Amer Sports Corp. reported earlier shipments of footwear and apparel and strong growth in the Americas and Asia Pacific easily offset flat sales in its native Europe for stronger third-quarter 2015 earnings.
The Finnish company, which resumed acquisitions this year after several years of restructuring operations, reported quarterly sales of €713.7 million – up 10.5 percent or 6 percent currency-neutral (up 5 percent currency-neutral, minus the acquisitions). Outdoor apparel and footwear accounted for 34.3 percent and 27.1 percent of the gains respectively in currency-neutral terms. Seventy-eight percent of the growth came from the Americas and 25.8 percent came from Asia Pacific.
In constant-currency terms, Ball Sports (Wilson) accounted for 51.4 percent of the growth, Outdoor (Salomon, Arc'teryx, Atomic, Suunto, Mavic) 35.7 percent and Fitness (Precor) 12.7 percent.
“We continued to grow profitably in the third quarter, driven again by Footwear, Apparel, Business-to-Consumer and China,” said Amer Sports President and CEO Heikki Takala. “Also Ball Sports [Wilson, Louisville Slugger] delivered strong profitable growth behind healthier fundamentals following Ball Sports’ new strategy.”
Takala added the results reflect a pulling forward of Footwear and Apparel deliveries to the third quarter compared with last year, as well as a shift in deliveries of Winter Sports Equipment (Salomon, Atomic) and Sports Instruments (Suunto) from the third to the fourth quarter.
At Outdoor, Softgoods Offset Equipment Declines
Outdoor net sales reached €476.6 million, as the increase in Footwear (19 percent currency-neutral) and Apparel (14 percent currency-neutral) offset declines in Winter Sports Equipment (-13 percent currency-neutral), Cycling/Mavic (-5 percent currency-neutral) and Sports Instruments/Suunto (-10 percent currency-neutral).
Again, timing played a role as footwear and apparel deliveries peaked in the third quarter, while winter sports equipment and sports instruments are expected to peak in the four-quarter. The Americas and the Asia Pacific, where currency-neutral sales grew 10 and 17 percent respectively, easily offset a 3 percent decline in EMEA.
Outdoor’s EBIT margin excluding €10.4 million in non-recurring items (NRI) recorded in the third quarter last year, rose 90 basis points to 19.5 percent or €92.9 million.
Ball Sports Growth Fueled By Team Sports
Ball Sports’ net sales came in at €147.8 million (a 16 percent currency-neutral rise) thanks to gains in Team Sports, where sales reached €77.4 million (up 28 percent currency-neutral), thanks in part to the acquisition of Louisville Slugger. Excluding the acquisition, Team Sport sales still grew 15 percent currency-neutral due to Wilson's strong performance across all categories. Individual Ball Sports’ increased 5 percent currency-neutral mainly due to growth in tennis rackets and balls sales. In currency-neutral terms, sales grew 18 percent to €105.3 million in the Americas, 17 percent to €25 million in EMEA and 4 percent to €17.5 million in Asia Pacific.
Ball Sports’ EBIT margin excluding NRI grew by 250 basis points to 6 percent, or €8.8 million.
Fitness Prepares For 2016
The Fitness segment was able to grow EBIT margin excluding NRI 120 basis points to 10.2 percent (or €9.1) despite a 3-percent currency-neutral decline of sales to €89.3 million. The focus continued to be on enhancing profits pending product launches in 2016. In July, Amer Sports acquired Queenax, a maker of functional training equipment that can be configured to fit a wide variety of spaces. In September, it announced it had secured an exclusive global license to co-develop a new range of indoor cycling equipment under the Spinner trademark.
Profit Growth Outpacing Sales Growth
Amer Sports consolidated gross margins rose 230 basis points to 47.0 percent for the third quarter, driven by Winter Sports Equipment, Footwear and Individual Ball Sports. Excluding NRI, EBIT grew €15.9 million, or 18.2 percent to €103.5 million ($115 mm), with Outdoor accounting for 61.6 percent of the increase, Ball Sports 30.8 percent and Fitness the balance. The gain was driven by a increased sales (+€14 million c-n) and €15 million in additional gross margin. Excluding the impact of currency rates, EBIT rose €10.9 million. EBIT per share, excluding NRI, climbed to €0.59 from €0.49 and free cash flow deteriorated by 8.7 percent to €-92.2 million (-$103 mm).
Outlook Affirmed
Amer Sports executives said their outlook for the full year was unchanged. They still expect net sales to increase in currency-neutral terms and EBIT margin excluding NRI to improve from 2014. They still plan to focus on maximized profitable growth in five areas: Apparel and Footwear, the U.S., China, business-to-consumer, and digitally connected devices and services.
On Thursday, the company announced it had hired former Nokia and Microsoft executive Heikki Norta as its chief digital officer to lead its new Connected Devices and Services segment which seeks to connect Suunto's sport watches and devices to be named later with Precor and Spinner trainers and other gear.
Amer Sports ended the period with cash and cash equivalents of €216.8 million, up from €109.6 million a year earlier, and inventories and work in progress of €511.5 million, up 8 percent from a year earlier. Long-term debt was €631.4 million, up 74.8 percent from a year earlier.
