Puma’s long slide: the rise and fall of a sports icon

Germany’s Puma and its fierce rival Adidas have their roots in the same house where brothers Rudolf and Adolf Dassler founded the shoe business a century ago, before a major dispute between the brothers split the company in two.

After the split of the original company Geda, Rudolf founded Ruda (later renamed Puma), while Adolf founded Adidas. The headquarters of the two companies are just a short walk away from each other in the Bavarian town of Herzogenaurach.

Now Puma is set to come under the wing of Anta, China’s largest sportswear company, which will become the largest shareholder in a $1.8 billion deal aimed at bringing back one of Europe’s most iconic sports brands that is rapidly falling out of favor.

While Adidas took the lead with its retro Terrace shoes, Puma, which widened the sales gap between the two companies, had difficulty winning over consumers to its sportswear and Speedcat sneakers with its leaping wildcat logo.

“Puma has become perhaps too reliant on lifestyle products rather than performance sports footwear, which has really driven this sector,” said Morningstar analyst David Swartz, adding that its lower revenues mean it has less money to spend on star names that would boost the brand.

“So they have no visibility.”

Until recent years, Puma was number 3 in sportswear after Nike and Adidas; He was competing to produce cool sneakers and win the best athletes and football team sponsorships. But as new brands like On Running and Hoka grew, Puma’s pace slowed.

Puma CEO Arthur Hoeld, a former sales chief at arch-rival Adidas, said in October: “Puma has become too commercialized, too much traction in the wrong channels, too many discounts.”

The Anta deal for the 29 percent stake held by the Pinault family, which is behind Gucci owner Kering, could give the firm an opportunity to regain some of its lost ground, including in China.

“We have a lot of insights on how to make Puma more successful in China,” Wei Lin, Anta’s global vice president of sustainability and investor relations, told Reuters. “It is one of the most valuable brands in this industry.”

The value of the Anta deal to Puma is around $6.2 billion. Its enterprise value is about a multiple of forecast 2027 sales, according to Visible Alpha analyst estimates, and it’s relatively inexpensive compared to rivals such as Adidas, Nike and Swiss firm On.

Founded in 1948, Puma has a long history of fitting athletes with cleats and football cleats; these products were later produced at the Herzogenaurach factory and are now mostly supplied from factories in China, Vietnam and Indonesia.

As Adidas boomed, Puma also climbed, with its shares peaking at 115 euros ($A197) in late 2021. But it has since depreciated, losing 80 percent of its value. Its market capitalization on Tuesday was 3.2 billion euros, an eighth of that of Adidas.

Trade war uncertainties have hit the retail industry as a whole in recent years, but Puma has been particularly hurt.

Sportswear has come under pressure as competition has intensified and recent sneaker launches, including the Speedcat, have been overshadowed by Adidas’ Samba and other “terrace” shoes, retro models inspired by the footwear of football fans in the 1970s and 1980s.

CEO Hoeld, who has been in the job since July last year, announced a turnaround plan in October aimed at cutting 900 corporate jobs, offering fewer discounts, improving marketing and reducing product range.

German bank Metzler retail analyst Felix Dennl said Adidas was putting pressure on Puma by “leading the way” in sneakers.

“Adidas was one of the first to tap into the retro sneaker trend, about six months before Puma,” he said.

“Not only did this allow Adidas to get a head start, but it also transferred the brand heat generated in lifestyle footwear to its performance lines.”

Reuters

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