By Charlie Lunan

Amer Sports will accelerate openings of Arc’teryx and Salomon stores in the United States and China as  part of a strategic pivot aimed at leveraging strong organic growth in both countries, the company told investors September 1.

Both brands will also accelerate expansion into new categories as part of the pivot, which the company revealed to investors during its annual “Market Day” presentation in Helsinki.

In May 2015, Amer Sports set a target of achieving at least €3.5 billion in net sales by 2020 through a combination of organic growth and the addition of approximately €200 million in revenue from acquisitions. On August 31, it said it expects to achieve that target through organic growth alone and that acquisitions should enable it to reach €4 billion in annual revenue within five years.

The company, which counts Salomon, Wilson and Precor among its flagship brands,  said revenues from its direct-to-consumer (DTC) and China and Connected Devices and Services” are running 25 and more than 20 percent respectively ahead of year ago levels. Amer Sports also owns Atomic skis, the baseball brands Demarini and Louisville Slugger, Suunto instruments and the Mavic and ENVE Composites bicycle component brands.

Given that it can cost up to 1.3 times sales and more than 10 times  EBITDA (earnings before income taxes, depreciation and amortization) to acquire brands, Amer Sports figures it’s more cost effective to fund organic growth. Because it can be funded through existing cash flow without taking on new debt, organic growth has the added benefit of being more sustainable, asserted the company’s President and CEO, Heikki Takala.

To leverage the momentum,  Amer Sports disclosed a restructuring plan it says will free up €20 million in annual operating expenses. The plan, which should be completed by the end of 2017, calls for investing the savings to accelerate five strategic initiatives propelling its organic growth. In addition to DTC, China and Connected Devices, that list includes growing its apparel and footwear and U.S. business.

The company said Thursday it still expect its U.S. revenues to reach at least $1.50 billion in 2020, compared with $1.07 billion earned from all of the Americas last year. But to push beyond that it will reinvest savings from the restructuring plan to  accelerate organic expansion.

Arc’teryx, which recently expanded into footwear, will  speed expansion into categories in a bid to become a four-season brand. Salomon will speed up its expansion into running.  Both brands will speed up store openings in North American and China. Amer Sports expects to increase its store count by at least 25 per year and accelerate online customization programs.

Amer Sports expects softgoods to represent 75 percent of Salomon sales this year compared with 50 percent in 2009, according to figures the company shared Thursday.

Other highlights include:

  • At Arc’teryx – best known for its technical mountain apparel – sales are on track to grow to five times their level in 2009.
  • Gross margin at its legacy winter sports equipment business, which includes the Salomon and Atomic brands, to reach 46 percent this year, up from 40 percent in 2009.
  • The fitness brand Precor and instruments maker Suunto are on pace to report earnings before income taxes (EBIT) equal to about 10 percent of sales compared to negative EBIT in 2009. Both brands are on pace to more than doubled their sales since 2009.
  • At Wilson, gross margins on the sales of sports equipment have grown 600 basis points to 46 percent.
  • Revenues from China and direct-to-consumer (DTC) are each expected to reach €100 million and €200 million respectively this year, up tenfold since 2009.

“Acquisitions will remain in the toolbox, as our ambition is to grow toward €4 billion in net sales in the next 5-puls years,” said Takala.

Photo courtesy Amer Sports/Arc’teryx