Puma Joining Wearables Sector, Sued by Nike for Patent Infringement

Puma

Puma SE has announced it will be joining the wearables sector, signing a 10-year global licensing partnership with Fossil Group. The 2 companies will collaborate to bring Puma branded watches and smartwatches to market by the end of 2019. Fossil Group (FOSL) will design, manufacture and distribute the sport-focused line of watches, as it does for several high-end fashion labels (see: Diesel, Michael Kors). It is expected that the Fossil x Puma line will run on Wear OS (formerly Android Wear) software.

Howie Long-Short: Puma SE is a subsidiary of Kering, trading over-the-counter under the symbol PMMAF. The German athletic footwear and apparel brand reported net profit rose +36% YoY (to $82.5 million) in Q1 ’18, with sales increasing double-digits across all product categories and markets (+15.6% in U.S.). China/Asia experienced “exceptionally high growth” (+35%), while the running, training and sportstyle categories grew the fastest. In early April, with currency adjusted sales +21% YoY, PMMAF slightly increased FY18 guidance (from +10% to +10%-12%).

Puma SE’s cautious approach to entering the wearables sector (with a licensing partnership, as opposed to building their own technology) is a wise one. Both Nike and Adidas have already tried and failed, only to later sign partnerships with Fitbit (Adidas) and Apple (Nike) respectively. There’s no reason to believe Puma would have had a different result.

On a separate note, Nike is suing Puma, accusing the competitor of patent infringement in federal court. Nike alleges the unauthorized use of “Flyknit, Air and cleat assembly technologies”, related to Puma’s Ignite, The Jamming and evoSpeed SL FG products. NKE is seeking a permanent injunction and has asked that damages be awarded. Puma plans to dispute the charges and has no intention of stopping production in the interim.

Fan Marino: In other Puma news, the company announced it will become the official kit sponsor of AC Milan for the 2018-2019 season; and the official kit sponsor of Sao Paulo Palmeiras (Brazil) for the 2019 season. Those clubs join Borussia Dortmund (BORUF), Arsenal FC and the National Football Associations of Italy, Switzerland, Austria, Cameroon, Ivory Coast, Ghana, Czech Republic and Senegal in the Puma football portfolio.

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