Puma shares drop as FX movements hit Q4 sales

Shares in Puma dropped sharply on Wednesday after the German sports apparel group reported a drop in fourth-quarter sales which it put down to a weakening Argentinian peso.

Sales were down 9.8% year-on-year at €1.98bn due to "hyperinflationary accounting" in the final three months of 2023, the company said in its results statement, with the peso devaluing by a whopping 54% in December alone following government measures as part of economic reforms.

According to the IAS 29 accounting standards, hyperinflation accounting requires using year-end currency rates instead of using the average currency rate of the full year.

However, the company said that the underlying performance of the business was strong. Adjusting for currency movements, sales fell by a lesser 4.0% in the fourth quarter. But net income for the fourth quarter shrunk by 42% to just €0.8m due to currency movements.

Full-year currency-adjusted sales grew by 6.6%, but by just 1.6% on a reported basis, to €8.60bn, while earnings before interest and tax came in line with guidance at €622m.

“Our underlying operating performance was strong in 2023 and showed that we were well on track to meet all expectations," said Puma's chief executive Arne Freundt.

"The accounting treatment of the hyperinflationary economy Argentina and its significant devaluation of the Argentine peso mid of December resulted in an extraordinary impact on fourth quarter and financial year results for 2023. Due to the magnitude and timing of this currency effect, we could not fully compensate the entire impact at the year-end."

The stock was down nearly 7% at €40.07 by 1310 in Frankfurt.