When Puma transformed a venerable soccer cleat made famous by Brazilian footballer Pelé into a sneaker in 1998, the shoe known as the King sparked a global fashion sensation and an eightfold surge in Puma revenue in as many years. Yet ever since the German sporting-goods maker was bought by French luxury house PPR in 2007, the brand has performed like David Beckham during his Los Angeles Galaxy years.
Revenue growth slowed during the recession as larger rivals such as Adidas and Nike (NKE), which made their names in high-performance shoes, expanded into Puma's more fashion-oriented designer sports gear market. Puma sales grew just 3.1 percent from 2007 to 2009. "A lot of people jumped in on what their niche was, and suddenly they were left looking pretty naked," says Simon Irwin, an analyst at Liberum Capital.
PPR is determined to help Puma get a second wind. Chief Executive Officer François-Henri Pinault wants to increase revenue more than $1.4 billion by 2015 by building a portfolio of "sports and lifestyle" brands around Puma. It's a strategy similar to one he's used in luxury goods bearing his signature Gucci label and seven others. Rather than focusing on athletic gear targeted at serious sports enthusiasts, the French company envisions a broader universe of consumer goods and apparel that can evoke the sporting lifestyle without all the sweating.
"The sports and lifestyle segment shares common characteristics with the luxury segment, growing fast in the same regions of the world," says Pinault from his office near the Champs Elysées. The brand-portfolio model "has been proven in the last 10 years—it was a winning choice."
Gucci snapped up small fashion and accessories makers such as Bottega Veneta and Balenciaga a decade ago and invested in design, advertising, and retail outlets. Both companies had combined revenue of less than €65 million ($93.5 million) when PPR bought them in 2001; last year they posted sales of more than $719 million.
PPR has begun a similar acquisition spree for brands that complement Puma. In early May it agreed to acquire Costa Mesa (Calif.)-based skater goods and apparel brand Volcom for $607.5 million. Billionaire Pinault says he's seeking other small- to medium-sized purchases in categories where Puma has no presence, such as hiking, where there are marketing tie-in and expansion opportunities. "Buying a big brand that is already mature in this segment is meaningless for PPR," he says. Instead, the company will make acquisitions "with the same logic as in luxury—not too big—to be able to grow fast and to create value."
Pinault says Puma, which also owns the Cobra Golf and Tretorn brands, will spend more this year on product development and marketing and accelerate store expansion, particularly in China and India. He's set an aggressive goal of lifting Puma sales by about 50 percent, to nearly $6 billion, by 2015.
Analysts say that won't be easy without another Pelé-class endorser and a slew of hot new products. Other than three-time Olympic gold medalist and sprint world-record holder Usain Bolt and Formula 1 motor-racing world champion Sebastian Vettel, Puma doesn't have a roster of memorable sporting talent, Irwin says. "Sports lifestyle is all very well," he says. "But to be a sporting brand you need to be associated with big names, and in my view, they just don't have enough."
Puma has also fallen behind in product innovation, says Peter Farren, an analyst at European investment bank Bryan Garnier. It introduced its first toning shoes, a popular footware design purported to work backside muscles during walking, only six months ago. Reebok, which Adidas owns, unveiled its equivalent, the EasyTone, in 2009.
Since September, Puma has hosted parties at night clubs around the world to promote its casual footwear and apparel. The events are part of its "After Hours Athletes" global marketing campaign, which lauds the playing of social games like darts and pool and "any other sport you can play with a drink in your hand."
Puma strategy is still a work in progress. Although products such as Puma's Suede Classic sneakers appealed to European and Latin American tastes, they never took off in the huge U.S. market. Likewise, says Farren, the vast majority of the Chinese sporting-goods market is in performance gear, where Nike and Adidas dominate.
The bottom line: Owner PPR is betting it can reinvigorate Puma through complementary acquisitions. A lack of big endorsers hurts the effort.