The sporting goods sector is facing a challenging time due to several factors such as increasing material and freight costs, a stronger U.S. dollar, inventory markdowns, and higher promotion expenses. As a result, profit margins have been adversely affected, and the industry is hoping for a recovery in China to ease the pressure. To this end, Puma has set its sights on Greater China and plans to expand its revenue contribution from the region, which currently only accounts for 5 per cent.

However, Puma's latest results show that sales in Greater China dropped by 36 per cent YoY, making it a difficult market to penetrate. In addition, Puma is looking to implement a more upscale strategy in the United States, which is a crucial market for the company.

Puma is forecasting an annual operating profit of €590-670 million ($626-711 million) in 2023, with sales expected to grow in high-single-digit percentage points. However, analysts believe that this guidance is assuming limited benefit from the reopening of China. Puma's gross profit margin decreased by 420 basis points to 44% in Q4 2022, citing an industry-wide increase in promotional activity amid high inventory levels.

The company expects gross profit margins to come under more pressure in H1 2023 than H2 2023, as it anticipates currencies, higher freight rates, and raw material prices to continue impacting profitability.