Puma caught between tariff fears and weak US demand as it discounts stock, plans price hikes
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 ($93.7 million) off its annual gross profit.
"Elevated inventory levels on our balance sheet are leading to lower full price realisation," CFO 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, he 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.
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