German sportswear firm PUMA AG's (PMMAF.PK) second-quarter 2014 consolidated net earnings plummeted to 4 million euros, from 18 million euros last year, partly impacted by a slightly higher tax rate in the quarter due to tax expenses related to prior years. Therefore, quarterly earnings per share fell to 0.28 euros, from 1.17 euros a year earlier.
Consolidated sales for the quarter were in line with expectations, rising by 0.6% currency adjusted to 652 million euros. However, owing to continued currency weakness in Turkey, Russia, South Africa, India, Japan and the Americas, sales dropped by 5.8% in Euro terms.
For the quarter, PUMA's gross profit margin increased to 46.7% from 46.0%, as promotional activities declined year-over-year. Despite higher marketing expenditures relating to the World Cup in Brazil, operating expenditures for the quarter were broadly unchanged at 297 million euros.
The negative currency impact on sales and gross profit resulted in a decline in PUMA's operating profit or EBIT from 31 million euros to 13 million euros for the second quarter of 2014.
For the full year, the firm still expects flat currency adjusted net sales and a slight increase in the gross profit margin, as PUMA replaces lower tier distribution with higher tier distribution channels. OPEX is still expected to increase significantly based on increased Marketing investments, mainly in the second half of the year.
PUMA's annual guidance for EBIT and net earnings remains unchanged from the first quarter; and the company confirmed that the continued volatile currency movements may have an adverse impact of around 50 basis points on the EBIT and net earnings margin for the year.
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