Puma Se Unsp/Adr

Hello everyone and welcome to the PUMA conference call for the fourth quarter and full year 2025. Joining me today are our CEO Arthur Höld and our CFO Markus Neubahn. Before we start, please take note of the cautionary statement regarding forward-looking information. Arthur and Markus will guide you through today's presentation covering our business recap, financial update and outlook for the year ahead. After the presentation, we will open the floor for your questions. For the Q&A session, we kindly ask that you limit your initial questions to two per person. This will allow as many participants as possible the opportunity to take part in the discussion.

Good afternoon and welcome from my side here from Herzogenaurach as well. Yeah, I think that video summarized perfectly what a great brand we are, what a great potential we have, but it certainly also highlighted some of the challenges that we have started to take last year. So allow me to take you on the journey and the progress that we have made over the last few months. However, starting, of course, when we talk about Puma, we want to start with sports, the foundation that we build upon. Some of the highlights last year were definitely Mondo Duplantis taking the world title and at the same time the world record in pole vaulting at the Tokyo World Championships that also made him the fourth time the men's athlete of the year. Amanel Petros featuring the fast R3 was winning the silver medal in the marathon race, and then subsequent to that in Valencia, set the third fastest European time ever. We are very happy that to date we have 10 teams qualified for the FIFA World Cup, and that gives us strong, strong presence at one of the most prolific sporting events later this year. HIROC's key partnership that we have extended last year sees increasing popularity building a community way beyond what we have imagined beforehand. And we have key athletes who are breaking world records almost on a weekly basis. In Formula One last year, we had two out of five teams in the top Constructor Championships. And as you've seen from our recent announcements, we're very proud to add McLaren, the current champion in the team and individual championships to our roster for 2026. And then last but not least, with Dennis Schroeder, and the German team winning the Eurochamps. At the same time, we are looking forward to Tyrus Halliburton coming back in the new season. So there's a lot of positivity, a lot of great achievements that PUMA as a brand has seen in the year 2025. And we also do see our foundation for future success in exactly those areas. First and foremost, providing innovative technologies for our athletes, for our teams, for our high-performing sports people. whether it's apparel technologies like Cloud Spun or Dry Sail, or the best technology in the running world out there with Nitro. We're extremely proud of the developments and of the success stories our teams have achieved in recent months. Second to that, our brand will be built on community platforms, connecting with consumers around the world, connecting in new, different, and engaging ways to really set the tone and set the standard. where Puma will be at the forefront of conversations again. And of course, it's also about global reach. A brand that is globally recognized, but globally also connects on the highest level with partnerships that have been either long-lasting or will be added freshly and newly to excite our audience out there. And that all will be built on 77 years of history. Of history that was made out of great products, great athletes, and great partnerships. that has built PUMA into one of the greatest brands on earth to date. However, we also recognized last year that we have to start to do things differently in our organization and in our brand. We have called out a three-year transformation journey that was clearly starting middle of last year with the so-called reset. Let me give you a brief update on what we have achieved and what we've done in those last five to six months since we called this out. So 2025 was not just a year of reset. We have clearly communicated and acted upon key measures and key activities that will take PUMA into a different area and allow us to really fulfill our growth ambitions in the years to come. From a distribution perspective, we have talked about cleaning up undesirable wholesale business, reducing our overstock with wholesale partners, and at the same time reducing our discounts on our own channels, and I come to talk a little bit more in detail about that one. From a cash perspective, we have become a much more prolific organization in terms of managing our cash situation. We have definitely reduced our PO placements in order to avoid a further oversupply, for example, for our 2026 business. And at the same time, we have also reset our OPEX operations. We have, for example, significantly reduced our range size, our complexity, and also committed to working on our operational inefficiencies as an organization and as a company. When I talk about right-sizing measures across our business, I wanted to give you some details, a bit more flavor, what that meant for us. In the S, for example, when it comes to undesirable wholesale business, we will decrease our business by the double digits. over the next couple of years until the end of this year. We have already started to reduce our discounting policy in our own e-commerce channels as well in our retail channels. This has already a significant impact, not just on our top line, but more importantly, that people and consumers start to see us again as a serious brand, as a brand that commands value. And last but not least, as I said, both our inline and non-inline product range will decrease double digit. The season where that will become into fruition will be the spring-summer 27th season. A lot of measures that we talked about that are now already in place that will show up in the market in the seasons to come. We also have committed to focusing on streamlining in our organization. The adjustments we've promised was about 20% of our white collar positions reduced between 25 and 2026. 500 of those positions have been reduced in the first half of 2025 within the so-called next level program. One third of the additional 900 positions we have reduced in the second half of last year. That is another two thirds of those 900 positions that we're actively engaging with at this point in time. So we are committed and we're executing to become a better, to become more streamlined, but also more efficient organization going forward. An organization is, of course, built on strong leadership, senior leadership that has the capabilities to transform this organization. What you see here on this chart is the already communicated new addition of Andreas Hubert as the chief operating officer, as well as the extended responsibilities for Maria Valdez. Her role was transformed from being in charge in terms of products only to now adding responsibility for go-to-market and brand marketing to fulfill a new operating model that we as an organization will be carrying in the future. You also see significant amount of other changes that I will not go into detail today, but they've all been announced over the last three to six months basically. Allow me to briefly touch on that new brand and operating model. What is new that we're basically bringing all the elements together that allow us to develop successful and promising and cut-through marketing stories and concepts in the future. That means brand marketing, product creation and the go-to-market teams are all united under one team and will in the future develop concepts and propositions right from the get-go and then take them also fully through into the sales and into the conversations with our customers and with our DTC colleagues. Under Maria's leadership, we have also restructured our categories with a full ownership proposition moving forward. We've also clearly called out what we say the four priority, the four DNA categories for PUMA in the future. There will be football, running and training now as two separated categories that previously were honed under one leadership and a focus on sports style which is the select and the prime business which has been split from the core business. So clearly a commitment to growth and to growth across a global scale with a dedicated viewpoint on how we will show up as a brand in the future also at the same time we have developed a new go-to-market calendar that will come fully into provision for the spring summer 28 season that means we're going to have a more focused approach in terms of alignment internally and improved selling readiness but also higher efficiencies when as a brand we go to market the second significant change that we are undergoing at the moment is on the leadership of Matthias as our chief commercial officer. We are going to transform our home region Europe from an organization that has a very small regional layer of seven almost with seven different competencies and different cluster centers, which lets a very decentralized structure duplicate a lot of efforts and ultimately also a pretty inconsistent brand activation. In the future, as of later this year, we're going to increase our regional layer, our European layer. We're going to have three more streamlined clusters across central, north and south. And that also will mean in the future, we're going to have more consistency, stronger efficiencies. There will be a regional ownership of the key growth levers and also allowing us for faster and more aligned decision making. So these were some of the methods we talked about last year and the execution that was started. But of course, we'll transition into 2026. With that, I'll hand over to Markus to talk you through the results.

Thank you, Arthur. And hello to everybody from my side. Following Arthur's remarks, I will now walk you through the key financial metrics and explain how the reset measures he outlined impacted Pumas Q4 and full year results. On the top line, we saw substantial currency-adjusted sales decline of nearly minus 21% in Q4, leading to a sales decline in full year 2025 of around 8%. Notable reduction in sales of around 8% was primarily attributable to our reset measures initiated during the second half of 2025. Our reset measures can be split up mainly into three buckets. The largest impact came from cancellations of undesirable business, with wholesale partners in the mass merchant space, followed by inventory take-backs and lower D2C promotions to improve brand perception. From a regional perspective, From a regional perspective, the reset was particularly pronounced in America, especially in the US, EMA, and China. Now let's have a look at the sales breakdown by channel. Wholesale saw a decline of around 28% in Q4 due to significant takebacks to clear excess inventory. in the channel, along with immediate actions to reduce exposure to mass merchants in North America and to phase out undesirable business in Latin America, EMA, and Asia Pacific. In full year 2025, wholesale decreased by 13%. Director consumer sales dropped 8% in Q4, with owned and operated stores down about 1%. and e-commerce falling by 20% due to fewer promotions aimed at strengthening UMA's brand. For the full year, D2C increased 3%, supported by both brick and mortar and e-commerce. Correspondingly, the Q4 D2C share rose substantially to 41.1% from 35.5% in Q4 2024. For the full year, The D2C share increased to 32.4%. Moving on to the sales breakdown by regions. EMEA sales decreased by around 24% in Q4 and minus 7% in full year 2025. Lower sales were driven by a weaker wholesale performance due to the reduction of undesired business and inventory takebacks as well as lower D2C business on the back of reduced promotions. In the Americas region, sales fell by 22% in the fourth quarter and by minus 10% on a full year basis. The decline was mainly attributable to North America, where sales decreased by slightly more than 33% in Q4 and minus 19% in the full year as a result of the distribution cleanup in the mass merchant business in the US. Sales in Asia Pacific dropped by nearly 13% in Q4 and by 7% in full year 2025. This was mainly driven by decline in the Greater China wholesale business, which was partially offset by robust growth in the direct-to-consumer channel. Overall, Greater China sales declined by almost 20% in Q4. From a product division perspective, Footwear sales in Q4 decreased by around 25% due to a broad decline across most categories. Within footwear, we saw growth in the sports style prime and select segment, driven by the Speedcat family, with particularly strong performance in the Asia-Pacific region in the past quarter. However, the training category remained resilient and delivered healthy growth. Despite an overall decrease in the running category as a result of the distribution cleanup, performance running showed strong growth driven by the success of the Velocity Nitro 4. 4 apparel sales fell 14% in Q4, reflecting widespread declines across categories. This was partially offset by growth in training with continued strong momentum in Hyrox. Accessories decreased by 18% in the past quarter, mainly due to golf. On a full year basis, all product divisions declined in the highest single digits. Moving on to the operating performance in the fourth quarter. Gross profit margin was down minus 7.5 percentage points, and I will elaborate a bit more on that development in just a minute. Royalty and commission income was up 36%, mainly due to a transition from a business partnership to a licensing agreement structure with United LACWARE. Operating expenses, excluding one-time effects, fell by roughly 8% to $887 million during the quarter. This decrease was driven by positive results from the cost efficiency program and reduced expenses in the D2C channel. which were a consequence of lower sales compared to the same quarter last year. Driven by lower sales and lower gross profit, adjusted EBIT came in at minus €229 million, down €315 million versus Q4 2024. One-time effects amounted to around €79 million, mainly related to the cost efficiency program and a goodwill impairment. Reported EBIT, including one-time effects, was around minus €308 million, and our loss from continued operations came at minus €335 million. As indicated, let's take a closer look at the cross-profit margin in Q4. First and foremost, the drop was primarily attributable to increased promotions the wholesale channel, and inventory reserves, resulting from the distribution cleanup, both as a result of the reset measures we commenced in the second half of 2025. Additionally, we saw headwinds from unfavorable currency effects from Turkish Lira, the US dollar, and the Argentine peso, as well as a slightly negative regional mix. These negative effects were partially offset by a favorable channel and product mix and slightly lower freight cost. In addition, lower sourcing costs including duties were a tailwind and therefore more than offsetting the negative impact from US tariffs. Now looking at full year 2025 operating performance. The gross profit margin was down year over year by 260 basis points Also here, I will dive deeper into the drivers in a minute. The royalty and commission income increased by 4.4% to 92 million euro. OPEX, excluding one-time effects, remained flat at around 3.5 billion euro. I will give more color on that development shortly. Due to reduced sales and gross profit, adjusted EBIT excluding one-time effects, fell to minus €166 million. We incurred one-time effects of around €192 million. Consequently, the reported EBIT came in at minus €357 million. Loss from continuing operations came in at around minus €644 million. In light of the net loss recorded in fiscal year 2025. And in order to maintain liquidity, the management board and the supervisory board of PUMA will propose at the 2026 annual general meeting that no dividend should be paid out for 2025. Turning to gross profit margin development in fiscal year 2025. Gross profit margin was down 260 basis points to 45%. On a full-year level, increased promotions in wholesale channels and inventory reserves represented the main headwind. We also saw negative currency effects impacting gross margin, mainly from Turkish Lira, Argentinian Peso, and Mexican Peso. This was partially offset by favorable channel and product mix, as well as reduced sourcing costs, including UDS. We managed to limit the adverse impact of U.S. tariffs to around 30 million euro in 2025. In 2026, we expect a substantial improvement versus 2025, especially due to low promotions, including inventory reserves and a favorable channel mix. Now let's take a closer look at OPEX and one-time effects respectively. OPEX excluding one-time effects was flat at around 3.5 billion euro. Both channel mix as the D2C share, especially e-commerce, increased from 28.9 to 32.4%. And other OPEX offset lower marketing expenses as well as savings from the efficiency program. Looking at marketing expenses, I want to highlight that we deliberately did not reduce marketing expenses any further than we did. In constant currency, it even remained stable year over year, as we see this cost position as an essential lever to elevate brand perception. The OPEX includes higher depreciation and amortization costs resulting from investments in D2C and infrastructure. along with approximately €30 million in accounts receivable write-offs precluded an OPEX decline. Due to significantly lower group sales, the OPEX ratio increased by 640 basis points to 48.5%. We recorded material one-time effects, mainly related to the cost efficiency program and goodwill impairments. Personal expenses accounted for €102 million. These expenses are linked to our cost efficiency program targeting a global headcount reduction. Impairments were €63 million related to goodwill impairments in Japan, Canada, as well as in digital infrastructure. Closing unprofitable stores and other non-operating costs reached €27 million. Looking forward, we anticipated significantly less one-time effects than what we saw last year. These costs will mainly focus on personal expenses. Overall, in 2026, we do not expect materially lower OPEX in absolute terms as we will continue to invest in our brand as well as marketing and expect stronger growth in D2C versus wholesale. Let me shed some more light on the drivers of the reported EBIT margin development. Reported EBIT margin was down from 6.5% in fiscal year 2024 to negative 4.9% in fiscal year 2025. The negative development in gross profit margin had an impact of minus 2.6 percentage points. the effect of royalty and commission income had a slightly positive impact of 20 basis points. While OPEX remained flat in absolute terms, the significant decrease in sales caused the OPEX ratio to rise by 6.4 percentage points. One-time effects of 192 million Euro also had a negative effect on margin of 2.6 percentage points. Now, I would like to take a closer look at working capital. Inventories rose by 2% reported and 11% currency adjusted to around 2.1 billion Euro, partly driven by inventory take-backs from wholesale partners to clean up distribution. This was partially offset by deliberate decrease in purchase volume that we adopted as a strategy to moderate inventory expansion. and prevent excess supply. Trade receivables decreased by around 27% to just over €900 million, mainly due to a significant sales decrease in the fourth quarter. Trade payables decreased by 33% to €1.3 billion, mainly reflecting reduced purchasing volume in the fourth quarter. Working capital overall exceeded €1.5 billion, increasing by 20% against last year and accounted for 21% of group sales compared to about 15% in fiscal year 2024. Staying within working capital, let's take a closer look at inventory development. Our inventory cleanup is slightly ahead of plan. We completed the majority of targeted take-backs and you can see that Q4 inventory started to decline slightly against the level seen in Q3. The decline was mainly driven by active inventory reduction measures, including clearance through factory outlets and selected wholesale partners, as well as a restatement effect related to United. We aim to further reduce inventories this year through our own factory outlets and wholesale partners. supported by targeted promotions and disciplined purchasing. We remain firmly committed to restoring inventories to normalized levels by the end of 2026. Let's move on to cash flow and a change in our cash position. We ended the year 2024 with around €370 million of available cash. Due to negative earnings before taxes and increased net working capital, we ended fiscal year 2025 with a negative operating cash flow of around €320 million. Investing cash flow through the capex of €206 million focused on digital infrastructure, investments in our D2C channels, and initiatives to strengthen long-term competitiveness. Our operating cash flow and investing cash flow summed up to a negative free cash flow of minus €530 million. Financing cash flow amounted to around €400 million and included around €1 billion proceeds from additional financial liabilities to support the operating business and finance working capital. Overall, the cash flow development led to a decline in cash against last year to €290 million. In 2026, we expect our free cash flow to be positive. This brings us to net debt development. The additional financial liabilities resulted in an increase in net debt to just over €1 billion. End of 2025, we saw a financial headroom of €1.5 billion, including a cash position of €290 million, as shown before, and unutilized credit lines of around €1.2 billion to invest in our strategic priorities. In February 2026, we were able to secure another private placement of €100 million. With this additional financing instrument, we reduced the bridge facility from 500 to 350 million euro and secured slightly more favorable financing conditions. The bridge facility was fully syndicated with our co-banks. Given the currently elevated level of net debt, deleveraging is a clear priority, and we target to reduce net debt over the coming years. This concludes my remarks on the financials and I will now hand back to Arthur for the outlook for fiscal year 2026.