Asics Sales Slide in First Half

Asics Corp. reported sales in the first half ended June 30 slid 5 percent to ¥210.7 billion.

Operating income declined 8.8 percent to ¥19.4 billion, while net income was down 18.4 percent to ¥11.8 billion.

In the Americas, sales slumped 17.3 percent to ¥59.3 billion, due to the effect of changes in the retail market and intensifying competition in the U.S., in addition to the effect of foreign exchange rates. On a currency-neutral basis, sales were down 11.8 percent.

Segment income tumbled 84.4 percent to ¥717 million, mainly due to the impact of lower gross profit margin reflecting the weaker Brazilian real etc. and a recording of allowance for doubtful receivables, despite efforts to reduce advertising expenses and other expenses. On a currency-neutral basis, segment income was down 83.4 percent.

In a separate statement, Asics America noted that net sales decreased 11.8 percent for the second quarter of 2016 for Asics America Group (AAG), with Asics America Corporation (U.S. only) showing a 15.4 percent decrease in net sales.

“Asics Americas continues to respond to the quick-changing retail marketplace by making key adjustments and strategic moves to drive the brand forward,” said Gene McCarthy, Asics Americas President and CEO. “This quarter was punctuated with the launch of an industry-leading product, signing one of the top talents in track and field and welcoming a forward-thinking head of sales. There is great momentum for the brand, and we are setting ourselves up for success.”

On the positive side, Asics noted that their lifestyle division once again saw growth, specifically the Asics Tiger brand, which increased 29.3 percent across the AAG. This growth was fueled by sales of Asics Gel-Lyte III, Gel-Kayano Trainer and a new model of the 2016 Gel-Classic.

Asics also noted that it did see strong results from its recently launched models: Gel-Quantum 180, Gel-Quantum 360 and FuzeX.  In June, Asics introduced the DynaFlyte model, its lightest-ever cushioning shoe featuring its FlyteFoam cushioning technology that is approximately 55 percent lighter than the industry standard EVA foam. DynaFlyte earned “Best Debut” in the August issue of Competitor Magazine.

Other accomplishments in the quarter included the signing of sprinter and long jumper Jarrion Lawson as he turned pro. The 15-time All-American made history earlier this year when he won the 100m, 200m and long jump at the NCAA track and field championship. In July, Asics America appointed Andrew Richard to vice president of sales.

In other regions, sales in the company’s home market of Japan decreased 3.4 percent in the half to ¥65.8 billion, while segment income increased 68.5 percent to ¥5.2 billion. Asics said that as part of structural reforms to its domestic business, Asics promoted minimizing and withdrawing from lower profitable products and invested in steps to build a lean organization structure.

Europe sales decreased 1.8 percent in the half to ¥55.8 billion, due to the effect of foreign exchange rates, despite the steady sales of running shoes. On a currency-neutral basis, sales increased 6.3 percent. In contrast, segment income increased 12.7 percent and grew 21.9 percent on a currency-neutral basis to ¥5.99 billion, mainly due to an improved gross profit margin.

Oceania/SouthEast and South Asia area sales increased 12.5 percent in the half to ¥12.5 billion, due to the continuing strong sales of running shoes. On a currency-neutral basis, revenues in the region jumped 26.7 percent. Segment income increased 16.6 percent to ¥2.23 billion due to the effect of increased sales, and expanded 31.6 percent on a currency-neutral basis.

East Asia area sales increased 9.8 percent in the half to ¥22.7 billion and increased 24.1 percent on a currency-neutral basis, due to the continuing strong sales of running shoes, Onitsuka Tiger shoes and others, particularly at the subsidiary in China. Segment income increased 44.9 percent and jumped 63.2 percent on a currency-neutral basis, to ¥4.01 billion.

In its other business segment, sales decreased 18.5 percent in the half to ¥4.1 billion, due to some weaker performances such as outdoor wear under the Haglöfs brand and the effect of foreign exchange rates, despite strong sales of outdoor shoes under the Haglöfs brand. On a currency-neutral basis, sales decreased 12.6 percent. Segment loss was ¥517 million.

Asics kept its forecast the same for the year. It expects sales to decline 6.0 percent to ¥403 billion and operating income to drop 16.2 percent to ¥23 million. Net profits, however, are expected to rise 31.9 percent to ¥13.5 billion.

“In the second quarter ended June 30, 2016, business was steady in the sporting goods industry on the back of a high level of interest in sports owing to rising health consciousness, as well as an increase in everyday use of sporting goods,” Asics officials said. “Under these conditions, the Asics Group  began initiatives toward further advancing its business on a global scale on the basis of the newly announced Five-Year Strategic Plan, ‘Asics Growth Plan (AGP) 2020.'”