The French conglomerate that owns Gucci and Alexander McQueen plans to divest itself of German sportswear brand Puma.
Kering currently owns 86 percent of Puma shares, but has announced a decision to distribute 70 percent of the company to its shareholders, retaining just 16 percent.
To go ahead, the proposal must first be approved at Kering’s Annual General Meeting on April 26. If it does, Kering’s largest shareholder, the Pinaut family, would receive approximately 29 percent of Puma shares.
Kering spent 5.3 billion euros to acquire a majority stake in Puma back in 2007. After dropping significantly in previous years, Puma’s shares leapt 45 percent in the past 12 months to recover to the price Kering originally paid.
While Puma has performed strongly recently, it has failed to keep pace with the remarkable growth in Kering’s luxury brands. Propelled by the luxury market recovery in China, Gucci led the charge for Kering, with sales up 49.4 percent in the third quarter last year, up from 39.3 percent the previous quarter.
According to Professor Qing Wang, Professor of Marketing and Innovation at Warwick Business School,
“Such strong performance must have given Kering the confidence to focus solely on its luxury fashion and jewellery labels. Another reason for this decision is also due to the weaker than expected performance of Puma since its acquisition ten years ago – it lags behind Adidas and Nike.”
Puma’s profit margin of 5.5 percent is also significantly lower than that of Kering’s luxury brands.
“Although Puma has pulled itself up in 2017 with a sale increase of 17 percent to 1.1bn euro, representing a third of Kering’s total turnover, Puma’s profit margin of 5.5 percent is still far below that of luxury labels such as Gucci and Saint Laurent,” Wang said.