Amer Sports, Inc. reported that first-quarter revenue increased 13 percent to $1.2 billion compared to the first quarter of 2023, led by a 44 percent increase in the Technical Apparel segment and expansion in Asia. On a constant currency (CC) basis, revenue increased 14 percent.

Technical Apparel growth was driven by Arc’teryx, which generated double-digit new store growth while delivering strong omni-comp growth against difficult comparisons from the first quarter of 2023. The brand is generating broad-based growth across regions, led by Asia Pacific and the Americas, followed by Greater China and Europe, the Middle East and Africa (EMEA).

At the Amer Sports Group level, direct-to-consumer (DTC) expanded 41 percent with double-digit growth across all regions, while Wholesale revenues decreased 1 percent year-over-year. 

Regional growth was led by Greater China, which increased by 51 percent, and the Asia Pacific region, which rose by 34 percent. EMEA grew 1 percent, and revenues were flat in the Americas, where growth in the Technical Apparel, primarily Arc’teryx, segment was offset by declines in the Ball & Racquet (Wilson Sports) and Outdoor Performance (Salomon) segments.

“The momentum behind our strong financial performance has continued through the first quarter of 2024, as we delivered sales and profitability above our guidance,” company CEO James Zheng said. “Our transformation to a brand-direct business model four years ago continues to fuel profitable growth today, and our high-performance technical products are resonating with consumers globally. We are gaining share in the premium sports and outdoor market and are well positioned to deliver another great year in 2024.”

Gross margin for the first quarter of 2024 was 54.0 percent of net sales, up 120 basis points from 52.8 percent in the year-ago Q1 period.

  • Adjusted gross profit margin rose 110 basis points to 54.3 percent compared to 53.2 percent for the first quarter of 2023, primarily driven by a favorable segment revenue mix shift towards Technical Apparel, the highest gross margin segment in the Group. Lower logistics costs also drove gross margin expansion, partially offset by higher raw material costs and higher product discounts than the prior year.

SG&A expense was $534 million, compared to $422 million for first quarter 2023.

  • Adjusted SG&A expenses as a percentage of revenues increased 420 basis points on slower sales growth and represented 43.7 percent of revenues for the first quarter 2024. Key areas of expense growth include variable costs related to the higher mix of DTC sales and key investments to support growth, including IT infrastructure investments and new store openings.

Operating profit for the first quarter 2024 was $109 million compared to $130 million for the first quarter 2023. Net finance cost was $94 million in the first quarter.

  • Adjusted operating margin decreased 240 basis points from 13.4 percent of net sales in the first quarter 2023 to 11.0 percent in the first quarter 2024, above the previous guidance of 9.0–10.0 percent. Adjusted net finance cost was $76 million in the first quarter.

Net income for the first quarter 2024 was $6.9 million, or 1 cent per diluted share, compared to net income of $19 million, or 5 cents per diluted share, in the first quarter of 2023.

  • Adjusted net income for the first quarter 2024 was $39 million, or 8 cents per diluted share, compared to adjusted net income of $27 million, or 7 cents per diluted share, in the first quarter of 2023.

The effective tax rate on adjusted pretax income was 25 percent in the first quarter.

Balance Sheet Highlights
Year-over-year inventories were up 6 percent year-over-year at quarter-end, below the 13 percent revenue growth for the quarter, and said to be “in a healthy position.”

Net debt was $1.7 billion, and cash and equivalents totaled $337 million at quarter end.

Segment Results

Technical Apparel (Arc’teryx and Peak Performance)
Technical Apparel segment revenue increased 44 percent (+48 percent CC) year-over-year to $510 million in the first quarter, reportedly driven by growth in both channels, with DTC up 46 percent, including 36 percent omni-comp growth, and Wholesale up 40 percent.

The over-performance was driven by Arc’teryx, which reportedly continues to experience strong brand momentum across all regions, channels, consumer segments, and product categories. DTC growth was driven by store network expansion, with a net increase of 19 newly owned retail stores and strong volume growth in existing stores and e-commerce platforms.

Wholesale revenues in the segment increased 40 percent, reportedly driven primarily by higher volumes than the prior year. Regionally, growth was led by Asia Pacific, followed by the Americas, Greater China, and EMEA.

Segment-adjusted operating profit margin contracted 40 basis points to 23.0 percent of net sales compared to a very strong margin comparison in the first quarter of 2023. The contraction was primarily due to foreign currency exchange losses.

“The fast growth of our high-margin Arc’teryx franchise is elevating the growth and profitability profile of Amer Sports,” said company CFO Andrew Page. “This dynamic allows us to deliver profitable growth for shareholders while continuing to reinvest in the many opportunities across our unique portfolio of brands.”

Outdoor Performance
(Salomon and Enve)

Outdoor Performance segment revenue increased 6 percent (+6 percent CC) to $400 million, driven by mid-teens growth in Salomon soft goods, led by Asia Pacific and Greater China. The company said this growth was partially offset by Winter Sports Equipment, which was negatively impacted by warm weather and high inventory levels in the market. 

DTC continued to outperform the Wholesale market with 42 percent growth, while Wholesale was down 3 percent, negatively impacted by the challenging environment in the Americas.

By geography, Outdoor Performance revenue increased in Greater China, Asia Pacific, and EMEA, offset by a decline in the Americas.

Outdoor Performance segment adjusted operating profit margin contracted 340 basis points to 4.9 percent of net sales in the first quarter, said to be due to increased SG&A expenses as a result of an increase in the share of DTC sales, partially offset by gross margin improvement from a beneficial channel and region mix.

Ball & Racquet Sports
(Wilson Sports)

Ball & Racquet Sports segment revenue decreased 14 percent (-14 percent CC) to $273 million in Q1 as Wilson continues to be constrained by challenges in its core market compared to strong growth and profitability last year when the flow of inventory improved and both retailers and consumers were buying early to avoid stockouts.

Growth in Wilson Sportswear was more than offset by declines in the other categories.

Ball & Racquet segment adjusted operating profit margin contracted 1,040 basis points compared to the first quarter 2023 to 4.0 percent of net sales in the first quarter 2024. The decrease was primarily due to the decline in revenue. Additionally, gross margin was negatively impacted by increased discounts and an unfavorable product mix.

Outlook
“Despite facing difficult comparisons for our wholesale businesses in Q1, we delivered results ahead of our expectations led by Arc’teryx, which gives us increased confidence in our full-year guidance,” said Page. “The continued outperformance of our fastest growing and highest margin franchise allows us to deliver great business performance and strong returns for shareholders while reinvesting in our key opportunities. As increased demand materializes, we are well positioned to service the elevated demand.”

Full Year 2024
Amer Sports updated its guidance for the year ending December 31, 2024 (all guidance figures reference adjusted amounts):

  • Reported revenue growth: Mid-teens percent;
  • Gross margin: approximately 54.0 percent;
  • Operating margin: 10.5 percent to 11.0 percent;
  • D&A: approximately $250 million, including roughly $110 million of ROU depreciation;
  • Net finance cost: $215 million to $225 million, including approximately $30 million of finance costs in the first quarter 2024 that will not recur;
  • Effective tax rate: approximately 38 percent;
  • Fully diluted share count: 500 million;
  • Fully diluted EPS: toward the high end of the previous guidance range of 30 cents to 40 cents per share, including a 3 cents to 4 cents negative impact to EPS from non-recurring finance costs in Q1 2024;
  • Technical Apparel: >25 percent revenue growth; segment operating margin slightly above 20 percent;
  • Outdoor Performance: mid-to-high-single-digit revenue growth; segment operating margin high-single-digit percent. Enve, which was divested in early May 2024, contributed approximately $25 million of annual sales to the Outdoor Performance segment; and
  • Ball & Racquet: low-to-mid single-digit revenue growth and low-to-mid single-digit segment operating margin.

Second Quarter 2024
Amer Sports provided guidance for the second quarter ending June 30, 2024, as follows (all guidance figures reference adjusted amounts).

  • Approximately 10 percent, including the impact of the disposition of Enve on May 1, 2024;
  • Gross margin: approximately 54.0 percent;
  • Operating margin: approximately 0.0 percent;
  • Net finance cost: $45 million to $50 million;
  • Effective tax rate: approximately 38 percent;
  • Fully diluted share count: 510 million; and
  • Fully diluted EPS: Loss in the range of 4 cents to 8 cents.

Image courtesy Arc’teryx