Amer Sports reported a 4.9% decline in first quarter net sales to 363.0 million ($543.7 mm). The company said it was particularly affected by the weakening of the U.S. dollar as sales increased 25 when measured in local currencies.
The split of net sales by geographical segment was as follows: the Americas (North, South and Central America) 48%, EMEA (Europe, Middle East and Africa) 43%, and Asia Pacific 9%. Sales in EMEA increased 12% but declined by 16% in the Americas and by 5% in Asia Pacific. In local currency terms, net sales were up 13% in EMEA but down 6% in the Americas and 1% in Asia Pacific.
The Group's EBIT amounted to 0.0 million after a loss of 7.8 million last year. The Winter and Outdoor business was behind the improvement of EBIT; its net sales increased 15% in local currencies.
Earnings before taxes were a loss of 6.9 million ($10.3 mm) compared to a loss of 14.6 million ($19.1 mm) last year. Earnings per share came in at a loss of 0.07 ($0.10) compared to a loss of 0.15 ($0.20) for the year-ago period.
WINTER AND OUTDOOR
Winter Sports Equipment
Apparel and Footwear
Net sales, total
Q1 net sales increased 15% in local currency terms. The breakdown of net sales was as follows: Winter Sports Equipment, 23%, Apparel and Footwear, 43%, Cycling, 21%, and Sports Instruments, 13%. EMEA accounted for 69%, the Americas for 22%, and Asia Pacific for 9% of net sales. Sales in local currencies were up 35% in Asia Pacific, 13% in EMEA, and 10% in the Americas.
Earnings before interest and taxes (EBIT) improved to a loss of 14.6 million from a loss of 34.4 million last year. The improvement was due to strong growth in the profitability of Apparel and Footwear and an increase in Winter Sports Equipment sales on the previous year.
Net sales of Winter Sports Equipment increased 22% in local currency terms. Sales of both Atomic and Salomon were fuelled by increased demand for alpine skiing equipment in Central Europe. The cross-country skiing equipment market was still extremely challenging. Positive sales development of winter sports equipment compared to the previous year is not indicative of the full-year picture; the amount of pre-orders for the upcoming season will be the decisive factor. These orders vary greatly, both geographically and by product category, and there are also great differences between customer segments.
The restructuring of the winter sports equipment business announced in January 2008 will streamline the industrial processes of Atomic and Salomon, as different sites will be specializing in their own strengths. The changes are estimated to reduce approximately 400 positions globally during 2008. Labor negotiations with employees are underway, and they are expected to be complete during Q2. Annual cost savings are expected to amount to 20 million, starting from 2009.
Sales of apparel and footwear continued to soar: net sales increased 18% in local currencies. The popularity of trail running continues to grow, and Salomon has strengthened its position as a manufacturer of technical trail running shoes. Indeed, Salomon's Wings running shoes have received a very favorable reception in the market. Judging from the pre-orders for apparel and footwear made for fall/winter 2008/09, continued solid sales development can be expected.
The number of cycling enthusiasts world-wide continues to increase. Bicycle component manufacturer Mavic had a good start for the year, its net sales increasing 13% in local currency terms.
Sports instruments net sales were on par with the previous year in local currency terms. Sales are expected to increase during Q2 with new product launches; for instance, Suunto's revised t-line wristop computers will be hitting the market. It is believed that these will help to return Suunto to a growth track.
Net sales, total
Q1 net sales decreased 4% in local currency terms. The breakdown of net sales was as follows: Racquet Sports 44%, Team Sports 40% and Golf 16%. The Americas accounted for 65%, EMEA for 25%, and Asia Pacific for 10% of net sales. Sales in local currencies were up 8% in EMEA and down 5% in the Americas. The decline of 21% in Asia was mainly due to licensing of the Golf business in Japan.
EBIT in local currency terms was down 12% to 15.7 million.
Racquet Sports net sales increased 3% in local currencies. Wilson retained its solid position in the racquet market. Accessories and strings were the fastest-growing businesses.
Team Sports net sales declined 2% in local currency terms. Demand in large sports equipment chains softened, whereas sales in specialty stores saw favorable development.
Golf net sales decreased 21% in local currency terms. Wilson's sales were cut by the decision made in 2007 to license the golf business in Japan and close down golf ball production in the United States. In addition to this, the softening of the economy and increased share of private labels decreased Wilson's sales to department stores in the United States. In Europe, the Golf business developed favorably.
*) In local currency terms
Q1 net sales decreased 13% in local currency terms. The Americas accounted for 77%, EMEA for 17%, and Asia Pacific for 6% of net sales. In local currency terms, sales were up 29% in EMEA, and down 10% in Asia Pacific and 19% in the Americas.
Due to the considerable fall in sales, EBIT decreased to 3.7 million (9.9).
The softening of consumer demand in the United States had a noticeable impact on the demand for Precor's products for home use.
Sales to health clubs continued to thrive in North America and EMEA. Sales were promoted by the successful launch of the AMT (Adaptive Motion Trainer) in EMEA and Asia Pacific.
At the end of the period, the Group had 6,351 employees (6,635). The Group had an average of 6,319 employees (6,612) during the review period.
Winter and Outdoor
EVENTS AFTER THE REVIEW PERIOD
Amer Sports Corporation sold its corporate headquarters building, located at Mäkelänkatu 91, to Catella Real Estate AG for 23 million on April 24, 2008. Amer Sports books a capital gain of approximately 13 million in its second quarter result. The company will remain in the building as its primary tenant.
FUTURE OUTLOOK AND GUIDANCE
The weakened U.S. dollar and the softening of North American consumer demand is creating uncertainty with regard to the full-year outlook. Based on received pre-orders, the development of the winter sports equipment market seems inconsistent. Full-year EBIT, excluding non-recurring other income, is estimated to improve on the previous year.
Guidance announced in February:
In 2008 Amer Sports aims to achieve a 5% increase in net sales in local currencies. It is estimated that Amer Sports EBIT will amount to 100 million to 130 million (comparison EBIT for 2007 excluding non-recurring items amounted to 92.2 million).
Earnings per share are estimated to come in at 0.75 to 1.00 (comparison earnings for 2007 excluding non-recurring items was 0.70).