Kering sheds Puma to focus on luxury sales

Dive Brief:

Last Thursday, Kering’s board of directors unanimously proposed to distribute to its shareholders around 70% of the 86.3% of Puma shares it now owns — effectively divesting itself of the athletic shoe and apparel brand.
The move enables the Kering to "reinforce its status as a leading pure player in luxury," according to a Kering press release. The company, (which runs Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Balenciaga and Stella McCartney, among others) said it aims to focus on high-end fashion, leather goods, jewelry and watches.
It's all fine with Puma, which, also on Thursday, said it welcomed the move because it "would lead to a greater free float of Puma stocks, providing investors an enhanced possibility to invest in Puma and allowing the company to reaffirm its business strategy," according to a Puma press release.

Dive Insight:

Sports brands may need to turn to fashion to boost sales, but fashion isn’t necessarily interested in sports, at least not in the couture circles that Kering plays in. The move is an endorsement of confidence in the luxury shopper.

"Kering would dedicate itself entirely to the development of its luxury houses, whose enduring appeal, built on creative audacity and innovativeness, will allow us to continue to gain market share and create value," CEO François-Henri Pinault said in a statement. He added that Puma "now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets" and "is poised to achieve substantial growth."

That future lies at least in part in continuing the fashion emphasis that Kering brought to the brand, considering that street styles are increasingly preferred by athletic shoe shoppers. Puma has proven able to capture the imaginations of teens who prefer street styles and like the retro look of the brand. It's a lesson that Puma's three rivals Nike, Adidas and Under Armour, are grappling with.

"There still is far too much performance basketball and running products in the market, which is creating markdowns at retail. Brands and retailers must work to shift inventories away from performance," according to a report last week from Matt Powell, vice president and senior industry advisor at The NPD Group. "The consumer is quite clear in telling us they have no appetite for 'performance-as-fashion.'"

Adidas, founded by the brother of Puma's founder, is doing best at that pivot so far and in 2016 took back the number two spot from upstart Under Armour.