected demand.”
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At the close of the second quarter, Puma’s inventories had increased 18.3% in terms adjusted by exchange rate compared to the previous year, reaching 2,151 million euros, mainly driven by North America.
But North America was also the weakest region of Puma in the last three months, with a sales fall of 9.1% in tight terms. Puma now expects global sales to fall this year at least 10%, which further aggravates the inventory problem.
“The idea of advancing imports to the US was a sensible tactical position given uncertainty, but it entails the risk of greater discounts in a weak market,” said Adam Cochrane of Deutsche Bank Research.
Puma’s plan to reduce orders should help reduce inventories, but also reflects a lower demand from the retailers, Cochrane added.
Puma generates three quarters of its income through the wholesale channel, and sales by that road fell 6.3% in the second quarter. The company does not break down figures per country, but the US market represents about 20% of global sales.
“Specifically looking at the ability to apply price increases not only seems difficult in the context of high inventories … but also due to the low impulse of Puma’s brand in the region, in the middle of an increasingly competitive environment,” said Felix Dennl, an analyst at Metzler in Frankfurt.
The leader of the sector, Nike, increased some prices in the US in May, while Lululemon and ON have also announced increases, as brands adapt to pay more for their imports.
“One of the main pending questions is how consumers will react to price increases, especially since the last great inflationary episode during the COVID was partially damping by the stimulus vouchers, which could have reduced the sensitivity to the price at that time,” said Ubs analyst Robert Krankowski.
Puma already faced difficulties before tariffs, with products such as the relaunch of Speedcat tennis selling less than expected.
The CEO Arthur Hoeld, in the position since July 1, warned that 2025 will be a year of “restart” and 2026 of “transition”, while trying a turn of course after the failure of his predecessor, Arne Freundt, to reactivate sales.
Puma’s act of balance is shared by all retailers in the US, where memories of excess record of inventories in 2022 are still fresh after the disruptions of the supply chain by the pandemic. The excess caused great discounts and affected the profits, a situation that the retailers are anxious for not repeating.
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