Putting the Puma shoe on the other foot
Famous for making football boots, Puma now rides on growth in its clothing business. The firm has been doing brisk business in the UAE since 2005. Puma CEO Jochen Zeitz says rising inflation may affect the UAE’s retail market. It is the first brand to really mix sport and fashion. Saudi regulators must become more investor friendly, says Zeitz.
Puma made its name selling football boots but, according to CEO Jochen Zeitz, the shoe is now on the other foot. The $7.2bn German firm, which was founded in 1948, is now concentrating on its clothing and lifestyle lines, rather than its once-core business in sports and sneakers. Last year, the company reported a disappointing 2.
One per cent rise in footwear sales – roughly a quarter of the growth it saw in apparel brands. The UAE is important to the company.
Registered – perhaps surprisingly, for a fashion brand – at Internet City, Dubai is Puma’s base for Middle East operations. It has three stores in the emirate, and plans to open an Abu Dhabi outlet in April.
When Emirates Business caught up with Puma’s Jochen Zeitz in Dubai, he explained the company’s strategy to become “one of the leading brands – not just in terms of sales, but in desirability.”
Dubai is known for its mega shopping malls. Does that mean big business for Puma?
Generally, there has been phenomenal growth in Dubai, and the whole infrastructure is following suit. We’ve seen over-proportional growth in the whole Middle East region. We’ve been in the UAE since 2005, as a 100 per cent owned entity. It is interesting to see how the market is evolving – you get a similar feeling when you’re in Shanghai.
Do you think the UAE’s retail market is becoming oversaturated?
I would not say that the retail market is oversaturated or that there is an oversupply of malls. We are well ahead here compared to the other Gulf countries. Increasing inflation may have an effect, though.
What about Saudi Arabia which, due to the fast emerging affluence among its middle classes, is sometimes called the ‘sleeping giant’ of Middle East business?
Puma is active in Saudi Arabia, but – from a regulatory point of view – [the country] needs to become more foreign-investor friendly. To explore the potential of the ‘sleeping giant’, one needs to further address the framework.
Last year’s results show that Puma’s apparel and accessories lines are outperforming footwear. Is that a trend that you see continuing?
We were the first brand to really mix sport and fashion: the two areas of sport and lifestyle have merged. I see lots of potential in the apparel and accessories business, and we are focusing more on these areas. The direction of the industry is changing.
Puma is a very individualistic brand, does that bode well in the region?
We’re not offering a ‘me-too’ product, it’s something far more individual. And it can be expressed in many ways.
Puma has stated its intention for a share buy-back. What’s the strategy behind that?
We have the authority to buy back up to 10 per cent of our shares, which we continue to do.
French group PPR acquired more than 60 per cent of Puma, promising it ‘arms-length’ independence. Is that the reality of the relationship?
The investment [PPR’s] in PUMA was made to give us a better platform to build the brand. We have the opportunity to tap into PPR’s resources when we need to. For example, the Chalayan tie-up [Puma recently hired top designer Hussein Chalayan, and acquired a majority stake in his eponymous business] would not have happened without PPR’s know-how.
Puma made its first major acquisition in 2001, when it purchased Swedish shoe brand Tretorn. What’s on the agenda for this year?
When we started the next phase of our long-term development plan in 2006, we have always said that we will expand our business regionally and through adding more categories. And we will have a closer look if a good opportunity arises. This year is one of massive events, though: The African Cup of Nation, the European Championships, the Beijing Olympics and the Volvo Ocean Race, which we sponsor and where we’ll take part with a boat to launch new line of business – sailing.
Puma also sponsors the Saudi football team, which the UAE beat in the semi-finals of last year’s Gulf Cup of Nations. Any plans to sponsor the winning team, too?
I would never rule out anything.
Chairman and CEO Puma
After beginning his career with Colgate-Palmolive in New York and Hamburg, Zeitz joined Puma as Marketing Manager for footwear in 1990. Three years later he was appointed chairman and CEO, becoming – at 30 – the youngest-ever boss of a publically quoted German company. He’s now one of Europe’s highest-paid executives, with an annual salary of 10.65m (Dh61m).
German-born Zeitz attended the European Business School, having broken with the family tradition of studying medicine. He has a pilot’s licence, owns a farm in Kenya, where he holidays, and also runs a charitable organisation. In August 2007, Zeitz was appointed a board member of Harley-Davidson – the first European to take up such a position at the US motorcycle giant.
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