Amer Sports Corporation reported its first quarter under a new name last week, posting currency-neutral increases across all divisions with the exception of the Atomic Winter Sports group. The company had to anniversary big numbers from Q1 last year when currency-neutral sales grew 12.5%. The bottom line took a hit as the EBIT loss in the Winter Sports group widened by roughly 65% versus the year-ago period and both the Precor Fitness Equipment group and the Suunto Sports Instruments group posted declines in their EBIT lines. (Click Here to View Chart)
Total company net sales increased 2.1% in Q1 to 277.8 million for the 2004 first quarter from sales of 271.6 million in the year-ago period. Currency-neutral sales increased 5.0% for the period.
The Americas made up 62.7% of sales in the period, down a bit from the 64.2% share of total company sales in Q1 last year. The EMEA region, which includes Europe, the Middle-East, and Africa, was also down as a percentage of sales to 26.1% of the business, while Asia-Pacific increased its contribution to 11.1% of sales, up 200 basis points from the year-ago quarter.
Sales in the Americas declined 0.1% in the Euro reporting currency to 174.3 million, while EMEA inched up 0.1% in Euros to 72.6 million and Asia-Pacific sales grew 11.1% to 30.9 million when measured in Euros.
As indicated on the following chart, sales in local currencies tell a much different story. With more than 60% of the companys business done in the Americas, its interesting to note that sales would have increased 7.4% if measured in U.S. dollars. For those businesses that are based in the U.S., Wilson actually saw sales increase 7.2% in the quarter when measured in U.S. dollars and Precor posted a 12.5% gain.
Net profit for the companys ongoing businesses was down 15.0% to 14.2 million, or 0.20 per diluted share, from 16.7 million, or 0.23 per diluted share, in Q1 last year. EBIT declined 21.5% to 21.5 million from 27.4 million in the year-ago period.
Total Wilson sales were up 7.2% when measured in U.S. Dollars to $226.1 million from $210.9 million in the year-ago period. Total EBIT for the Wilson divisions increased nearly 21% when measured in U.S. Dollars to $34.3 million versus $28.4 million in Q1 last year.
Racquet Sports net sales increased 3.9% to 61.0 million from 58.7 million in the year-ago quarter, but increased 9.2% in U.S. dollar terms to $80.1 million.
Wilson saw its strongest gains in Asia-Pacific, which posted a 22% sales increase for the period, while the Americas grew 6.0%. The EMEA region declined 2.0% in Racquet Sports. Sales of Wilson's tennis rackets grew by 10%, with sales of premium rackets increasing by 6% in the period. Sales of tennis balls increased by 5%. Sales of footwear declined by 8%.
Better gross margins and the re-org of the U.S. operation must be paying dividends as EBIT increased 25.0% (+31.3% in USD) to 9.0 million ($11.8 mm). The improvement here came on top of an 85% jump in EBIT last year.
Golf Division sales obviously benefited from an increase in rounds played as Wilson mirrored much of the same good news we heard last week from other golf brands.
Golf Division sales mirrored the reported 3.5% decline in rounds played in the U.S. as a later Spring kept many off the links and a pricing war hangover from 2004 held growth in the sector in check. Net sales declined 2% to 47.4 million from 48.6 million in Q1 last year, but were flat when measured in local currencies. Sales declined by 6.0% in the Americas and by 2.0% in EMEA. In Asia-Pacific, sales grew by 30%.
Sales of golf clubs rose by 4%, but the company sees nicer gains down the road as sales of new Wilson Staff premium clubs increased by 23% in the period, which in turn benefited EBIT in the first few months of the year. EBIT for the division jumped 40.6% for the period to 4.5 million ($5.9 mm) versus an EBIT of 3.2 million ($4.0 mm) in the year-ago period.
Amer said the golf ball market continued to be “extremely competitive”, with Wilson golf ball sales flat to last year.
Team Sports Division net sales were up 3.9% to 61.5 million in the period, reversing the decline of a year ago when sales were 61.5 million. Measured in U.S. Dollar terms, sales increased 9.1% for the period. Sales increased 7.0% in the Americas, 9.0% in EMEA, and jumped 120% in Asia-Pacific. Outside the U.S., Amer said the division saw “exceptionally buoyant growth in Japan.” The fastest growing product categories in Team Sports were baseball and softball bats, which posted a 34% increase. EBIT for Team Sports gained 2.4% to 12.6 million ($16.5 mm). In local currencies, the Team Sports Divisions EBIT improved 7.0%.
Winter Sports Division net sales declined 8.3% to 26.5 million from 28.9 million in Q1 2004, with most of the decline coming out of the Americas. Sales fell 27% in the Americas and declined 4.0% in the EMEA region.
The divisions EBIT loss widened nearly 65% to (8.4 million) versus (5.1 million) in Q1 last year. Amer said that increased investment in sales and marketing as well as the sales decline in North America were two of the main factors affecting EBIT.
Sports Instruments (Suunto) division net sales rose 6.4% in the quarter to 20.0 million, erasing the sales decline in the year-ago period. In local currencies, net sales grew by 7% for the group in the first quarter.
Geographically, EMEA sales were up 10% and sales in the Americas rose 5.0% in the period. Sales of Suunto's diving instruments grew by 15% and sales of wristop computers grew by 2.0% during the period. Diving and Watersports Suits grew by 10%. EBIT declined in the period to 1.7 million, a decrease of 5.6%.
Wristop computers and diving instruments accounted for 62% of Suuntos net sales.
Fitness Equipment (Precor) net sales were 59.0 million ($77.4 mm) in the first quarter, a 7.1% increase over the 55.1 million ($68.8 mm) figure posted in the year-ago quarter. In U.S. Dollar terms, divisional sales were up 12.5%. The fastest growing product categories were treadmills and stationary cycles. Sales outside the Americas grew by 14% in Euros.
EBIT fell nearly 39% to 5.8 million ($11.9 mm) from 9.5 million ($11.9 mm) in Q1 last year. Fitness Equipments net sales in local currencies increased 12% and EBIT fell 36%. The decline in profit was attributed to heavier investments in sales and marketing, as well as increased steel and freight costs.
For the year, Amer Sports comparable net sales in local currencies are expected to grow by 3% to 5% compared with 2004. Earnings per share for 2005 are expected to be 0.90 to 1.05.
| Amer Group | ||||
| 2004 First Quarter Results | ||||
| in $ millionsa | 2004a | 2003a | Changeb | Local Chgc |
| Group Sales | $364.6 | $339.3 | +2.3% | +5% |
| Americas | $228.8 | $218.0 | -0.1% | +4% |
| EMEA | $95.3 | $90.6 | +0.1% | — |
| Asia/Pacific | $40.6 | $30.7 | +25.6% | +29% |
| Raquet | $80.1 | $73.3 | +3.9% | +6% |
| Golf | $62.2 | $60.7 | -2.5% | +0% |
| Team | $83.9 | $76.8 | +3.9% | +9% |
| Winter | $34.8 | $36.1 | -8.3% | -8% |
| Fitness | $77.4 | $68.8 | +7.1% | +12% |
| Suunto | $26.2 | $23.5 | +6.4% | +7% |
| Net Income | $18.6 | $20.9 | ||
