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Puma Sees No End to China Woes as Sportswear Brands Suffer From Continued Boycott

By Joshua Kirby

 

Puma SE's sales performance in China remains heavily affected by a consumer boycott that began last year and it is unclear when the company will return to organic growth in the key market, its chief executive officer has warned.

Reporting 2021 results earlier Wednesday, the German sporting-goods maker said fourth-quarter sales in Asia-Pacific fell 5.4% on year, with disruption from the pandemic and "geopolitical tensions" in Greater China largely to blame.

In a conference call after the results, CEO Bjorn Gulden said performance in China was affected by a boycott that began last year. In March 2021, a consumer boycott of Western sportswear and fashion brands was sparked in China in response to brands' statements that they wouldn't use cotton produced in the country's Xinjiang region. Human rights groups and some governments allege that forced labor is used against the Uyghurs and other ethnic minorities in Xinjiang, a claim disputed by the Chinese authorities.

Amid the resultant boycott, which was fuelled by government media, Puma reported double-digit declines in second- and third-quarter sales in Greater China last year, as did larger rival adidas AG. U.S. sportswear major Nike Inc. booked a 20% fall in China sales for its most recent quarter, though it highlighted supply problems behind the decline. Adidas will report its fourth quarter and 2021 results in March.

As the controversy continues to dog Puma, sales are set to decline again in the first quarter of 2022, Mr. Gulden said. Puma hopes to return to organic growth in the country for the full year but can't guarantee doing so, nor say at what point it will, he cautioned, adding that the company nevertheless remains "optimistic" over its China prospects. "It's out of our hands," he said.

As a result of the boycott and the stigma still attached to Western brands, Puma remains unable to use Chinese celebrities to promote its products there, Mr. Gulden said. However, the situation is beginning to improve regarding the use of athletics stars in this regard, he added. He said the company's global position allows it to alleviate the pressure in China by focusing on gaining market share in other geographic regions.

The issue is nevertheless a serious one for sportswear companies, which operate in a sector with a greater focus on top-line growth than on margins, analysts at Stifel said in a recent note. Puma's consensus-beating 2021 results should however help to assuage concerns, the financial-services company said.

 

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

 

Corrections & Amplifications

This story was corrected on February 24, 2022. The original version incorrectly said Puma CEO Bjorn Gulden said tensions referred to a consumer boycott of Western sportswear and fashion brands that started in China in March in response to brands' statements that they wouldn't use cotton produced in the country's Xinjiang region. Mr. Gulden only referred to a boycott, without specifying the reasons behind it.

(END) Dow Jones Newswires

February 23, 2022 08:32 ET (13:32 GMT)

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