Puma, the sports fashion retailer, will be eager that it can capitalise on the rebounding Chinese market to counteract reduced growth in North America, according to analysts.
The German company saw North American revenues decline by 19% annually in its first quarter.
The fall was driven largely by increases in discounted sales as the group look to shift its inventory overhang, the Royal Bank of Canada (TSX:RY) argued.
“Units in North America were also down year-on-year,” the bank added.
The clothing company is expecting revenues in the region to continue declining by a mid-high teens rate for the rest of the 2023 financial year.
Conversely, Puma is hoping that in 2023 Chinese revenues will grow above group guidance by a high single digit.
The group has signified its intent to dive into the Asian market, already signing up Chinese singer Cheng Xiao as a brand ambassador.
“This, combined with the restart of sporting events, coupled with the opportunity to locally leverage global brand ambassadors, should provide a healthier ground for a Chinese recovery,” said analysts at Jefferies, which also sees Puma growing in the country.
The New-York based bank argues that Puma delivered a “remarkable recovery in the pre-Covid years” and remained popular during the pandemic with “ample double-digit growth in the first quarter of 2021 vs 2019”.
Jefferies rates the stock a ‘buy’ and targets a share price of €76.
Over in Canada, RBC sees the retailer as one of the most attractive sporting goods companies it covers and it estimates underlying profits to jump 14% over the next five years.