German sportswear brand Puma plans to re-join the basketball market as it makes a push to grow in the U.S. and China.
This, the sportswear giant hopes, will bring its profitability closer to that of larger rivals Adidas and Nike.
Puma has hinted for some time that it was considering returning to major American sports after pulling out of basketball 17 years ago.
The German outfit has been putting a big focus on football and running in recent years and makes the bulk of its sales in Europe.
Puma said it would partner with athletes and celebrities linked to basketball, noting that basketball shoes still dominate US footwear sales.
This is in spite of Nike and Under Armour having been hit by a shift away from basketball performance shoes to more retro styles in the last few years.
Nike has the contract to supply NBA uniforms.
Puma made the announcement as it issued new medium-term targets at a capital markets day.
It said it sees “substantial upside’’ for the brand in the US market, while it expects Greater China — where basketball is also popular — to be its top market by 2022.
Puma shares jumped by 5.5 per cent on Tuesday, the second biggest German small-cap gainer.
The stock had dipped after French parent company Kering said in January it would spin off the brand, before rallying on an upbeat 2018 outlook.
Chief Executive Bjorn Gulden has revived Puma’s fortunes over the past five years by sponsoring top football teams and partnering with celebrities, including singer Rihanna.
However, its profitability lags well behind bigger local rival Adidas and market leader Nike.
A focus on the U.S. and Chinese markets should help it boost profits, while profit margins are the highest in the sporting goods industry in China.
Puma said on Tuesday it wants to lift its operating profit margin to about 10 per cent of sales by 2022 at the latest.
This will be up from the 5.6 per cent it reported in 2017.
Shares in Adidas jumped last week after it raised its operating margin target to 11.5 per cent for 2020.
Puma expects currency-adjusted consolidated net sales to grow around 10 per cent on average per year until 2022.
It also said it would propose a dividend of between 25 and 35 per cent of consolidated net earnings starting in 2019.
The company wants sales from its own stores and e-commerce to account for 30 per cent of sales in the medium-term, up from 23 per cent now.
This shift away from wholesale should also support margins by cutting out the middleman of other retailers, the company hopes.