Amer Sports continued its struggle with a weak winter 
sports market and an SAP implementation that caused slower sales at Wilson, but was able to make some positive progress in restructuring to improve profits.
Additionally, strong results from apparel, footwear, Suunto and the Precor fitness business were able to partially offset top-line declines in other businesses. Because of the considerable work on restructuring, Amer was able to increase its profitability for the third quarter in spite of the slight top-line decline.
Last years difficult winter is still impacting snow sports hardgoods sales globally. Amer management said that, from their viewpoint, no winter sports hardgoods companies will be profitable this year due to the depressed pre-season orders.
Roger Talermo, Amer Sports president and CEO described the situation, “I think this is a very, very tough year for the industry. I know there have been a lot of lay-offs left and right. I'm very, very sure that there will be companies sold, and there might be a situation where some of them will go [away] altogether. So I think this new environment and a bad winter last year, triggered consolidation. And if you want to speculate, one more bad winter and consolidation will go all the way through, because I don't think many will survive a second bad winter. We will, but I dont think a lot of others will.”
Salomon's net sales in the third quarter increased 9%, with the strongest results in apparel, footwear and the Mavic brand. Salomons EBIT continues to improve as Amer re-structures its operations. Third quarter EBIT increased 53.8% to 36.3 million ($49.9 mm) compared to 23.6 million ($30.1 mm) last year.
Sales of winter sports equipment were down 1% to 90.2 million ($123.9 mm) compared to 91.1 million ($116.2 mm) last year. This decline is up against an easy comparison to last year since net sales for the corresponding quarter were negatively affected by logistics issues. Sales are still expected to be some 20% lower than last year.
Sales of apparel and footwear increased 25.6% to 78.0 million ($107.2 mm) versus 62.1 million ($79.2 mm) last year.
Sales were boosted by Salomon trail running shoes and both Salomon and Arc'teryx apparel. Management said that they expect their technical apparel sales to reach the 200 million mark this year and that the fastest growth today is in technical apparel and footwear. Based on pre-season softgoods orders, management was “confident” of double-digit growth going forward.
Mavic sales in the third quarter increased 12.2% to 27.5 million ($37.8 mm) compared to 24.5 million ($31.2 mm) last year, primarily driven by strong demand for Mavic's high-performance wheels.
Atomics net sales for the third quarter declined 32% due to weak pre-season orders in the U.S. and Europe. EBIT declined even more rapidly than sales as expenses were de-leveraged on the lower volume. The divisions EBIT for Q3 was down 52% to 11.2 million ($15.4 mm) compared to 23.4 million ($29.8 mm) last year. Management said that in spite of the heavy declines at Atomic, it is performing on-par with Salomon and the rest of the winter sports market. The disparity between Salomon and Atomic is due to Salomons logistical issues during Q3 of last year.
The exceptionally mild winter weather in the first quarter weakened this year's outlook for the winter sports business. Pre-orders for the 2007/08 winter season fell short of expectations in all of Atomic's key market areas. The net sales forecast for 2007 remains unchanged. Sales are expected to be more than 20% lower than the previous year. Management also said that they have a better margin than last year on winter sports products and they do not have a much aged inventory on-hand that could depress retail prices.
While last year was a very difficult season in Europe, this year is shaping up better, with more normal snow conditions. Talermo said, “This year, there is over two meters of snow on the glaciers, so it's very, very good snow conditions. The dealers have all been out there, and there is a full testing going on. So that is, for us, a normal season. Now I can't guarantee what happens going on from here, if we will continue to have a good season or if we have a big hole like we had in the past years. I called the United States last night and there is already snowfall in the Rockies.”
Suunto's Q3 net sales increased 18% on strength in their wrist top computer sales. This growth was primarily driven by the companys new T-Line of training computers, their new womens specific line, and the new Core line of outdoor computers.
Sales were strongest in the EMEA region, followed by the Americas and then by Asia. Management said that Suunto's net sales are expected to increase in 2007 following the new product launches. The divisions EBIT increased 40% for the quarter to 1.4 million ($1.9 mm) compared to 1.0 million ($1.3 mm) last year.
Precor's net sales for Q3 were up 20% with strong demand for fitness equipment from health clubs and hotels. Management said that the demand for Precor's products in the North American consumer markets continues to be strong. Sales to the Americas is still Precors biggest market, accounting for over three quarters of their business. EBIT grew faster than sales with a 35% increase to 8.1 million ($11.1 mm) compared to 6.0 million ($7.7 mm) last year.
Wilson's third quarter net sales were down in every category with overall brand sales declining 9%. Wilsons EBIT declined 32% during the quarter to 5.4 million ($7.4 mm) compared to 7.9 million ($10.1 mm) last year. In spite of the slow growth, management said Wilson is still generating a “good” amount of cash that can be reinvested.
Golf sales were down 14% to 18.2 million compared to 21.2 million last year. In U.S. dollars, the currency where the majority of Wilsons sales are recorded, sales only declined 7.0% to $25.1 million compared to $27.0 million last year. Management said that the declines in the golf business were “in line with the company's strategy,” Amers golf business is now focused on irons and mid-priced golf balls and sales have “developed positively” in these product groups. Management also said that measures taken to ensure positive performance in the golf business in 2008 will continue.
They said that Wilsons brand positioning in golf in Europe, Asia and Canada is strong and, “Our only problem with the brand positioning with Wilson is golf [in the] United States. And we're working hard on it to change it.”
Team Sports also saw a double-digit decline in the reporting Euro currency with sales falling 11% to 36.0 million compared to 40.6. However in U.S. dollars, sales only declined 4.6% to $49.5 million compared to $51.9 million. The decline in sales was mainly due to lower demand for footballs and baseball bats and gloves; and, because of delays in deliveries caused by the implementation of the global SAP system. Fourth quarter sales are expected to show “solid development” and management said that they have a strong order book for Team Sports going forward.
Racquet Sports sales were impacted the least with a 5% decline in sales when measured in Euros to 55.7 million compared to 58.5 million. In U.S. dollars, sales actually increased 2.7% due to fluctuations in currency exchange rates with 2007 Q3 sales at $76.5 million versus $74.5 million last year.
The Amer Sports management team is still keeping a close eye on the M&A market and feels that the global stock markets are under-valuing sporting goods companies, pointing the the 60% premium Nike paid for Umbro as an example. Talermo was very evasive about potential divestitures or acquisitions, saying only, “That's something that you will then hear of if we do it.”
The company maintained its guidance going forward with EBIT for the year coming in below last years level. This is due to the mild winter last year which reduced pre-orders for winter sports more than expected and increased the uncertainty of re-orders in the latter part of the year. The result for winter sports equipment will be in the red.
