Puma curbs flow of sneakers from China to US as tariffs kick in

PUMA is shipping far fewer Chinese-made sneakers to the US as the trade war between the countries heats up.

The German sportswear brand is sourcing only about 10 per cent of its US shoe imports from China now, down from 30 per cent in the past, chief executive officer Arne Freundt said. Puma is increasingly relying on suppliers in places such as Vietnam and Indonesia for the US market, he said.

The change is one of several that Puma ushered in since Donald Trump’s victory in the US presidential election in November roiled an already volatile sportswear industry. Tensions between the world’s two largest economies have escalated, with Trump slapping 10 per cent tariffs on China and Beijing responding with its own levies and export restrictions.

Agility has become essential to navigate the uncertain trade landscape and its knock-on effects on consumer behaviour, the Puma chief said. This week, he held a staff meeting to dig into consumer sentiment in the US, to discuss how rivals are responding and make sure Puma’s product sourcing teams are receiving information directly from staff on the ground.

“You need to be very close to things which are happening, and have a constant information flow, and reflect if your plans are still accurate under that environment or if you need to change things,” said the CEO.

Upbeat forecasts

Puma is benefiting from its strategy of sourcing goods from multiple countries, Freundt said. “Other competitors may not be able to react that fast. It might lead to certain price increases.”

Even so, Puma has faced setbacks in recent months. On the day after Trump’s election in early November, it reported upbeat third-quarter results and Freundt affirmed his financial forecast for 2024. In hindsight, that was a mistake, he said.

Puma had seen strong demand in October for all sorts of products, including the soccer-inspired Palermo sneakers and Suede XL skater shoes, Freundt said. As November progressed, however, consumer demand slowed, especially in China and Latin America, where the company was already dealing with warehouse constraints.

As a result, Puma shocked investors in January when it reported preliminary fourth-quarter results that missed estimates and full-year net income that was shy of Freundt’s forecast. The company also pushed back a key profitability target by two years. Shares fell by the most in more than two decades.

It did not help that cross-town rival Adidas had reported better-than-expected results the day before, citing strong momentum across all regions and divisions.

Nor was it the first time that Freundt had surprised investors with bad news. In July 2023, he had suggested that if business continued to develop favourably Puma might raise its forecast for the year – but then it did not do so, angering some investors.

The 45-year-old took over as CEO in November 2022 after serving as Puma’s chief commercial officer. He has worked for the company since 2011, overseeing strategy, retail and e-commerce channels as well as the Europe, Middle East and Africa division.

Since taking the top job, Freundt has tried to give a “very realistic” financial outlook, he said. But given how volatile the industry is, he intends to alter his approach. “For me, the message is loud and clear: we need to be more cautious on communicating our expectations,” he said.

Brand elevation

Puma announced a cost-cutting programme last month that’s designed, in part, to counteract the expected drag on earnings from a stronger US dollar once its currency hedges expire in 2026.

While Puma is not looking to reduce headcount, Freundt sees potential for streamlining in some areas – such as material procurement or IT and logistics. “We are a growth company, but we want to grow more efficiently going forward,” he said.

Freundt insists that Puma’s new effort to elevate the brand is working. Until recently, the focus was on maximising sales growth, even if much of that progress came from selling relatively cheap shoes and apparel. Now, Puma wants to increase its presence in higher-end channels for sports and lifestyle products, such as sneakers that sell for more than US$100 a pair and help build hype.

Puma has made progress in the past year, especially with products selling at hip streetwear stores such as Kith and End, Freundt said. The company has been building buzz around the Speedcat, a thin-soled sneaker that originally debuted in 1999 and has recently appeared on the feet of celebrities such as actor Jennifer Lawrence.

While Freundt may become more cautious on his financial forecasts, the CEO appears as optimistic as ever about the prospects for the Speedcat after Puma began ratcheting up supplies in preparation for a marketing blitz around the product. This approach to managing a product cycle will help Puma usher in its next era of profitable growth, the CEO said.

“What we have done the last 12 to 18 months is really to build up a new silhouette, a new trend,” Freundt said. “We are very confident that this can be one of the hottest shoes in the summer.” BLOOMBERG