Puma: New Entrants Taking Market Share
Published July 3 2025
Current Price
€23.59
Fair Value
€18.00
Weak FY25 outlook and rising geopolitical concerns are having a significant adverse impact on the company.
The company is anticipating EBIT between €445m - €525m in FY25, compared to €690m that analysts had expected.
Dividend cut to €0.61 from €o.82 in the prior year.
Losing market share to ‘challenger’ brands such as On, New Balance, Lululemon and Asics.
Rising debt levels, and consequently rising interest payments are a worry for investors.
Overview
Puma, long overshadowed by it’s more prominent rivals, Nike and Adidas, has seen its market share eroded further by newer, more trendy rivals such as On and Lulelemon. It is finding it increasingly difficult to gain traction with consumers who want innovative products that are contemporary. Puma’s collections are largely stale and somewhat dated which is reflected in the stagnant sales the company is experiencing. The company has cut back its EBIT forecast a couple of times, now anticipating EBIT between €445 million to €525 million, compared to €690 million that analysts had anticipated. Following this announcement, the company’s share price cratered and is down by approximately 50% since the start of the year.
The company is facing strong headwinds from major geopolitical developments in recent months, with tariff uncertainty still a concern due to the worldwide supply chains Puma has. Shipping has also become a compounding problem which will result in longer lead times and cost build up. The signals the company is sending by reducing dividends are not good as there could be a strain on liquidity in the future. As of today, Puma has total debt (including leases) of €1.72 billion.
Summary Forecast Income Statement
| (€ millions) | 2024 | 2025E | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|
| Revenue | 8,817.00 | 8,920.00 | 9,009.20 | 9,099.29 | 9,190.28 |
| Cost of Sales | (4,639.00) | (4,693.19) | (4,684.78) | (4,640.64) | (4,687.05) |
| Gross Profit | 4,178.00 | 4,226.81 | 4,324.42 | 4,458.65 | 4,503.24 |
| Gross Margin % | 47.4% | 47.4% | 48.0% | 49.0% | 49.0% |
| EBITDA | 978.00 | 892.00 | 945.97 | 955.43 | 964.98 |
| EBITDA Margin % | 11.1% | 10.0% | 10.5% | 10.5% | 10.5% |
| EBIT | 622.00 | 526.28 | 585.60 | 591.45 | 597.37 |
| EBIT Margin % | 7.1% | 5.9% | 6.5% | 6.5% | 6.5% |
| Net interest | (160.00) | (160.00) | (160.00) | (165.00) | (175.00) |
| Exceptionals | - | (75.00) | - | - | - |
| Profit Before Tax | 462.00 | 291.28 | 425.60 | 426.45 | 422.37 |
| Taxes | (120.00) | (82.00) | (114.91) | (115.14) | (114.04) |
| Minority Interest | (61.00) | (60.00) | (62.00) | (62.00) | (62.00) |
| Net Income | 281.00 | 149.28 | 248.69 | 249.31 | 246.33 |
| Net Margin % | 3.2% | 1.7% | 2.8% | 2.7% | 2.7% |
Q1 2025 Sales Product and Regional Summary
(€ Millions)
Valuation
Based on a Discounted Cash Flow (DCF) valuation model, the company is overvalued by approximately 24%, giving a Fair Value of €18. Puma has a lower Operating Margin of 7.1% and Net Margin of 3.2%, when compared to Nike’s Operating Margin of 11.5% and Net Margin of 9.5% . On, a Swiss sportswear company founded in 2010, has a Operating Margin of 9% and Net margin of 8%. With the various challenges Puma is facing, it’s not clear where revenue growth is going to come from. Stiff competition will lead to margin erosion in the future and in the event Puma cannot reinvent itself then it will join the list of sportswear brands that fell into obscurity.
Puma has set aside €75 million for ‘NextLevel’ restructuring programme in FY25. This will be used to cut head office roles and close unprofitable stores. The rationale is logical (to boost EBIT and potentially pay down debt), however, whether management can execute this is the question. The company has a deep and storied history but hasn’t got the ability to translate this into revenue.
Comparable Analysis
| Company | Ticker | Stock Price |
52 Wk High |
52 Wk Low |
P/E Ratio | P/B Ratio | Beta | Total Debt / Total Equity | Current Ratio |
|---|---|---|---|---|---|---|---|---|---|
| Puma | PUM | 23.59 | 47.93 | 18.07 | 18.3 | 1.3 | 0.85 | 97.73 | 1.37 |
| Nike | NKE | 76.61 | 90.62 | 52.28 | 35.5 | 8.6 | 1.22 | 60.29 | 2.21 |
| Adidas | ADS | 208.00 | 263.80 | 175.30 | 36.4 | 6.5 | 1.12 | 97.53 | 1.29 |
| On | ONON | 53.84 | 64.05 | 34.59 | 67.7 | 9.5 | 2.35 | 23.25 | 2.80 |
| Lulelemon | LULU | 246.67 | 423.32 | 219.97 | 16.7 | 7.2 | 1.26 | 39.79 | 2.28 |
| Asics | 7936 | 3,625.00 | 3,842.00 | 1,810.00 | 38.0 | 10.9 | 1.34 | 50.75 | 1.94 |
| Under Armour | UAA | 7.22 | 11.89 | 4.78 | - | 1.6 | 1.63 | 31.48 | 2.10 |
| Li Ning | 2331 | 17.00 | 21.00 | 12.56 | 13.3 | 1.5 | 0.99 | 7.42 | 2.71 |
| Median | 35.5 | 6.9 | 2.2 | ||||||
| Average | 32.3 | 5.9 | 2.1 |
Puma initially appears undervalued based on the P/E and P/B ratios of 18.3 and 1.3 respectively, however, with rising debt levels and a prospect of liquidity issues in the future, the relatively low valuation is justified.
Majority of Puma’s competitors have stronger balance sheets, stronger brand awareness and stronger profitability. Furthermore, most have better control over distribution and operate robust direct to consumer models, where margins are noticeably better. In summary, Puma’s competitors warrant a better valuation based on superior financial and operational performance.
Persistent issues are hampering Puma’s growth prospects and its competitor advantage is being eroded by more agile rivals. Brand loyalty is significantly stronger with Adidas and Nike, thereby making customer retention more difficult. Puma is also heavily reliant on wholesale, which has considerably lower margins compared to direct to consumer.
Disclaimer
This report has been prepared by Nabla Delta for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions, estimates, and projections contained herein are those of the firm as of the date of publication and are subject to change without notice. Nabla Delta may from time to time have positions in or options on the securities mentioned in this report and may trade for their own account.
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