We trade under the name PUMA SE with Group headquarters in Herzogenaurach, Germany. Our internal reporting activities are based according to regions (EMEA, America and Asia/Pacific) and products (footwear, apparel and accessories). A detailed description of the various segments can be found in paragraph 25 of the Notes to the Consolidated Financial Statements.

Our revenues are derived from the sale of products from the PUMA and COBRA Golf brands via the wholesale and retail trade, as well as from sales directly to consumers in our own retail stores and online stores. We market and distribute our products worldwide primarily via our own subsidiaries. There are distribution agreements in place with independent distributors in some countries.

As of December 31, 2016, 106 subsidiaries were controlled directly or indirectly by PUMA SE. Our subsidiaries carry out various tasks at the local level, such as sales, marketing, product development, sourcing and management. A full list of all subsidiaries and an associated company can be found in paragraph 2 of the Notes to the Consolidated Financial Statements.

The results achieved in 2016 show that PUMA is starting to gain momentum: Throughout the year, we focused and invested in events, products, and campaigns that took us yet again a step closer to becoming the Fastest Sports Brand in the World. For us, the past year was particularly exciting and characterized by the following highlights: The football tournaments Copa América and UEFA Euro 2016, the Olympic Games in Rio and the fantastic development of our women’s category.

We continued to make progress along our five key strategic priorities: creating brand heat for PUMA as the Fastest Sports Brand in the World, further improving the product engine with a strong pipeline of exciting and commercial products, optimizing PUMA’s distribution quality through stronger sell-through, enhancement of organizational speed and business processes as well as strengthening PUMA’s women’s business. These priorities will be at the center of our strategy going forward. While we still have a lot of work ahead of us, we feel that 2016 took us a big step forward within each of these areas.

We have further strengthened our brand heat, by leveraging our brand ambassadors and cultivating the hype in social media. We are proud to have long-standing partnerships with some of the world’s greatest athletes, such as the Olympic legend Usain Bolt, who has been with PUMA for almost 15 years. Additionally we have new relationships with up-and-coming stars and talents like the charismatic Silver-medalist Andre De Grasse, the one of a kind Cara Delevingne, the R&B star, style icon The Weeknd, and of course Rihanna who have made a major impact in 2016. During the UEFA Euro 2016 we ensured high visibility with our five PUMA-sponsored teams Italy, Austria, Switzerland, Slovakia and the Czech Republic. On top, outstanding players such as Antoine Griezmann, who was named player of the tournament were wearing our distinctive two-colored Tricks boots. In terms of media investments, we have shifted much of our budget into online, and especially social media channels. Not only our own channels, but especially those of our brand ambassadors and other influencers have proven highly effective in reaching our target consumers. In addition, we have increasingly partnered with key customers for the launch of new collections in order to optimize sell-through and get our brand noticed at the point of sale. Both the focus on our ambassadors and social media as well as the close integration of our retail partners will continue to be integral parts of our brand strategy.

On the product side, we introduced a number of key styles. The PUMA Fierce with its highly distinctive silhouette and uncompromised performance attributes has been an instant hit in terms of distribution, media coverage and most importantly sales. Other new key footwear styles included the IGNITE Dual and IGNITE Evoknit with its modern mid-top silhouette that represents the first style in our Street Running initiative. Our FENTY collection, that features apparel and footwear, was very well received by press, retail partners and our consumers. Some styles, such as the FENTY Creeper and the Leadcat, were sold out within hours or even minutes. According to our retail partners as well as independent research companies, we have gained shares in most geographies and channels, showing that PUMA products are again resonating well with consumers.

In terms of improving the quality of distribution, we continued to strengthen our relationships with key strategic accounts and built new partnerships with strong retailers in both established and emerging markets. One of the best examples is our long-standing strong relationship with Foot Locker in North America. For several years, we have rolled out our jointly developed retail concept “PUMA Lab”. This has helped to grow sell-through well beyond just the “PUMA Lab” doors, especially in Foot Locker’s women-only banner Six:02, where PUMA sales have more than doubled. PUMA is also gaining traction with other customers in the US, but also in Europe, where PUMA has returned to double-digit growth rates in many markets. In China, our partners such as Belle and the YY Group have opened around 200 additional PUMA doors in 2016. PUMA’s owned and operated retail sales developed quite strongly throughout the year based on a healthy like-for-like sales growth, an increased number of own retail stores in operation as well as significant momentum in our eCommerce business, which we have moved into our global headquarters in Herzogenaurach. We also continued our worldwide roll-out of the “Forever Faster” store layout, which contributed to this positive development. We will continue to build on this momentum with our most important accounts as well as our own retail stores across geographies in 2017.

The continuous improvements made to our systems, processes and overall organizational structure in the last two years enabled us to further increase the flexibility of our supply chain in 2016. Further rollouts to build an improved, standardized global IT foundation allow for faster and better communication and information exchange, which form the basis for strengthening and improving the performance of our staff. Closer proximity to the supplier by relocating employees to product operation centers (POCs), increased local-for-local production in countries such as India and Mexico as well as implementing a new, highly automated warehouse solution in the United States will ensure faster lead times for key markets and allow us to come one step closer to our mantra of being “Forever Faster”.

An area where PUMA has received a lot of attention in 2016 – and will continue to put a special focus on – is our women’s business. Building on PUMA’s fashion credibility and sports authenticity, as well as a profound understanding of the modern female athletic consumer, we have positioned PUMA to address the segment “where the gym meets the runway”. Not only are women increasingly participating in athletic activities worldwide, but they are also taking inspiration from athletic wear for their everyday wardrobe. In 2016 PUMA has successfully introduced cross-category collections merging sports and fashion. With our “DO YOU” campaign, which aims to inspire confidence in women around the world, we are changing the way we address our female consumer. Additionally we are collaborating with a number of strong female brand ambassadors such as Rihanna, Kylie Jenner, the New York City Ballet and Cara Delevingne to tell a powerful story. The reactions to our FENTY PUMA by Rihanna runway shows during the New York and Paris Fashion Weeks have been overwhelmingly positive and have created major social media buzz for us. Our women-specific collections are among the best performing styles in terms of both sell-in and sell-through. Not only have many major retailers made additional space for our female collections, in many accounts the success of our women’s line has actually been a door opener to expand our shelf space with men’s and kids styles.

Social, economic and environmental sustainability is among the core values at PUMA. In line with our Forever Faster mantra, we define sustainability as “Forever” – Caring for the needs of the present without compromising future needs and “Faster” – in responding to economic, environmental and social opportunities and challenges we face. Our sustainability strategy is centered around ten priority areas, which form our 10FOR20 sustainability targets. Our mission to be the Fastest Sports Brand in the World includes assuming responsibility for ensuring that our products are manufactured under appropriate working conditions and produced by suppliers who respect human rights and care for the environment.

In line with our mission statement of being the Fastest Sports Brand in the World, PUMA offers an attractive product range of footwear, apparel and accessories within its Performance and Sportstyle categories. In 2016, we set ourselves the goal to further improve our product offering: This includes increasing design clarity by reducing and standardizing colors and material components, and introducing more innovative technologies and more commercial products. The positive response from our retail partners and the increased sell-through of our products in the past year show that these improvements have been well received by our customers. Lightness, strength, comfort, and agility are among the most important attributes of our product concepts in the Performance category, as for example demonstrated in our successful IGNITE series in Running and our Teamsport products. All of our Sportstyle ranges are inspired by our roots in sport, combined with fashionable trends for a sporty lifestyle. Under the leadership of our Global Creative Director, Torsten Hochstetter, we ensure a design language that spans all our collections by organizing our product responsibility within global business units and regional design centers.

In 2016, our product range in Performance was dominated by major sporting events, from the Copa América and the European Championships in Football to the Summer Olympics in Rio. These events provided the perfect stage for us to show that PUMA is an innovative and design-oriented sports brand. At the European Championships in France, we achieved a high level of visibility with our five participating teams in their jerseys equipped with PUMA‘s innovative ACTV Thermo-R technology. In addition to many other individual players in PUMA shoes, France’s Antoine Griezmann in particular attracted attention to our brand: He was named Player of the Tournament by UEFA and the six goals he scored in his duo coloured PUMA Tricks shoes made him the top goal scorer of the Championships.

In addition, PUMA also received a 2016 IPSO AWARD in the Apparel Performance Products Outer Layer category for a Football product: Our evoTRG vent jacket with dynamic temperature control has ergonomically-placed inserts that adapt to movements during football matches: The inserts open during movement to cool the players, and close during periods of rest to keep players warm.

The Olympic Games in Rio de Janeiro, where PUMA athletes won a total of ten gold, five silver, and nine bronze medals, were also a perfect opportunity to showcase our products and establish our credibility as a sports brand. As supplier of all the competition and training apparel of the Caribbean nations Jamaica, Cuba, Grenada, the Dominican Republic, the Bahamas and Barbados, as well as other associations like Switzerland, we once again showed – led by the Fastest Man in the World, Usain Bolt, and with the three gold medals he won in Rio in the 100, 200 and 4×100 meter races – that no other brand stands for speed the way we do.

Other highlights of our product range in Running and Training included our successful IGNITE series with the IGNITE Dual for the fall/winter season. Its innovative sole construction and the proven IGNITE foam offer an ideal combination of flexible grip and good cushioning, especially for medium and long-distance runners. Our apparel, with its strong colors and simplified designs, gives our customers a dynamic look when engaging in sports.

Our Motorsport category saw the introduction of our latest model in the DISC family with the metallic-silver shoe BMW X-CAT DISC. This striking shoe is another example of our reintroduced DISC technology, which uses an intelligent fastening system developed in 1991 to provide an optimal and comfortable grip. Formula 1 is dominated by PUMA-sponsored teams such as MERCEDES AMG PETRONAS, Scuderia Ferrari and Red Bull Racing, which hold top places in the Drivers‘ and Constructors‘ Championships in what has been an enormously successful season thus far.

We were particularly pleased with the sustained success of our product concepts for women. In keeping with our mission statement „The future is female“, we have systematically expanded our women‘s collection over the past two years. We achieved major success in this segment again in 2016, especially in Sportstyle. The overwhelming response to our „FENTY PUMA by Rihanna“ fashion show at New York Fashion Week in February, for example, gave a boost to the launch of other FENTY collections. The FENTY Trainer and the CREEPER model, which was released in new colors, sold out within a few days, and the Fur Slide sandal sold out after just a few hours or minutes. As part of our partnership with Kylie Jenner, who has a great influence on young women in the USA and is a new brand ambassador of PUMA, we launched another revolutionary silhouette – the FIERCE training shoe.

After launching our first, long-awaited „FENTY PUMA by Rihanna“ collection in September for the fall/winter season, Rihanna presented her 2017 spring/summer collection at Paris Fashion Week only a short time later. This second collection is inspired by the France of the 18th century and combines influences from the time of Louis XVI with a modern street-style look. We also further strengthened our Women‘s segment with the launch of our „DO YOU“ campaign, which aims to inspire self-confidence in women around the world. The campaign is spearheaded by Cara Delevingne, an international model, actress and activist who complements PUMA‘s growing number of influential brand ambassadors. „DO YOU“ involves a cross-collection range of products from Running and Training and our Sportstyle collection.

PUMA is continuously researching new technologies and constantly developing new products that meet the high standards of high-performance athletes and consumers in terms of design, quality, technical characteristics and wearing comfort.

Research and product development at PUMA mainly comprises the areas of innovation (new technologies), product design, and model and collection development. The research and product development activities range from the analysis of scientific studies and customer surveys, through the generation of creative ideas, to the implementation of innovations in commercial products. The activities in research and product development are directly linked to sourcing activities.

As of December 31, 2016, a total of 525 employees were employed in research and product development. Expenses for research and product development totaled € 52.0 million in 2016.

The Sourcing Organisation

Sourcing refers to the central management of the purchasing of products for PUMA and the Group’s own brand, COBRA. 
All necessary sourcing functions in the Group are merged in PUMA Group Sourcing.

PUMA International Trading GmbH (PIT), PUMA’s globally active trading company which has its head office in Herzogenaurach (Germany), is the Group company mainly respons    n addition, through its service companies in Hong Kong, PIT manages cooperation with suppliers worldwide and also oversees the production processes at the sourcing sites in China, Vietnam, Bangladesh, India, Turkey, South Africa, Brazil, and Mexico. Hedging is also centralized at PIT. The centralized control of these processes guarantees a high degree of transparency within the supply chain and reduces sourcing complexity.

The processes of PUMA Group Sourcing are continuously improved in line with the six core principles of partnership, transparency, flexibility, speed, simplicity, and effectiveness, thus satisfying the aim of offering service at a high level for all PUMA brands and creating a sustainable production and supply chain. In order to further strengthen the link between customer demands, product design and production, product knowledge is moved closer to production, thus ensuring any developments in the market can be adapted to more quickly. PUMA Group Sourcing’s worldwide production network, which is the main focus of PIT’s efforts, helps to optimize the supply chain by working with independent manufacturers, from materials purchase to manufacturing through to product delivery. The aim is to offer an optimum service to the various PUMA brands in order to meet and continue to improve global requirements for quality and safety along with environmental and social aspects in production. At the same time, the centralized sourcing responsibility results in regular improvements to sourcing costs, sourcing flexibility, and the required supply reliability.

In 2016, PUMA’s sustainability function (Corporate Sustainability department, formerly PUMA Safe) was integrated into PUMA Group Sourcing. This ensures that social and environmental issues and standards of good corporate governance are integrated into day-to-day sourcing activities. The service companies in Hong Kong that are managed by PIT are mainly responsible for compliance with PUMA’s own standards and statutory standards.

The Sourcing Markets

During the financial year 2016, PUMA Group Sourcing worked with 163 suppliers in 34 countries via PIT. The strategic cooperation with long-term partners was one of the key competitive advantages in 2016, ensuring stable procurement in turbulent market conditions. The trend away from China toward Vietnam as the main production country continued in 2016.

Asia remains the strongest sourcing region overall with 89% of the total volume, followed by Europe with 6%, America with 4%, and Africa with 1%.

As a result, the six most important sourcing countries (85% of the total volume) are all located on the Asian continent. Vietnam was the strongest production country again in 2016 with a total of 32%, an increase of 4 percentage points from the previous year. China followed at 23%, a decline of 3 percentage points from 2015. Cambodia was in third place at 12%. Bangladesh, which focuses on apparel, is in fourth place at 10%. Indonesia, which focuses on footwear production, produces 5% of the total volume and is in fifth place. India is in sixth place at 3%.

Rising wage costs and macroeconomic influences affected the sourcing markets in 2016. This increases the need to take into account the risks of these factors when allocating production. This is a crucial component of our sourcing strategy in order to ensure the secure and competitive sourcing of products.

Number of Employees

The worldwide number of employees on average for the year was 11,128 in 2016 compared to 10,988 in the previous year. The increase was mainly related to the higher number of the Group’s own retail stores.

In 2016, personnel costs increased by 1.9% from € 483.8 million to € 493.1 million. On average, personnel expenses per employee amounted to € 44.3 thousand, compared to € 44.0 thousand in the previous year.

As of December 31, 2016, the number of employees was 11,495, compared to 11,351 at the end of the previous year.

In the Marketing/Retail segment, the number of employees increased by 3.4 % to 5,668. The number of employees in Sales remained largely stable at 2,241. The number of employees in Product Management/Merchandising increased by 6.3% to 364, while the number of employees in the administrative and general units declined by 1.9 % to 2,698. The number of employees in Research and Development remained largely stable at 525.

Talent Recruitment and 

PUMA’s success depends to a large extent on its employees. In order to secure and expand our position in the market, it is essential that we have highly qualified and motivated personnel. Our recruitment strategy allows us to recruit external talent through different channels according to specific target groups and thus strengthen our workforce.

In addition to performance assessment and target-setting, our global performance management system includes talent management and systematic succession planning. This system serves as the basis for the annual employee interviews and for identifying talent within the company. PUMA has set itself the goal of developing this talent individually, both in Germany and internationally, and creating a high degree of employee loyalty to ensure that staff is retained in the long term. This shows that we regard our employees as an important and valuable asset. The long-term retention of motivated and capable employees is a core element of competitiveness today and ensures that we can perform well both as a company and an employer in our dynamic environment and can adapt to changes in the market.

The continuous professional and personal development of our employees also ensures that our workforce has the necessary skills to ensure steady growth and market expertise. In our effort to provide adequate entry-level and development opportunities to talented individuals at all levels, in addition to the range of different training and dual-track (combined work-study) programs, we also promote the systematic training of our professionals and managers. We continually develop our PUMA training offers in order to ensure that our employees have at all times comprehensive and diverse options to add to their qualifications, build on existing knowledge and acquire new skills. This approach helps employees achieve their personal goals and helps the company achieve its goals as well. In addition to a training program with a broad range of individual courses and workshops, a large number of seminars is offered with the aim of developing employees and managers over the longer term, giving them the opportunity to apply their newly acquired knowledge in practice between the individual modules and then to discuss this with other seminar participants. For example, this year we continued to enhance our successful International Leadership Program (ILP), an internal program consisting of several modules, on a worldwide scale. In addition, in Speed Up² we have developed a new training program that will intensively prepare our top talents for the next steps in their career. Participants, who are selected for the program by a panel of executives and human resources representatives, work with a personal mentor. The first Speed Up² module took place in November.

PUMA offers its employees a targeted and competitive compensation system, which consists of several components. In addition to a fixed base salary, the PUMA bonus system, profit-sharing programs and various social benefits and intangible benefits form part of a performance-based compensation system. We also offer long-term incentive programs for senior management levels that recognize the sustainable development and performance of the business.

We use a variety of indicators to manage our performance in relation to our top corporate goals. We have defined growth and profitability as being key targets within finance-related areas. Our focus therefore is on improving sales, gross profit margin and operating income (EBIT). These are the most important financial control variables. In addition, we aim to minimize working capital and improve free cash flow. Our Group’s Planning and Management System has been designed to provide a variety of instruments in order to assess current business developments and derive future strategy and investment decisions. This involves the continuous monitoring of key financial indicators within the PUMA Group along with a monthly comparison with budget targets. Any deviations from the targets are analyzed in detail and appropriate countermeasures are taken in the event such deviations have a negative impact.

Changes in sales revenues are also influenced by currency exchange effects. This is why we also state any changes in sales in euro, the reporting currency, adjusted for currency exchange effects, in order to provide information that is relevant to the decision-making process when assessing the revenue position. Currency-adjusted sales volumes are used for comparison purposes and are based on the values that would arise if the foreign currencies included in the consolidated financial statements were not translated at the average rates for the previous reporting year but were instead translated at the corresponding average rates for the current year. As a result, currency-adjusted figures are not to be regarded as a substitute or as superior financial indicators, but should instead always be regarded as additional information.

We use the indicator free cash flow in order to determine the change in cash and cash equivalents after deducting all expenses incurred to maintain or expand the organic business of the PUMA Group. Free cash flow is calculated from the cash flow from operating activities and investment activities. We also use the indicator free cash flow before acquisitions, which goes beyond free cash flow and includes an adjustment for payments that are associated with investments in companies.

We use the indicator working capital in order to assess the financial position. Working capital is the difference between other current assets – including in particular inventories and trade receivables – and current liabilities. Amounts that are received in connection with financing activities are not included in working capital.

Non-financial performance indicators are of only minor importance at PUMA as control variables.