By Charlie Lunan
Amer Sports lost only €14.7 million during the second quarter ended June 30 despite company closings in the sporting goods industry.
Although Sports Authority and Sport Chalet launched liquidation sales at more than 500 stores during the quarter, the Finnish company was able to grow its net sales 6 percent, its consolidated gross margin 60 basis points to 44.7 percent, its earnings before income taxes (EBIT) by €3.5 million and reduce its loss by €3.3 million or 18.3 percent. All this happened while Amer Sports added 225 jobs (including 119 in the Americas) and increased spending by €14 million to open stores and distribution centers, plus accelerate its digital transformation and expand production.
“The second quarter is traditionally our smallest, however we delivered a solid 6 percent growth despite short-term, adverse business impact due to U.S. customer disruptions, which especially impacted ball sports,” explained Amer Sports President and CEO Heikki Takala. “During the quarter we executed a significant distribution center expansion in both the U.S. and EMEA, and moved Arc’teryx into a larger production facility in Canada.”
Amer Sports net sales reached €477.4 million in the quarter, up 6 percent in currency-neutral terms from the year-earlier quarter. Organic growth was 5 percent, led by sales of footwear and apparel, which came primarily for the outdoor segment’s Arc’teryx and Salomon brands.
These numbers look good considering many sporting goods companies are blaming disappointing second-quarter results on the demise of Sports Authority and Sport Chalet.
Outdoor Gets Lift from Apparel, Footwear and a U.S. Acquisition
Growth was once again driven by apparel and footwear sales at the flagship outdoor segment. Outdoor sales grew 10 percent (13 percent currency-neutral), with apparel and footwear accounting for 86 percent of the growth. Organic sales were up 9 percent due largely to sales of Salomon and Arc’teryx apparel and footwear.
Year-over-year growth in apparel sales accelerated to 18 percent (24 percent currency-neutral), while growth in footwear moderated to 12 percent (15 percent currency-neutral). The growth came primarily from Salomon and Arc’teryx, which entered the footwear business last year. Growth accelerated from 8 percent to 20 percent at the cycling segment, reflecting revenues from Enve Composites LLC, a fast-growing Utah-based maker of high-end carbon wheels, components and accessories that generated about $31 million in sales in 2015. Sales declined at the segment’s other two businesses, winter sports and sports instrument. Pre-season sales of Salomon and Atomic skis (and other winter sports equipment) fell 3 percent and were off 5 percent for the six months ended June 30 after one of Western Europe’s warmest winters in years. Sales of Suunto smartwatches and other instruments declined 8 percent (minus 6 percent currency-neutral).
The Americas, where sales grew 16 percent (21 percent currency-netural), accounted for 41.8 percent of the outdoor segment’s growth in the quarter, while EMEA accounted for 30.9 percent and Asia Pacific 27.2 percent. Excluding restructuring costs, major write-downs and other non-recurring items, the segment generated EBIT of minus €16 million, compared with minus €18.7 million in the second quarter of 2015.
Ball Sports and Fitness Down
Sales for ball sports declined 2 percent (flat, currency-neutral) as a decline at the company’s Wilson tennis and golf business more than offset an increase in the team sports business, which includes Wilson and Louisville Slugger. Amer Sports said sales were hurt by U.S. retail bankruptcies, which dragged down sales in the Americas by €2 million, but still edged up 1 percent, currency-neutral. Sales grew 5 percent in EMEA and fell 13 percent in the Asia Pacific. EBIT excluding non-recurring items dropped 31.2 percent to 4.7 percent of net sales from 6.7 percent of sales a year earlier. Lower gross margin accounted for a little more than half that decline.
At the fitness segment, which consists primarily of Precor, sales declined 1 percent (up 1 percent currency-neutral), as a 2 percent decline in the Americas and 7 percent decline in EMEA offset 9 percent growth in the Asia Pacific. EBIT excluding non-recurring items was 11.8 percent to 5.6 percent of net sales, compared with 6.2 percent in the year earlier quarter.
Outlook Intact
Despite the tumult in the retail industry, Brexit and slowing growth in China, Amer Sports affirmed its outlook for 2016. It still expects net sales to increase and EBIT margin, excluding non-recurring items, to improve in currency-neutral terms.
“During the quarter we executed a significant distribution center expansion in both the U.S. and EMEA, and moved Arc’teryx into a larger production facility in Canada,” noted Takala. “These changes added short-term CapEx and OpEx; however they support our mid/long-term growth. Our outlook for the year remains positive, supported by robust pre-orders in most businesses, with the exception of winter sports equipment, where we expect a modest decline following the challenging previous winters. Our initiative pipeline for the fall/winter season is stronger than ever with strong joint business plans with our retail partners, continuous B2C expansion and a robust innovation rollout across the brands.”
Lead photo courtesy Arc’teryx/Amer Sports
