Asics U.S. Sales Drop 11.5 Percent In First Half

Asics America Group (AAG) reported that sales in the U.S. fell 11.5 percent in the first half year over year. The decline was largely attributed “to market forces and additional retail partner store closings.”

Overall, sales at AAG, which also includes Canada and South America, decreased 5.9 percent year over year, according to the AAG statement.

According to the report from its corporate parent, sales In the American region fell 6.1 percent in the half to ¥55.66 billion ($505 mm) and were down 5.9 percent on a currency-neutral basis.

On the positive side, segment income in the American region increased 394.9 percent to ¥3.55 billion ($32 mm) mainly (up 396.2 percent at currency-neutral exchange rates) due to an improved cost of sales ratio, expenses being pushed to the second half of the fiscal year and the recording of allowance for doubtful receivables in the corresponding period of the previous fiscal year.

Like many of its competitors, Asics Americas was impacted by the bankruptcy filings of Sports Authority and some other chains in the space.

Asics in the Americas region also was impacted by the termination of its agreement with from Windsor Financial Group, which had the exclusive rights to operate retail stores in the U.S. The termination led to closing of Asics’s 13 full-price stores in the U.S. in the latter part of 2015 and a lawsuit. Stores have slowly been reopening since.

 On the positive side, AAG noted that the brand continues to see growth across their digital channels with an increase of 53 percent on mobile revenue in the half since last year. The increase was due to optimized mobile banners for site and e-mails, enhanced search capabilities and an overall update to the checkout process on Asics.com to reduce clicks

Asics also experienced an increase in online order values this half, increasing 29 percent per order, based on a better inventory position and higher focus on product performance.

AAG’s statement also indicated that Asics has expanded significant expanded its presence in the Boston market. As previously reported, Asics America earlier this year opened a Product Creation Studio in Boston to house teams focused on business drivers such as footwear merchandising, apparel design, sales leadership and global performance footwear. Key members of Asics’ executive leadership team will be based at the new location, and the move is expected to expand the brand’s presence in the U.S. to both coasts: Irvine, CA and Boston.

“We have an unwavering focus on being strategically geographically aligned to deliver innovative products to our fans, responding to their needs both on the field, on the court and, of course, online and on their phone,” said Gene McCarthy, Asics America president and CEO, in a statement. “Further, we continue to update our product offering with new and innovative pieces that respond to needs in the marketplace for our core consumer and to entice new consumers. We are excited to have expanded our performance line with three new products to bring in athletes and enthusiasts into the Asics family this quarter.”

Key releases in the quarter included the GEL-Kayano 24 and the GEL-Venture 6.

Extrapolating out first-quarter results, sales in the American region for the second quarter, ASG showed operating earnings of ¥974 million ($8.8 mm) in the latest period against an operating loss of ¥350 million in the same period a year ago.

Revenues in the quarter were ¥25.8 billion ($234 mm) against ¥27.7 billion a year ago, a decline of 6.9 percent.

Companywide, Asics reported consolidated net sales decreased 3.3 percent (a decrease of 2.4 percent on a currency-neutral basis) to ¥203.74 billion ($1.85 bn).

In the six months ended June 30, consolidated net sales decreased 3.3 percent (a decrease of 2.4 percent using the previous fiscal year’s foreign exchange rate) to ¥203.74 billion ($1.85 bn).

Domestic net sales decreased 3.4 percent to ¥54.3 billion ($492 mm) mainly due to weak sales of sportswear, despite strong sales of running shoes. Overseas sales decreased 3.3 percent (a decrease of 2.1 percent on a currency-neutral basis) to ¥149.5 billion ($1.35 bn) due to weak sales in the European and American regions as well as the effect of the strong yen, despite strong sales of running shoes and Onitsuka Tiger shoes in the Oceania/Southeast and South Asian regions as well as the East Asian region.

Gross profit increased 0.7 percent to ¥94.5 billion ($856 mm) mainly due to an improved cost of sales ratio. SG&A expenses increased 5.3 percent to ¥78.5 billion ($711 mm) due to increased costs in line with the expansion of own retail stores and increased costs related to the rollout of various digital strategies.

Operating profits declined 17.1 percent to ¥16.08 billion ($146 mm) from ¥19.4 billion.

Profit attributable to owners of parent reached ¥11.69 billion ($106 mm) against ¥11.85 billion a year ago. Asics noted that comprehensive income amounted to ¥1.34 billion ($12 mm) against a loss of ¥5.3 billion in the same period a year ago.

In the Japanese region, sales decreased 2.9 percent to ¥63.87 billion ($579 mm), due to weak sales of sportswear, despite strong sales of running shoes. Segment income decreased 14.1 percent to ¥4.46 billion ($40 mm), due to the sales decline despite an improved cost of sales ratio.

In the European region, sales decreased 10 percent (a decrease of 7.7 percent on a currency-neutral basis) to ¥50.18 billion ($455 mm), due to the effect of changes in the retail market and intensifying competition, in addition to the effect of foreign exchange rates. Segment income decreased 40.0 percent (a decrease of 38.4 percent on a currency-neutral basis) to ¥3.6 billion ($33 mm) mainly due to the declined sales.

In the Oceania/Southeast and South Asian regions, sales increased 15.5 percent (an increase of 13.7 percent on a currency-neutral basis) to ¥14.45 billion ($131 mm), due to the strong sales of running shoes and Onitsuka Tiger shoes. Segment income increased 6.7 percent (an increase of 4.9 percent on a currency-neutral basis) to ¥2.38 billion ($22 mm).

In the East Asian region, sales increased 10.8 percent (an increase of 12.4 percent on a currency-neutral basis) to ¥25.1 billion ($228 mm), due to the continuing strong sales of running shoes and Onitsuka Tiger shoes, particularly at the subsidiary in China. Segment income increased 5.1 percent (an increase of 8.9 percent on a currency-neutral basis) to ¥4.22 billion ($38.3 mm).

In its Other business segment, sales decreased 8.2 percent (a decrease of 2.3 percent on a currency-neutral basis) to ¥3.81 billion ($35 mm), due to weak sales of outdoor shoes under the Haglöfs brand and the effect of foreign exchange rates. Segment loss was ¥430 million ($3.9 mm).

Looking ahead, Asics retained its guidance for the year. The company continues to expect sales for the full year of ¥420 billion, up 5.2 percent versus the year ago. Operating income is expected to ¥22 billion, a reduction of 13.6 versus a year ago. Profit attributable to owners of parent is expected to reach ¥13 billion, down 16.5 percent year over year.