Mizuno Corp.’s sales slid 14.2 percent in the Americas region in the company’s fiscal year ended March 31. But the decline was partly due to efforts to clean up inventories and reduce lower-margin sales that bolstered underlying profitability. Some sales recovery was predicted for the Americas region in the years ahead.

The operating loss in the year in the Americas region came to ¥21 million ($191,000) against a loss of ¥1.5 billion a year ago. Sales slid to ¥20.8 billion ($190 mm) from ¥24.2 billion.

In the company’s statement, Mizuno attributed the Americas’ sales decline to a “strategy putting emphasis on profitability rather than sales scale,” while efforts on inventory management reduced the loss. Mizuno’s statement also said the Americas’ performance reflects a rebuilding of the organization structure in the region.

Among categories, the steepest decline was seen in footwear, down 25 percent to ¥7.8 billion ($71.3 mm). Apparel grew 11 percent to ¥3.5 billion ($32 mm) while equipment was down 11 percent to ¥9.4 billion ($85.9 mm).

Extrapolating full-year results from nine-month figures shows that Mizuno’s sales weakness in the region continued in the fourth quarter. Revenues were down 27.6 percent to ¥4.2 billion ($38 mm). Comparable profitability figures weren’t available.

Looking ahead, however, Mizuno sees sales steadily improving in coming years. For the year ended March 2019, Mizuno predicted sales in the Americas would rise slightly to ¥21 billion, from ¥20.8 million just reported. Sales are then expected to reach ¥22 billion in the year ended March 2020 and ¥23 billion in the year ended March 2021.

Companywide, Mizuno saw a sharp turnaround in profitability due largely to higher gross margins.

Revenues declined 1.8 percent to ¥185.4 billion ($16.9 bn). Mizuno said the decrease was due to efforts to bringing in more profitable sales in Americas. A recovery was seen in Mizuno’s golf business in the year due to the growth of custom fitting in all regions. Steady growth was seen in the competitive sports business such as table tennis, badminton, soccer and the sports facility service business in Japan.

Gross margins in the quarter improved to 40.6 percent from 37.5 percent due to reduction of purchase costs reflecting the foreign-exchange impact in Japan and the restructuring in the Americas region. SG&A expenses were reduced as a percent of sales to 36.3 percent from 36.7 percent.

Operating profit in the year climbed to ¥8.0 billion from ¥1.4 billion a year ago, a gain of 456.9 percent. Ordinary profit was ¥8.1 billion versus ¥1.5 billion a year ago while net income climbed to ¥4.9 billion from ¥0.7 billion.

Among other regions in the year, Japan was the only region to see a revenue gain, climbing 0.6 percent to ¥129.3 billion. EMEA’s revenues were down 6.5 percent to ¥14.3 billion. In the Asia/Oceania region, sales were basically flat at ¥20.8 billion from ¥20.9 billion.

Extrapolating full-year results from nine-month figures shows Mizuno continued to make progress shoring up profitability in the fourth quarter. Sales were down 2.3 percent to ¥51.1 billion.

Gross margins in the quarter improved to 39.7 percent from 36.1 percent a year ago. SG&A increased 2.3 percent but decreased to 34.2 percent of sales from 32.7 percent due to the sale de-leverage.

Operating profits improved 70.6 percent to ¥2.9 billion. Ordinary profits rose 45.0 percent to ¥2.9 billion. Net profits reached ¥1.6 billion against ¥600 million.

In other regions, Japan’s sales increased 3.8 percent in the quarter to ¥38.3 billion. EMEA revenues were down 14.6 percent to ¥3.5 billion. In the other Asia/Oceania region, sales were down 7.3 percent to ¥5.1 billion.

For the current year, Mizuno predicted ordinary profit improving to ¥9.0 billion from ¥8.0 billion. Sales are expected to rise to ¥190 billion from ¥185.4 billion. In the two following years, sales are expected to reach ¥200 billion and ¥210 billion and ordinary profits, ¥10 billion and ¥12 billion, respectively.

Besides some recovery in the Americas region, growth in the Asian market is expected to boost results in the years ahead. Sales in Japan are expected to climb from ¥129.3 billion in fiscal 2017 to ¥131.0 million in the current year and then to ¥137.0 billion and ¥142.0 billion in the following years. The Asia/Oceania region is expected to see sales expand from ¥21.1 billion to ¥23.0 billion in fiscal 2018, ¥25 billion in fiscal 2019 and ¥28 billion in fiscal 2020.

EMEA’s sales are projected to climb from ¥14.3 billion to ¥15.0 billion in fiscal 2018, ¥16.0 billion in fiscal 2019 and ¥17.0 in fiscal 2020.

Photo courtesy Mizuno