Puma inventory headache highlights tariff dilemma for retailers
LONDON (Reuters) -Puma faces a dilemma in the United States: after rushing shipments from Asia to beat incoming tariffs, the German sportswear brand is now discounting to clear stock, while planning to raise prices this year to offset rising costs.
These conflicting pressures reflect a broader challenge for retailers trying to make sure U.S. shelves are stocked for the crucial back-to-school and holiday seasons, while looking to pass on higher costs through price increases at a time when demand is softening.
Puma, which warned on Thursday that it expects an annual loss, said it was cutting orders and plans to raise prices in the fourth quarter to soften the impact of tariffs, which it estimates will take 80 million euros ($93.78 million) off its annual gross profit.
"Elevated inventory levels on our balance sheet are leading to lower full price realisation," Chief Financial Officer Markus Neubrand told journalists on Friday. "In response, we've adjusted our future orders to better match expected demand."
At the end of the second quarter, Puma's inventories were up 18.3% in currency-adjusted terms compared with the previous year, hitting 2.151 billion euros. The increase was mostly driven by North America, Neubrand said.
But North America was also Puma's weakest region last quarter, with sales down 9.1% in currency-adjusted terms. Puma now expects global sales to fall this year by at least 10%, further heightening the inventory problem.
"The idea to front load imports into the U.S. was a sensible tactical position given uncertainty, but it does come with the risk of increased discounting in a weak market," said Adam Cochrane at Deutsche Bank Research.
Puma's plan to reduce orders should help bring inventories down, but also reflects weaker demand from retailers, Cochrane added. Puma gets three-quarters of its revenue from wholesale, and sales through that channel fell 6.3% in the last quarter.
Puma aims to bring inventory levels down and rely less on discounting, but Neubrand warned that this could take up to a year. The company does not break out U.S. figures, but the market accounts for around 20% of global sales.
"Looking specifically at the U.S., the ability to push through price increases not only appears challenging in the context of higher inventories being up 18% ex-FX, but also given Puma's muted brand momentum in the region amid an increasingly competitive environment," said Felix Dennl, analyst at Metzler in Frankfurt.
Even before tariffs, Puma was struggling, with products such as the relaunched Speedcat sneaker not selling as well as expected.
CEO Arthur Hoeld, in charge since July 1, warned 2025 would be a "reset" year and 2026 a "transition", as he attempts a turnaround after predecessor Arne Freundt failed to revive sales.
Puma's balancing act is one shared by all retailers in the U.S., where memories of record inventory pile-ups in 2022 in the wake of pandemic supply chain disruptions are still fresh. The glut that triggered deep discounting and dented profits is a situation retailers are anxious to avoid repeating.
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