Posted in: Business News
Published:
April 4, 2020 5:11 PM UTC

Coronavirus Ravages Puma as Apparel Makers Struggle to Preserve Cash

Sportswear giant Puma has announced measures to conserve cash amid the coronavirus pandemic. It's not the only apparel maker doing so.
  • The coronavirus pandemic is forcing Puma to cut executive pay and suspend stock buybacks.
  • Other sportswear giants, including Lululemon, have taken similar measures.
  • Adidas went a step further and announced it would not pay rent on its shuttered retail locations.

Puma’s (ETR: PUM) shareholders and senior executives are the first victims of the sportswear giant’s survival plan amid coronavirus. To conserve cash, Puma is suspending shareholder payouts and cutting or eliminating salaries.

In a statement, the sportswear maker disclosed that it will suspend dividends and cut senior management’s pay by 25%. Board members, on the other hand, will not receive any salary.

The coronavirus pandemic has additionally forced Puma to hold its upcoming annual general meeting online. Puma’s first-quarter results will also be delayed by a week as a result of the coronavirus outbreak.

Puma’s peers feeling the same pain

To conserve cash amid the coronavirus pandemic, other sportswear makers and retailers are taking similar measures.

U.S. sports apparel maker and retailer Lululemon (NASDAQ:LULU) has, for instance, temporarily suspended its share repurchase program.

Its board of directors will not receive cash retainers and salaries of senior executives will be slashed by 20%.

Fortunately, the firm has a strong cash position. According to Lululemon CEO Calvin McDonald, the retailer is in “very good standing … [from a ] … balance sheet perspective.”

Lululemon will weather the storm

Lululemon ended 2019 with a cash balance of $1.1 billion. Even after closing all its stores in North America, all employees will be paid through June regardless of whether retail locations reopen in two months.

After its stock price fell by nearly 50% from the all-time high, LULU has slightly recovered. The stock is now up over 30% from its 2020 low.

LULU has recovered from its 2020 low. | Source: TradingView

When the general public sided with landlords…

Retailers have tried other unconventional methods to preserve cash amid coronavirus.

Adidas (ETR: ADS) is one such company. In addition to cancelling its billion-dollar share buyback program, forcing executives to take pay cuts and slashing hours for hundreds of employees, Adidas last month tried to stiff landlords out of their income.

Towards the end of the month, the German sportswear maker announced that it would not pay rent across the world after its stores were forced to shutter by coronavirus lockdowns. In 2019 Adidas made $2.2 billion in net profits.

The company quickly backtracked following widespread criticism:

Source: Twitter

The German sportswear giant has now paid April rent for all its stores.

This article was edited by Sam Bourgi.

Mark Emem @wetalkmarkets

I cover business and the stock market for CCN. Currently based out of Nairobi, Kenya. Feel free to get in touch with me. Email: wetalkmarkets[at]yahoo.com