Investing.com -- Berenberg has named Puma (OTC:PMMAF) as its top pick in the global sporting goods sector, citing deep value and upside potential despite recent challenges.
The stock trades at 0.36x EV/Sales, a two-decade sector low, which implies permanently depressed margins of 2% to 3%, levels it has reported only twice in the last 30 years.
Berenberg argues that if new management cannot unlock value, Puma risks becoming a takeover target.
The endorsement comes in a broader report that warns of multiple headwinds across the sector, including tariff exposure, weakening demand, and competitive pressure.
Despite long-term tailwinds such as rising sports participation and lifestyle-driven demand, the short-term outlook is complicated by U.S. trade policy and macroeconomic uncertainty.
With 38% of global industry revenue generated in the U.S. and around 95% of production concentrated in Southeast Asia, the sector is highly exposed to Washington’s new reciprocal tariffs.
Berenberg estimates that U.S. retail prices for sporting goods could rise by 8% to 17%, reversing three decades of flat footwear inflation.
Based on historical downturns, including the Great Depression and the 2008–09 financial crisis, real revenue in the U.S. could fall 10%, with EBIT margins declining 5 to 8 percentage points.
Supply chains, already strained post-COVID-19, offer limited flexibility. Shifting production takes 6 to 24 months and comes with political, contractual, and operational risks.
New locations such as Turkey, Egypt, or Brazil are not plug-and-play solutions and may offset any tariff advantages with indirect costs. Berenberg notes that policy unpredictability may further discourage supply reconfiguration.
The global sporting goods market, valued around €380 billion in 2024, has historically grown at 1.2 times nominal GDP and has slightly outpaced the luxury sector over the past decade.
Growth has been driven by increased health awareness, casualization of fashion, and rising participation in women’s sports. Footwear now represents 42% of the global market and continues to outpace apparel in growth.
Still, sector fundamentals are vulnerable to fashion cycles. Berenberg estimates 40% to 80% of revenue is lifestyle-based, making branding and consumer engagement essential.
The brokerage criticizes recent trends in marketing, where spending has dropped from 11% to 9% of revenue. Brands that reduced investment lost market share, with performance marketing via social platforms failing to match the reach of traditional brand building.
Innovation remains uneven. Nike (NYSE:NKE) leads in patents, filing 3.7 times more than any peer, but still faces claims of stagnation.
Newer players like On and Hoka have carved niches with clear product identities. Flagship innovations, such as carbon-plated running shoes from Nike and Adidas (OTC:ADDYY), have driven performance gains and allowed pricing power, but not all product bets have delivered ROI.
From a valuation perspective, the sector trades at a 36% premium to MSCI Europe and a 5% discount to the S&P 500, at the low end of its historical range.
Compared to luxury peers, sporting goods companies deliver higher asset turns and free cash flow but see more volatile returns due to changing trends.
Marketing is treated as opex rather than capex, suppressing reported earnings and inflating P/E multiples.
Beyond Puma, Berenberg rates both Adidas and Nike as “hold.” adidas benefits from brand heat, management credibility and renewed investment in marketing, though its valuation reflects top-of-range EBIT margins.
Nike is in the early stages of a turnaround after strategic missteps, with a strong balance sheet providing downside protection.
In positioning, Berenberg favors incumbents over challenger brands and footwear-led businesses over apparel-focused peers, citing stronger margins, brand depth, and market durability.