Fila Holdings weathered a tough first quarter in the market for the Fila brand, managing a 3.3 percent increase in total sales year-over-year to ₩1,109.6 billion for the period. Assessing the business without the benefit of FX Rate fluctuations was not so rosy as sales fell 6.2 percent for the quarter in currency-neutral terms versus the year-ago quarter.

Overall Fila brand revenues were ₩233.2 billion in the quarter, down 32.1 percent year-over-year, or down 35.3 percent in currency-neutral terms. The story here was similar to most other footwear and apparel brands in the market, with the company pointing to the U.S. consumer market, excessive inventory and increased promotional activity. Fila said the “inventory digestion” through discount channels continued.

  • Fila USA revenues, which covers the U.S., Canada and Mexico, fell 43.3 percent (-46.4 percent currency-neutral) in Q1 to ₩76.8 billion ($60.2 million), due to the decreased revenues and overall gross profit decline.
  • Fila Korea, excluding a Design Services Fee (DSF), fell 31.6 percent in Korean won terms to ₩79.9 billion in the quarter. Design Service Fees were up 7.5 percent to ₩17.1 billion. The company said the decline reflected the continued impact of sales channel adjustments to enhance brand equity.
  • The Acushnet company, the parent of the Titleist and FootJoy brands that is 52 percent owned by Fila Holdings, saw revenues increase 19.9 percent (+7.5 percent currency-neutral) in the period to ₩875.4 billion ($686.3 million). For more on the results from Acushnet, go here for the full story.

Gross margins were 50.2 percent of sales in the first quarter, up 80 basis points versus 49.4 percent in the 2022 first quarter. Margins rose 70 basis points in currency-neutral terms.

  • Fila USA’s gross margin was only 5.8 percent of sales in the quarter, both in U.S. dollar terms and Korean won terms, down 21.1 full points from Q1 last year. Margins were said to be negatively impacted by higher freight and storage costs.
  • Fila Korea’s gross margin slipped 50 basis points to 59.7 percent of sales, due to a rise in product quality, raw material costs and unfavorable FX rates.

SG&A expenses increased 9.8 percent to ₩396.5 billion in Q1 but was flat in currency-neutral terms.

  • Fila USA SG&A expenses were ₩32.5 billion ($25.5 million) in the quarter, down 17.2 percent year-over-year, or down 21.7 percent in U.S. dollar terms.

Operating profit slipped 5.0 percent in the period to ₩160.4 billion in Korean won terms, but fell 14.7 percent in currency-neutral terms. Operating margins were 14.5 percent of sales in Q1, down 120 basis points from Q1 last year.

  • Fila brand operating profits fell 91.1 percent (-91.8 percent currency-neutral) to ₩4.1 billion in the first quarter.
  • Fila USA posted an operating loss of ₩28.0 billion ($23.6 million) in the quarter, a considerable increase from the loss of ₩2.8 billion ($2.3 million) in the year-ago period, due to the decreased revenues and overall gross profit.
  • Fila Korea’s operating profit was down 32.9 percent to ₩17.2 billion in the quarter, due to margin pressure, partially offset by controlling SG&A expenses.
  • Acushnet’s operating profit increased 27.4 percent, for the period to ₩156.3 billion ($122.5 million), a 14.3 percent increase in currency-neutral terms, or 20.4 percent in U.S. dollar terms.

Net profit for Fila Holdings was ₩118.3 billion in the first quarter, down 3.9 percent in Korean won terms and down 13.5 percent in currency-neutral terms.

  • Fila USA posted a net loss of ₩30.1 billion in Q1 compared to a loss of ₩2.1 billion in Q1 last year.
  • Fila Korea’s net profit fell 38.9 percent year-over-year to ₩12.3 billion in Q1 2023.

Looking ahead, Fila Holdings lowered its outlook for the year, cutting total revenues expectations to a range of negative 10 percent to negative 5 percent. The previous outlook delivered in March called for a range of negative 5 percent to positive 5 percent revenue growth.

  • Fila USA’s revenue estimate remained unchanged at a range of negative 25 percent to negative 20 percent for the year.
  • Fila Korea, excluding DSF, is a problem spot as the outlook shifted from a range of negative 5 percent to positive 5 percent to a new range of negative 15 percent to negative 10 percent.

The outlook for consolidated operating profit remained unchanged at a range of negative 20 percent to negative 10 percent.

  • Fila USA’s business is now expected to show an operating loss of ₩110 billion to ₩90 billion.
  • Fila Korea, excluding DSF, is now seen posting a 70 percent to 60 percent operating profit decline for the year, compared to previous estimates of 10 percent to 20 percent growth.

Photo courtesy FootJoy