Impacted by postponements and delayed launches as well as an overall softening marketplace, Amer Sports reported earnings fell 10.2 percent in the fourth quarter, to €47.9 million.
Sales eased 1.4 percent to €772.4 million. The German-based conglomerate owns Salomon, Wilson, Atomic Skis, Arc’teryx, Mavic, Suunto, Enve Composites and Precor.
On conference call with analysts, Heikki Takala, president and CEO, noted that the quarter was impacted by the postponement of some planned launches in its sports instruments category due to “some technical difficulties.” The fitness segment was also impacted by delays in some product launches due to issues involving the ramp-up of production.
Finally, the overall market “softened further” in the quarter, in part due to the inventory overhang stemming from “some poor winters earlier.” Takala said Amer Sports chose to “avoid promotions in a quite promotional environment,” boosting gross margins in the period.
Takala added, “We improved gross margins, and executed short-term expense reductions, whilst continuing to invest into our 2020 acceleration priorities, most notably digitalization, retail openings, and developing new products and technologies for future commercialization.”
Among its segments, outdoor’s sales declined 2.2 percent in the quarter to €490.7 million and was down 4 percent on a currency-neutral basis. On an adjusted basis, operating earnings in the outdoor segment grew 6.3 percent to €69.7 million.
In the ball sports segment, revenues advanced 3.7 percent to €171.9 million and gained 3 percent on a currency-neutral basis. Adjusted operating earnings jumped 56.1 percent to €12.8 million.
In the fitness segment, sales slid 5.4 percent to €109.8 million and were down 5 percent currency-neutral. Operating income on an adjusted basis was down 56.7 percent to €6.8 million.
Among categories, footwear sales were down 4 percent to €96.4 million and declined 3 percent on a currency-neutral basis. Footwear as well as winter equipment sales were impacted by a shift in deliveries earlier in the year due to changes at its warehouse infrastructure.
Winter equipment sales in the quarter were down 6 percent to €118.5 million and 8 percent on a currency-neutral basis.
Apparel sales jumped 11 percent to €131.5 million and gained 10 percent on a currency-neutral basis. Cycling sales were up 9 percent to €38.2 million and added 8 percent on a currency-neutral basis.
Sports Instruments sales tumbled 22 percent to €36.1 million and were also down 22 percent on a currency-neutral basis due to the postponements.
Individual ball sports sales were flat at €67.9 million and off 1 percent on a currency-neutral basis. Team sports sales were up 7 percent to €104.0 million and advanced 5 percent on a currency-neutral basis. Fitness sales slid 5 percent to €109.8 million and were also down 5 percent on a currency-neutral basis.
By region, sales in the Americas inched up 0.4 percent to €314.5 million while easing 1 percent on a currency-neutral basis. In the EMEA region, revenues dipped 3.2 percent to €345.3 million and gave back 2 percent on a currency-neutral basis. In the Asia Pacific region, sales slipped 1 percent to €112.6 million and were down 6 percent on a currency-neutral basis.
Gross margins improved to 44.7 percent from 43.8 percent in the quarter. On an adjusted basis, EBIT declined 3.2 percent to €81.3 million. Including a cost-restructuring program announced in August 2016, EBIT would have been €73.1 million, which represents a decline of 13 percent versus year-ago levels.
For the full year, sales grew 3.5 percent to €2.62 billion. In local currencies, sales increased by 4 percent. Organic growth was 3 percent.
Adjusted EBIT in the year came to €221.7 million, representing a decline of 4.5 percent. With non-recurring items in both periods, reported EBIT was €204.8 million against €204.1 million a year ago. Net earnings for the year were €126.9 million, up from €121.6 million.
Takala said that due to the continued “challenging” market conditions, Amer Sports will be expanding its restructuring program started in August 2016 with the objective to reduce its operating expenses by approximately 100 EBIT margin basis points in the coming 24 months.
For 2017, Amer Sports expects net sales in local currencies to increase “despite short-term market softness.” The growth is expected to be biased to the second half of the year. The focus will remain on growing its core business and its five prioritized areas: apparel and footwear, U.S., China, direct-to-consumer, as well as digitally-connected devices and services.
Takala noted that 2016 marked another year of record sales and profit, despite the market challenges. Efforts to accelerate growth in footwear, apparel, direct-to-consumer and China particularly helped drive overall gains while gross margin in the year marked an all-time high. With the improving performance and a healthy balance sheet, Amer Sport’ board will propose another increased payout to the shareholders.
“We have now delivered seven consecutive years of profitable growth in line with our Sustainable Growth Model,” said Takala. “Going into 2017, our pipeline of new initiatives is strong, and we continue to invest into the prioritized acceleration areas. However, as the market is challenging, we adjust our short-term growth ambitions and elevate our focus on profit, cash and asset efficiency.”
Photo courtesy Salomon
