Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Q3 2026 Earnings Call of PUMA SE. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance.
I would now like to turn the conference over to Manuel Bösing, Director, Investor Relations. Please go ahead.
Thank you, Maura. Hello, everyone, and welcome to PUMA's third quarter 2026 earnings call. Joining me today are our CEO, Arthur Hoeld, and our CFO, Mark Langer. Before we begin, please take note of the cautionary statement regarding forward-looking information, which is included on the next slide of the presentation. Arthur and Mark will then take you through today's presentation, covering our business recap, financial update, and way forward. Following the presentation, we will open the line for questions. To give as many participants as possible the opportunity to ask questions, we kindly ask you to limit your initial questions to two.
With that, over to you, Arthur.
Manuel, thank you very much. Good afternoon from Herzogenaurach. Mark and myself are looking forward to taking you through our Q3 results in the next few minutes. Let me start that overall, our Q3 results reflect the progress we are making in our transition year against the backdrop of a challenging market environment, specifically in key markets like Europe and North America. Despite continuous macroeconomic and geopolitical uncertainties, we do remain on track to achieve our plans for this year. Our sales are at - 6.3% versus last year, and that is currency adjusted. That's an improvement versus Q2, as expected, but remains below last year, mainly due to our continued reset measures. We see weaker consumer demand that's also weighing on sales, while we also see double-digit growth in Asia Pacific and our e-commerce channel that provided some positive momentum for our results overall.
Additionally, strategic growth categories are gaining traction. That's led by a double-digit growth in running and a single-digit growth in training. Our reported EBIT landed EUR -11.4 million in Q3 this year. That is a sequential improvement versus the last quarter. Compared with last year, the improving gross profit margin was more than offset by a higher OpEx ratio. Finally, we see an improvement in cash flow, landing Q3 at EUR 92 million despite lower profitability. That's supported by an improved working capital management, which Mark will allude to later on. As outlined, we're clearly a sports company, we're a sports brand, and therefore, I'd always like to share the highlights from a sports perspective when we talk about the previous quarter. Clearly, on running, we're building our momentum. We're showing up stronger than ever before at key races like, for example, the recent Berlin and Chicago Marathon.
With Project3, which is a sub-elite program, we had in both races 300 athletes competing, and more than 100 of those 300 achieved personal bests in PUMA gear and equipment. In Berlin, we nearly doubled the share of our runners versus last year, and we are also the number four brand within the top 10 finishers of the race. Activation around the marathons also included shakeout runs, a relay to Berlin, and most importantly, we have had 6,000 visitors during the weekend in our NITRO LAB , where we have an amazing opportunity to showcase not just our innovation, but how PUMA is really a leading force in the world of running. Speaking about activation, it is also worth mentioning that our Meditation in Motion campaign generated more than 1.2 billion organic reaches in more than 40 markets globally.
That is an amazing result for us to also demonstrate that the new Deviate NITRO is really getting consumer traction. Moving from running into track and field, which has always historically been a stronghold of PUMA, I am happy to report that we have been a number two brand when it comes to footwear gold medals at the recent European Athletics Championships in Birmingham. Our Swiss athlete, Swiss partner, Audrey Werro , was definitely standing out, not just at the European Championships, but she has won literally every possible event this year, and she also was nominated the Female European Athlete of the Year, next to Gianmarco Tamberi, our partner in Italy, who was also named Male Athlete of the Year.
Last but not least, of course, also to mention again, Mondo Duplantis, who was winning the Ultimate Athletics Championship, whilst at the same time, this year has been clocking his next world record at 6:31, which means the 15th time he has broken that record. Moving on to Formula 1, we are very pleased with the performance of our partners. Ferrari is, at the moment, taking the second place in the Constructors' Championship, both between Ferrari and McLaren. They had multiple podium finishes in Q3, while we have also seen amazing activations around the Monza Race Weekend, for example, where our activation around Charles Leclerc specifically generated more than 15 million online impressions. A similar success story in Singapore, where we had in-store activation, Charles Leclerc and Lando Norris, both in-store, but also using TikTok live streams in six different countries in Southeast Asia.
Last but not least, we have also merged our motorsports activations with culture and fashion, where we have celebrated a fashion show recently, where we had us joining together with McLaren to celebrate the legacy of Formula 1 icon James Hunt. For performance, from a sports perspective, last is our DNA category football. We have seen very good sellout results across all of our major partnerships when it comes to our football clubs, with the preseason activations also happening across the globe. We have also had a very, very significant culture collaboration with A$AP Rocky, with the likes of Man City and AC Milan. It was supported with local activations around those jersey launches and his European tour.
Speaking about European club football, we are also very pleased with the start of the season for our clubs, most notably Galatasaray and Man City leading the table of their respective local leagues. Closing off the Q3 achievements from our football federations, Portugal and Switzerland opened the UEFA Nations League with four wins in four matches in their respective groups. Portugal has already secured the qualification for UEFA Nations League quarterfinals. In Africa, Morocco and the Ivory Coast have opened the African qualifying with maximum points, and both no goals conceded. A lot of highlights on the sporting side of things for PUMA and our partners. In a similar vein, where we now transition into Sportstyle, we are very pleased with the continued success that we have with Speedcat.
It does remain our best-selling Sportstyle franchise in the third quarter, and we continue momentum with partnerships, specifically with Rosé and launches we had around the Speedcat Croco, for example. Suede, we are building up as the next franchise for us visible in Q3, supported by a global campaign with the tagline, "Never Not Suede." We do see significant uplift in our DTC sales for that franchise, which is important for us in the future. Several other partnerships, which we have also used to not just highlight our product, but strengthen our brand and strengthen our fashion and culture credibility across the globe. So many things happening in our DNA categories and in our sports to make sure that the brand momentum that we need and want to generate to become a brand-led organization, as we have promised last year, is really getting traction.
When you look at our three-year plan, 2023 remains a transition year as we build the foundation for a return to growth in 2027. We are encouraged by the progress both in our brand, our products, and most notably also by the execution of our teams locally. At the same time, we expect the recovery to be gradual in a challenging consumer environment. We do remain focused on building a stronger PUMA for the long term. Building a stronger PUMA also means we have updated our leadership roster. As announced two weeks ago, Arne Arens will join us as the Chief Commercial Officer starting middle of next November, next month that is. Arne brings a wealth of experience of more than 25 years in international companies in the sporting goods and outdoor industry.
We trust that his experience and capabilities will lead our global commercial organization as well as our marketplaces locally. On the brand side, we have also announced that Steve Cecchini will be joining us, or is joining us, as the Senior Vice President Sports Marketing. Steve will be responsible to shape our global sports marketing strategy, elevate our strategic partnerships, and maximize the impact of our portfolio. Last but not least, on the commercial side of things, Fokko de Rooij has joined us also on October 1st as the Managing Director Europe. Fokko will lead the operations of our new European operating model, which I will talk about in a second, and focus on driving our performance and healthy revenue growth across all of our European channels.
The ongoing transition in our home market, Europe, has been announced in our full-year earnings call 2025, and the operating model has gone live in Q2 this year. Since then, we have established a new regional leadership structure with Fokko leading Europe, and all cluster leaderships are now in place. We have successfully implemented a new organization, and we have affected with that about 600 employees across Europe. We have also made meaningful progress in creating a more unified European product range, supporting greater consistency across the entire geography and efficiencies across clusters and channels. Finally, our warehouse consolidation initiatives across Europe are underway and progressing really well. I would also like to point out something that we are very proud of at PUMA.
In 2026, while we have been going through a significant organizational change, maintaining a strong culture and high employee engagement is critical and a key priority for us as a leadership team. We are therefore particularly proud that PUMA was recognized by Forbes and Statista as one of the world's top companies for women, ranking number 15 globally and number one in our industry. That ranking is based on feedback from approximately 140,000 women across 61 countries. This recognition reflects the positive experience of our employees and the strength of our culture during a period of transformation. It also demonstrates the progress that PUMA has made over time, from number 80 being positioned in 2024 to now in 2026 being the 15th brand globally.
Last, before I hand over to Mark, allow me also a quick word on ANTA's acquisition of the PUMA stake, which is now completed. We are pleased to welcome ANTA Sports as PUMA's largest shareholder and a long-term strategic partner. This marks the beginning of an exciting new chapter for our company. We are looking forward to welcoming Dennis as the new Chairman of PUMA's Supervisory Board and Jeanne Huang as a Supervisory Board Member. This transition has been very smooth, with close collaboration between the outgoing and the incoming Supervisory Board representatives, as well as the PUMA Executive Board Members.
At the same time, I would like to sincerely thank Héloïse Temple-Boyer and Jean-Marc Duplaix for their commitment, support, and valuable contributions during their tenure on PUMA's Supervisory Board. Looking ahead, we are all excited about the opportunities this partnership will create. We are confident that ANTA's industry expertise, global experience, and long-term perspective will support PUMA's continued growth and transformation.
With that, I am finishing my first part and will hand over for more details to Mark. Thank you.
Thank you, Arthur. Ladies and gentlemen, a warm welcome also from my side. I am pleased to take you now through the financial update for the third quarter. Let me start with an overview of our key financial indicators for the quarter. Overall, our performance reflects the ongoing transition. Sales improved sequentially versus Q2 as expected, but still declined by 6.3% currency-adjusted, mainly due to reset measures and weak consumer demand. EBIT also improved sequentially versus Q2, coming in at EUR -11.4 million . The improvement in gross margin was offset by higher OpEx ratio. Inventories decreased significantly by 24.3% year-on-year. We remain on track to normalize inventories by year-end.
Free cash flow was positive at EUR 92 million , well above last year's level. Net debt was down EUR 127 million year-over-year. De-leveraging remains clearly a priority for us also going forward. Let us now look at our sales performance by channel. Wholesale sales declined by 9.6%, mainly reflecting the reduction of undesirable business. See comparison against Q3 2025, when we still had substantial mass merchant business, as the reset only started later in that year. We also saw softer underlying demand across wholesale partners, particularly in EMEA and the Americas. Direct-to-consumer sales increased by 1.2%. E-commerce grew even by 7.8%, supported by growth in running, HYROX, football products in Europe, as well as marketplace expansion in APAC. Sales in our owned and operated retail stores declined by 2.3%, reflecting lower traffic and weaker consumer demand.
As a result, the D2C share rose significantly from 30.5% in Q3 2025 to 33.1% in Q3 2026. Let us now look at our regional performance. EMEA sales declined by 11.5% currency-adjusted. This mainly reflected the reduction of undesirable business and subdued demand in Europe due to spillover effects from the ongoing conflict in the Middle East. On the positive side, we recorded growth in D2C in EMEA, supported by HYROX and football products. Americas sales declined by 8.1% currency-adjusted. North America was down 17.2%, mainly due to weaker consumer demand and a continued reduction of undesirable wholesale business with mass merchants. Latin America grew slightly by 1.4%, supported by a relatively resilient demand for our products in key markets and a partial catch-up in Mexico following last quarter's temporary operational challenges.
Asia Pacific delivered a strong performance, with sales growing by 10% currency-adjusted. Greater China sales were up by 3.5%, driven by a double-digit growth in D2C, supported by marketplace expansion and low-profile trend. This was partially offset by weaker wholesale performance, as wholesale partners in China have become more cautious following the announcement of ANTA Sports' planned acquisition of a stake in PUMA. All other markets of APAC grew by 13% currency-adjusted, driven by strong wholesale performance. The low-profile trend and HYROX were main drivers of the increase.
Turning to our performance by product division. Footwear sales declined by 5.1%, mainly reflecting weaker performance in core, football, and selected Sportstyle franchises. This was partially offset by continued momentum in low-profile styles and strong growth in running. Apparel sales declined by 9.4%, mainly reflecting softer demand in core and kids. This was partially offset by growth in football, training, and motorsport, with training particularly benefiting from strong sales of HYROX-related products. Accessory sales decreased by 3.2%, mainly due to a decline in Golf. Let's now turn to our operating performance. As discussed earlier, sales declined by 6.3% currency-adjusted. On a reported base, the decline was at 5%.
Currency movements provided a tailwind of around 130 basis points, mainly from the U.S. dollar, Mexican peso, Chinese yuan, and the Argentine peso. Gross profit margin improved by around 420 basis points to 49.5%. OpEx increased by 6.7% to EUR 900 million, and I will explain the drivers of both on the following two slides. Adjusted EBIT, excluding one-time effects, decreased to EUR 0.4 million. The lower sales base and higher OpEx more than offset the strong improvement in gross profit margin. One-time effects amounted to EUR -11.7 million. This was mainly related to personnel and consulting expenses from the cost efficiency program. Including these effects, EBIT came in at EUR -11.4 million. Let's now look at what drove the gross profit margin improvement.
Overall, our gross profit margin improved by around 420 basis points to 49.5%. This was mainly driven by lower sourcing prices, including tariff refund effect of EUR 29.8 million, which contributed around 170 basis points to the overall margin improvement. Beyond sourcing, our higher D2C share helped improve the margin through more favorable channel mix. We also benefited from currency effects driven by the U.S. dollar and the Mexican peso, while lower shipping volumes reduced freight expenses and provided further support. Taken together, these gains were partially offset by negative product mix effects. Let us now take a closer look at operating expenses.
Excluding one-time effects, OpEx increased by 6.7% to EUR 900 million. The increase was driven by our growing D2C business, higher marketing expenses, higher general and administrative expenses, as certain IT investments were recognized as OpEx rather than CapEx, and foreign exchange effects. Savings related to the cost efficiency program partially offset this increase. Together with lower sales, higher OPEX led to an an increase in the OpEx ratio from 41.1% last year to 50.7% in Q3 2026. Looking ahead, operating leverage remains essential to improving profitability and is a key management focus.
We continue to make progress on our cost efficiency program while reinvesting savings into the brand, D2C, and our strategic priorities. These investments support our return to growth, but also mean that cost savings will not fully translate into lower operating expenses. The pace of EBIT improvement will therefore depend on both top-line growth and the operating leverage we achieve. Moving on to working capital. Inventories decreased by 24.3% to EUR 1.6 billion. This mainly reflected lower purchasing volumes in line with the expected lower sales base for the year. Trade receivables decreased by 11.8% to EUR 1.1 billion, mainly due to lower sales. Trade payables were down 17% to EUR 1.1 billion, also reflecting lower purchasing volumes.
Overall, this resulted in a 24.4% reduction in working capital to around EUR 1.4 billion. Looking specifically at inventory development, inventory levels continue to decline sequentially in the third quarter, supported by lower purchasing volumes and clearance activities. We remain on track towards more normalized inventory levels by the end of fiscal year 2026. Let us now turn to free cash flow. Despite lower profitability, free cash flow was significantly stronger year-on-year and came in at EUR 92 million. This improvement was mainly driven by improved working capital, including reduced purchasing volumes as discussed earlier, as well as lower tax payments and a decline in CapEx.
CAPEX declined from EUR 41.1 million to EUR 29.9 million, reflecting a more focused approach to investments, particularly in the D2C channel and digital infrastructure. As said previously, we continue to expect free cash flow to be positive in fiscal year 2026. Moving on to net debt development. Net debt amounted to EUR 1.1 billion, down year-over-year by EUR 127 million, supported by positive free cash flow generation. Our cash position stood at EUR 353 million, up 33% year-on-year. In addition, we had unutilized credit lines of EUR 827 million, resulting in total financial headroom of EUR 1.2 billion. This provides sufficient flexibility to support our transformation and strategic investments.
However, net debt remains elevated despite the year-on-year reduction. Reducing it over the coming years therefore remains a clear priority for us. Before I hand it back to Arthur, let me share some positive news on our refinancing progress. In Q3, we began refinancing our EUR 350 million bridge loan. After the quarter end, EUR 100 million were successfully refinanced through a bilateral loan with DBS. We are pleased to welcome DBS as a banking partner. This is a positive step in broadening our banking relationship and improving our debt structure. Further refinancing is underway to replace the remaining bridge loan.
This concludes the financial part of today's presentation, and with that, I hand it back to you, Arthur.
Thank you, Mark. For the end of our call, let's now turn to our outlook for full year 2026. With one quarter remaining, we have updated our outlook to reflect our current assessment of business performance and the operating environment. Let me take you through the key points. We confirm our full-year sales outlook. We continue to expect a currency-adjusted decline in the low to mid-single-digit percentage range. For Q4, we expect a continued improvement in sales performance compared with Q3. Turning to EBIT, we now expect between EUR -80 million and EUR -130 million. This narrows our previous range of EUR -50 million to EUR -150 million.
CapEx is now expected to be below EUR 150 million, compared with around EUR 200 million previously. This reflects two factors: a more focused approach to investments and certain IT investments now being recognized as OpEx rather than CapEx. Our journey back to the podium started in Q3 2025. We promised at the time to become a more brand-led organization, and certainly a key focus from us is on rebuilding our brand value. We've made significant changes, not just in our operating model, but also in our leadership lineup. We, just like our new partner ANTA, are very confident, we have a lot of support from our new major shareholder that this is the right way moving forward that gets PUMA back into the top three global sports brands.
To wrap it up, here are the three main messages I would like to share with you for Q3 2026. We started to build a stronger brand relevance and momentum in key strategic categories. Our transition journey is progressing well, with important achievements being made and challenges being addressed proactively. Our full year 2026 outlook is confirmed for sales and updated for EBIT and CapEx.
With this, I would like to hand it over to Manuel again. Thank you.
Thank you, Arthur. Thank you, Mark. We are now ready to start the Q&A session. Operator, please open the line for questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. In the interest of time, please limit yourself to two questions only. One moment for the first question, please. The first question comes from the line of Monique Pollard from Citi. Please go ahead.
Hi. Thank you very much for taking my questions. Two, if I can. The first one, obviously, as you said, Arthur, your guidance implies an improvement in the constant currency sales growth in the fourth quarter as compared to the third quarter. Could you give us a sense of which regions or categories we should particularly expect to drive that improvement as we go through the fourth quarter, please?
The second question is particularly on China. You have delivered a 3.5% constant currency growth rate in the third quarter. Obviously, a lot of that DTC-driven, given the issues with the wholesale that were well flagged through the year. How should we think about that China growth, particularly as we go into fourth quarter, if we take into account things like the industry backdrop, the consumer environment, inventory levels, et cetera? Thank you.
Well, we thank you for the question. From a Q4 overall perspective, without going into too much details, we do not expect the patterns we have seen for Q3 to significantly change. So the markets that we are outlining, we have seen growth in the previous parts of 2026. We do expect to continue majorly in our Asian and Southeast Asian marketplaces. From a category perspective, a similar story here. Running and training will remain our key growth drivers towards the end of 2026.
China, a similar pattern. You have asked about the growth trajectory, so we continue to see the same conversations that we had with our wholesale partners, with the anticipated arrival of ANTA, i.e., a slowdown of our wholesale business due to a muted sentiment of our franchise partners, who are at the moment either not refurbishing current stores or have moved out of certain retail premises, whilst at the same time, we are very confident with our future DTC outlook. Thank you.
Thanks very much.
The next question comes from the line of Thierry Cota from Bank of America. Please go ahead.
Yes, good afternoon, gentlemen. Thank you very much for taking my questions. In fact, two questions on costs. Given the OpEx inflation ex-one-offs that we have seen in Q3, what do you expect for Q4, either in terms of percentage of sales or potentially percentage change year-on-year? Secondly, Mark, you have mentioned that you target a normalized level of inventories at the end of the year. This is not the first time that this guidance is given. Can you tell us what you consider to be a normalized level for the company, potentially as a percentage of sales, please? Thank you.
Thanks, Thierry, for the question. What we gave here as an explanatory factor on the drivers on the absolute increase OpEx quarter after quarter barely holds true also in the fourth quarter. We continue to invest into the growth categories that we outlined. We continue to have investment into our DTC business. Also from the CapEx to OpEx shift, we have seen that there is, particularly compared to last year, a higher cost base just from the continued investment into our IT infrastructure. As you know from the seasonality of our business, Q4, in terms of top-line contribution, is one of the weaker quarters of the year. OpEx leverage will be even more negative affected for the fourth quarter.
This is basically also, if you look at year-to-date EBIT development, whereas this ends the year to go, based on the guidance that we have updated today, that we expect that OpEx leverage will be a negative contributing factor, leading to a negative EBIT development the fourth quarter. However, we continue to reap the benefits from the full-year effect from cost savings. There will be a continued prudent approach to the cost management, but this will be partially offset by marketing, by D2C, and infrastructure investments. Inventory levels, I think we are very happy with the strong improvement we have seen in the current fiscal year, as we will return to growth with a consecutive improvement already into the fourth quarter.
We need to have a sufficient base of inventory to run our business. With the return to growth, we expect that, all other things equal, inventory will follow a more positive sales momentum. However, we expect also with the implementation of further consolidation of our warehouse infrastructure, that the company will generate further inventory improvement in terms of DIO. But we would refrain to give a specific guidance on DIO inventory as a percentage of sales at this point in time.
Okay, very clear. Thank you very much, Mark.
The next question comes from the line of Wendy Liu from J.P. Morgan. Please go ahead.
Hi. Thank you for taking my questions. I have two as well. One is in terms of the growth outlook. I think you previously said that you wanted to grow above industry from 2027, and I see consensus currently at around 4%-5%. Any early indications about your current order book or your discussions with retail partners that you could maybe help us understand how we should think about 2027 going forward? The second question is on OpEx. I think by next year, you should have the full benefit of cost savings. I see current consensus expecting a 2% OpEx reduction year-over-year.
Do you see this as a fair assumption? I know that you will be investing across marketing and internal organizations as well, so it would be very helpful to understand how should we think about the cost going into next year as well. Thank you.
Thank you, Wendy. As you might understand, we are not providing quantitative guidance for 2027 at this stage, and therefore, we will also not validate individual consensus estimates. We continue to expect 2027 to mark a return to growth for our brand and for our company globally. We do expect that recovery to be gradual, particularly given the more cautious consumer and retailer environment. We are, of course, in intense discussions with our retail partners around the globe, but also when it comes to our future China operating model with our new shareholder, ANTA. Thank you.
Yeah, and let me just follow up on, because you correctly asked the OpEx question not from an absolute, but also from a relative base. Part of that is clearly what we have just outlined and what Arthur just also alluded on, is that there are two elements to further OpEx leverage improvement. One is the consecutive improvement that we already see in the current fiscal year, and the trend we expect to continue into Q4 and into 2027, will return to top-line growth, which will be clearly helping to improve OpEx leverage. But at the same time, the degree of this top-line growth is something we cannot comment on yet for 2027.
At the same time, you see that we continue to reinvest partially the savings we have generated as part of our optimization into building capabilities and skills. We expect this to continue, so we will update the market basically with our full-year fiscal year guidance at the balance sheet presentation in March to give you the full picture on top and bottom line development for 2027, but not at this point in time.
Right, understood. Thank you very much.
Thanks, Wendy.
Next question comes from the line of Zeyn Burak from StoneX. Please go ahead.
Hi. Thank you very much for taking my question. I was hoping you would talk about the underlying demand you saw in the quarter after we removed the effects of reset measures in the third quarter, and how that compares to what you saw the past couple of quarters, just to get a better sense of how the business is performing, and then also what is assumed in the fourth quarter from an underlying demand perspective.
My second question is also on 2027. I understand you did not want to quantify sales targets, but previously, you had expressed confidence in PUMA's ability to return to above-market growth in 2027. Is that still the expectation? Thank you very much.
Let me take the first part of the question and just reiterate. I think also the past call, we have not splitted out our OpEx development into kind of like the impact of underlying recurring and the impact of the saving. I think we have given you a quantification to the recurring impact from the adjustment in headcount, and we see this effect now be fully materializing, particularly in the second half of this year, and it will be a recurring underlying improvement factor also for 2027. Partially this, and Q3 is a testimonial to that one, is being offset by investment into, or continued investment into marketing, into the enhancement of upgrade of our D2C and IT investments.
As I said earlier, we do expect with a continuous improvement in top-line momentum that we will achieve OpEx leverage, but we would refrain from giving a more specific guidance on OpEx development beyond the current fiscal year.
On your second part of the question, our ambition to return to above industry growth remains unchanged. However, we see the industry environment has become more cautious with softer consumer sentiment, and also retailers taking a more selective approach. In that environment, we are focused on rebuilding sustainably rather than chasing short-term growth. We see encouraging momentum as described in running, training, and selected Sportstyle franchises, but converting product momentum into broader consumer demand and meaningful scale will take time. Therefore, we expect the recovery to build progressively rather than assume an immediate setup.
Thank you very much.
The next question comes from the line of Viktoria Petrova from Adidas. Please go ahead.
Hi. This is Viktoria Petrova from Barclays, and I have a question. Where do you think PUMA, sort of longer term, has a right to win? Is it more about premium? Is it more about mass and value of perform, or maybe performance? What gross margin OpEx and turn framework should support a credible margin longer term, let's say in three years from now?
Thank you very much. From a long-term perspective in terms of where we see our growth opportunities, I think we've outlined this in our category focus areas. Definitely running and training do provide for us significant growth opportunities globally. Running specifically with our unmatched proposition in NITRO, and in training, we're going to build this around our long-term established partnership with HYROX. However, not exclusively on HYROX, we of course do intend to broaden our training offer globally. Football will remain a DNA category where we do see globally growth momentum, both in apparel and growth opportunities in footwear as well.
Secondly, from a Sportstyle and core perspective, with a stronger brand momentum, a stronger brand positioning in the years to come, which we expect significant growth opportunities for us in pretty much each and every market.
In terms of gross margin sort of contributors?
Yeah. Let me take this question. First, as we are going forward, please keep in mind that we, like many other industry participants, have in 2026 benefited from non-recurring effects of tariff refunds. That is where we have been quite explicit to show the impact is around half net 170 basis points. But beside that, and I think that is also very visible in our year-to-date performance, we continue to benefit from sustainable improvement in gross margin. One is clearly we have discontinued low-margin, low-quality distribution, which were margin dilutive. We have a stronger focus on discount management in our full-price channels, and we are very happy with the margin development and the top-line development in our D2C business.
Thirdly, we are benefiting from a continuous shift, particularly in Asia, shifting in our channel mix from a more wholesale to a D2C-led business. These factors, together with clearly a stronger brand heat and demand in Sportstyle and performance categories, will allow us to continue to improve the gross margin. But we would refrain also at this time to give any indication on gross margin objective for 2027 and beyond.
Thank you. On turns, this is kind of an extension of Wendy's question. Longer term, what should be the level, your turnover ratio behind a sustainable, healthy performance?
Sorry, I think we did not get you. What is the level of which P&L line you are referring to?
I am mostly referring to inventory and working capital.
Oh, inventory. Okay. Let me go back to what I told Thierry already. This company will, or is on a clearly tangible path to return to top-line growth, and this top-line growth will require funding to have the right inventory levels to support demand from wholesale and retail. Clearly, all other things equal, it would lead to an increase in net working capital. Let's say with inventory, we do believe that there are some self-help measures beyond that that will help us to reduce inventory relative to our business size. The most important one are the investment into our IT systems and warehousing. I think we have highlighted in previous meetings that we are making good progress in consolidating our warehouse fleet in North America and Europe.
There are further plans in the future, so we expect there will be operational improvement that we will achieve in further improvement in the relative percentage of inventory to sales. But again, we will not give a specific guidance, neither for 2027 nor in the midterm. But clearly, the commitment from the management that we will further improve inventory relative to the size of our business.
Thank you very much.
You are welcome.
The next question comes from the line of Warwick Okines from BNP Paribas. Please go ahead.
Hi there. I have two questions. The first is actually just building on what you have just said, Arthur, about future success. You are already seeing success in running, training, and low profile to an extent, but how do you actually broaden that success out into other categories? You referenced core should improve, but how are you actually going to engineer that?
Secondly, the session that we had at your head office a month ago or so, there was a question around football, and it sounded like PUMA needs to have a bit of a new strategy, new holistic approach to distribution and marketing in that category. Can you tell us what the plans are to revitalize football? Thank you.
Warwick , thank you. Let me start with the second question, which is football, and that is primarily related to the current trading situation when it comes to football boots. I think we are pretty much aware that the football boots market is under heavy pressure at the moment from an inventory and also from a promotional perspective, so we have started to now engage with our key partners, football specialists and generalists, to agree on a different go-to-market cadence in the future. That will mean we have more succinct launches, more digestible launches, more meaningful launches with our partners agreed. That means a streamlined go-to-market approach and also, therefore, a more focused brand marketing support.
I think our partners will benefit from that because it will also allow them to focus on simpler and clearer go-to-market measures with PUMA, and we consider ourselves to be the first mover in that respect in the market. Your second question relates to core in terms of how we are going to broaden our reach. Before I talk about core, let me just reiterate why we are so focused also on continuously mentioning running and training in both growth categories. We do see ourselves at the moment significantly underrepresented. We see by far not an end of our growth ambition in both key areas, which are also important from a sports participation and consumer conversion point of view globally.
How to translate that into core is, as you have suggested, a stronger portfolio in Sportstyle, which then will have an opportunity on the one hand for trickle-down effects. It is, of course, one of the key focuses. We have also appointed a new leader for our core division about six months ago, someone also who, Marcia Dos Santos, that is, with extensive experience in that area. We have started to apply different ranging methods. We are also looking at our distribution landscape for our core products moving forward, and therefore, that gives us a lot of confidence that growth and a substantial growth in that area will also be feasible for us at PUMA.
Thank you. Would you allow me to come back on football, actually? Because I suppose when you talk about streamline, it sounds like you are implying that that segment needs to shrink a little bit. I was also wondering whether you would recognize the need to sign more assets, more stars, in particular individual players, to build up football.
We are, of course, looking at opportunities that present themselves in terms of bid. That is primarily in the area of talents and scouting for future PUMA partners and PUMA ambassadors, but we will also look at current opportunities. Secondly, I did not say that the market would shrink necessarily. What I was referring to, that there is a feeling, there is definitely a perception in the market that there is too much from a volume and from an inventory perspective. It is probably also fueled by the fact that there is too many launches in retail and for the consumers that are probably not digestible at this point in time.
PUMA, together with key retail partners, has sat together, and we will adjust it for the seasons to come.
Understood. Thank you very much.
The next question comes from the line of Andreas Riemann from ODDO BHF. Please go ahead.
Yes, good afternoon. Two questions. First on Q3, can you help us understand what was actually the underlying revenue decline, excluding any distribution adjustments in the third quarter? I think actually someone else tried to ask the question, but you gave an answer on OpEx, I guess. The second topic linked to that, so the distribution adjustments, I guess, mainly affect Europe and North America. So which of the two regions actually could lead the recovery in 2027, or will that happen in parallel from your perspective? These will be my two questions. Thanks.
Andreas, let me take this question. First, on the regional drivers for 2027, I think in general, we do expect that, driven by the categories that we have outlined, that they will contribute across all global segments of running and training, and both in Sportstyle will be elements on the key category contributing to growth. We will not call out or break down our growth ambition, which we have not quantified in total and not by regions, but we do expect based on the trends we see, particularly in Europe and North America, there will be a gradual improvement in the sales trends across 2027.
When you talk about underlying, we have not given a like-for-like net sales indication also in previous quarter, and we will not do it on Q3. But I think it was clear that Q3, particularly in North America and Europe, and I think either Arthur and I also made it very clear, in the comparison, this region was affected by the still quite sizable mass merchant business that we did in these markets in Q3 2025, which is not part of our base in 2026. But we will not give a specific quantitative breakdown how much of the decline of 6.3% had to be adjusted for the discontinued operation.
But for both markets, these were sizable elements which affected the comparison also for the third quarter versus last year.
Okay. Thanks.
Thanks, Andreas.
The next question comes from the line of Jürgen Kolb from Kepler Cheuvreux. Please go ahead.
Very good. Thank you very much. Two questions. First of all, how do you see prices developing next year, also in the light of raw material prices developing in a certain direction? I guess your transport contract still runs until, I say, mid-2027, but what is your thoughts on this front for the gross margin next year? Mark, specifically, the leverage ratio obviously is what it is at PUMA. When do you think you can bring it down to a more reasonable level, given that obviously you do have and you do express a lot of confidence on the free cash flow generation? Maybe some indications and some comments here in this respect. Thank you.
Yeah. Thanks, Jürgen. Let me start on the leverage factor. I think overall, I am happy on two fronts if I look on our balance sheet. First, we continue to see also now into the third quarter a very healthy free cash flow development, and this has led to an improvement in the net debt situation, giving us more headroom. We specifically flagged the refunding, starting of the refunding of the bridge because it underscores that with DBS, we have now a banking partner that we welcome very much as our partner in our banking facility, which will allow us to retire the bridge loan more than 12 months prior to the expiring date.
Clearly one element, and I think we are making already today good progress on the deleveraging, is clearly the prudent allocation of capital and the tight management on working capital and the access to capital markets. Secondly, clearly, Jürgen, we are committed to return to growth and profitability. Further details, as we said, will be shared with you as part of the balance sheet presentation. But this is where two elements of the leverage ratio will come together in terms of EBITDA development or EBIT, where this level of indebtedness, which we have, as I said earlier, further strive to decline.
In terms of commodity and price exposure, you are right. I think we mentioned that also to you. We have a long contract when it comes to transportation. Certain temporary surcharges is also something we are exposed to, but we do not expect, as we said also on the year-to-date performance, to have only a marginal impact. Also commodity price development, as we have locked in purchase prices both for spring, summer, and autumn/winter 2027, shouldn't be a major factor in our assessment on income development for 2027 at this point in time.
Does that answer your question, Jürgen?
Yeah. They absolutely did. Thank you very much, guys.
Thanks, Jürgen.
Next question comes from the line of Robert Krankowski from UBS. Please go ahead.
Hello. Two questions for me, please. The first one will be related to pricing. Should we think that maybe pricing action next year to offset the raw materials and freight costs will be less aggressive given the benefits of FX hedges? Given the consumer environment, maybe you prefer to take a bit more cautious stance on pricing. The second thing is, how should we think about balancing top line and profitability recovery next year? As we heard, it is all about building sustainable top line. It will be more gradual, but if it is maybe not as fast recovering as you would expect, should we expect more investment behind the brand in marketing, or is it basically also more about recovering profits and maybe top line will come a bit later? Thank you.
Yeah. Just to be sure, what Jürgen asked about commodity price just translates that there is not a pricing increased pressure from our perspective for high commodity prices. Clearly, we do evaluate, especially in high or mid-inflationary markets, on price adjustment, but we will consider this as a part of regular course of business. So, we do not expect any particular inflationary tendencies in a highly competitive market.
I think your question in terms of balancing top to bottom line or top line development OpEx investment, what we clearly indicated that we see a gradual improvement, like we have seen already in the course of the last quarter and also expectation for Q4, that there is a return to growth, clearly part of our plan. We continue to invest to fuel this growth, both from a marketing investment and AI capabilities.
How this will lead out to a balance in between top and bottom cost development for each quarter over the year is something we said earlier we would refrain to be more specific at this point in time, and we will provide you with our guidance later at the balance sheet presentation.
All right. I think[crosstalk].
There are no further questions at this time. There are no further questions at this time. I hand back to Manuel Bösing for any closing comments.
Thank you, Maura. Thank you all for your time, your questions, and your interest in PUMA. You know where to find us, and we are looking forward to speaking with you again. This concludes our third quarter 2026 earnings call. Thank you, and have a great weekend.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephones. Thank you for joining, and have a pleasant day. Goodbye.