A Puma factory in Hunan. (Photo/CNS)
Puma, the third largest sportswear company in the world, announced recently that it will close around 90 unprofitable outlets globally, reported the National Business Daily in Shanghai.
After seeing its profit decline by 85% in the third quarter of 2012, Germany-based Puma reported a loss of US$56.8 million in the final quarter.
According to its financial statement, the group's consolidated revenue rose 8.7%, below expectations, in 2012. But its net profit dropped from 49.6% in 2011 to 48.3% in 2012.
Instead of raising its annual revenue expectation to above €4 billion (US$5.2 billion), now the group's top priority is to generate profit rapidly.
The National Business Daily quoted market analyst Zhang Qing as saying that Puma's troubles partly stem from weak demand in Europe and partially from its misplaced business strategy in the Chinese market.
The company has failed to unveil any trend-setting products, Zhang said.
In China, the brand is not considered as prestigious as its foreign competitors Nike and Adidas, and its products are priced higher than its Chinese competitors, said Zhang.
Citing Du Yanhong, an industry researcher with the CIConsulting Company in Beijing, the National Business Daily said Puma's financial plight is also shared by other sportswear companies, not to mention the ones operating in China.
Noting that Chinese sportswear company Xtep is also planning to close 100 to 200 of its outlets in 2013, Du said shutting down unprofitable outlets and concentrating on improving business at profitable ones is necessary for sportswear companies to weather the tough times.
Zhang echoed Du's opinion, saying that the days when sportswear companies enjoyed fast growth and higher returns are gone, and that they can no longer boost their revenue by simply ramping up their store count.