With the close last week of its deal to acquire Salomon, Amer Sports is touting its own designation as the worlds number one sports equipment company, but now adds more footwear and apparel to its mix of business. Long focused on the hardgoods end of the spectrum, it will be interesting to see if the company goes the way of K2 Inc. and utilizes some of the newly-acquired talent on the softgoods side to expand their brands footprint in footwear and apparel. One direction is clear, the market can expect the Finland-based Amer to find new ways for its products to work together to provide through technology a distinct differentiation for the end user, whether that be in fitness, ski, tennis, team sports, or golf.
Amer Sports reported that third quarter net sales increased 5.7% to 294.2 million ($359 mm) from 278.4 million ($341 mm) in the year-ago quarter. Excluding the effect of foreign currency exchange rates, sales would have increased 5% for the three-month period ended September 30. Fitness Equipment division sales increased by 16% in local currency terms, compared to the year-ago quarter, but were offset in part by sales in the Sports Instruments division, which declined by 11% in local currency terms. Earnings before interest and taxes amounted to 35.5 million ($43.3 mm), compared to 33.8 million ($41.3 mm) in the year-ago quarter.
Sales for Wilson Racquet, Golf, and Team Sports products rose 3.8% to 126.1 million in Q3, when measured in Euros, from 121.5 million in Q3 last year. Measured in home country U.S. dollars, Wilson sales rose 3.6% to $164 million from $149.0 million in the year-ago period. EBIT for the Wilson divisions improved 83.0% in Euros to 6.9 million ($8.4 mm) versus 6.7 million ($8.2 mm) in the year-ago quarter, with an improvement in the loss in the Golf division more than offsetting EBIT declines in Racquet Sports and Team Sports. Wilson Q3 EBIT increased 2.8% in U.S. dollars.
The Racquet Sports division saw revenues grow 3.3% to 56.6 million when measured in Euros. In U.S. dollars, the Racquet Sports business rose 3.1% to $69 million from $67 million in Q3 last year. Divisional EBIT declined 5.2% to 7.3 million ($8.9 mm) from 7.7 million ($9.4 mm) in Q3 last year, and declined 5.4% when measured in U.S. currency.
For the nine-month YTD period, Racquet Sports net sales grew 6% in local currencies, with fairly balanced growth coming across regions. Sales grew 6% in the Americas, increased 5% in EMEA, and jumped 7% in Asia Pacific. YTD sales of Wilson tennis rackets increased 5%.
Amer said the sales growth for the period was attributable in large part to the worldwide success of Wilson tennis racquets. Wilson tennis racquet sales grew by 8% in local currency terms during the YTD period and sales of tennis balls increased 4% through September. The Racquet Sports division continued to invest in and focus on increasing the market share of the global badminton market. Badminton equipment sales rose by 41% in local currency terms.
Racquet Sports EBIT grew by 16% for the nine-month YTD period.
Golf division revenues for the third quarter declined 5.0% in Euros to 26.5 million on top of an 11.4% decrease in Q3 last year. Sales declined 5.2% to $32.3 million when measured in U.S. dollars. The Golf division narrowed its EBIT loss by nearly 24% to 3.5 million ($4.3 mm) in the Q3 period from a loss of 4.6 million ($5.6 mm) in the same quarter last year, or roughly the same percentage improvement when measured in U.S. dollars.
YTD net sales for the division declined 5% in local currencies, with a decline in club sales offsetting gains in balls. Sales increased 3% in Asia Pacific, but declined 6% in EMEA and 7% in the Americas. Sales of Wilson golf clubs decreased by 6% compared to last years YTD period, but golf ball sales rose by 3% for the period.
After achieving a swing to profitability in the Golf division last year, the company saw a 47% decline in profits this year, due in large part to “lower sales and the lower gross profit margins necessitated by a highly competitive marketplace.” Management said that “decisions to boost the Golf Divisions operational efficiency and reduce costs” will be made during the fourth quarter, signaling some potential cuts in expenses.
The Team Sports division reported a 10.8% increase in Q3 sales to 43.0 million measured in Euros, or a 10.6% increase to $52.5 million when measured in U.S. dollars. Team Sports EBIT fell 13.9% to 3.1 million ($3.8 mm) from 3.6 million ($4.4 mm) in Q3 last year, or a 14.1% decline in EBIT in U.S. currency.
Team Sports division YTD net sales in local currencies grew by 10% for the period on top of a 12% gain in the year-ago period. EBIT grew by 18% in local currency terms. Sales jumped 52% in Asia Pacific and rose 9% in the EMEA region. Sales in the Americas rose 8% for the period.
The fastest growing product categories in Team Sports were baseball and softball bats and baseball training equipment. Sales of baseball equipment rose by 18%.
The Winter Sports business, which is currently anchored by Atomic, increased 5.9% to 93.8 million in the quarter when measured in Euros. In this historically important period for the Winter Sports business, EBIT slipped 1.3% to 23.7 million from 24.0 million in the prior year period, resulting in a 65% decrease in YTD EBIT for the division. Amer said one of the major reasons underlying the decline in nine-month EBIT was the “waning of sales in North America.”
Winter Sports net sales in local currencies grew by 2% for the nine-month YTD period. Order backlog for the all-important fourth quarter was said to be “on par” with last year. On a regional basis, YTD sales grew 9% in EMEA, but fell 21% in the Americas, a decline Amer attributed to “poor weather conditions in the first part of the year.” Sales of alpine ski boots were up 42%.
The acquisition of Salomon will substantially increase Amer Sports net sales in the fourth quarter. Salomons net sales in Q4 last year were 253 million ($304.6 mm). The Salomon acquisition is not expected to have a significant effect on Amer Sports earnings per share in the current fiscal year.
Suunto instruments revenues decreased 9.9% to 16.4 million for the third quarter, while EBIT for the period fell 55% to 0.9 million.
Suuntos net sales in local currencies declined 5% in the YTD period, reversing the gain in the prior-year period. Sales were down 11% in the Americas and 3% in EMEA, but were up 11% in Asia Pacific. EBIT declined by 26% to 4.1 million in the YTD period. Sales of Suuntos wristop computers declined by 4% and diving instruments sales were roughly flat to last years nine-month YTD period. The two categories make up roughly 64% of total sales for the division.
The Fitness Equipment business, which is built on the Precor platform, was again the darling for the quarter, posting a 15.6% increase in sales to 57.9 million when measured in Euros, or 15.3% measured in U.S. dollars. Third quarter EBIT for the division jumped 69.0% to 7.1 million ($8.7 mm) from 4.2 million ($5.1 mm) in the same period last year. Excluding a 2.5 million ($3.1 mm) settlement payout in the year-ago period, Q3 EBIT would have been up roughly 6.0% for the period when measured in Euros.
Fitness Equipment net sales in local currencies increased 16% in the nine-month YTD period and EBIT grew by 11% for the same time frame. Of the total net sales, 77% were generated in the Americas, where sales were up 16%. Sales grew by 18% in EMEA and by 11% in Asia Pacific with increases in all of the main product groups.
For the full year 2005, Amer Sports comparable net sales in local currencies exclusive of Salomon are expected to grow by 5% compared with last year. Earnings per share are estimated to amount to 0.90 to 1.00 versus 2004 EPS for continuing operations of 0.96.
>>> Lets see if Amer can do what adidas could not — turn Salomon into an international force…
| Amer Sports | ||||
| Third Quarter Results | ||||
| (in $ millionsa) | 2005a | 2004a | Changeb | Local Chgc |
| Group Sales | $359.1 | $340.5 | 5.7% | 5% |
| Americas | $180.6 | $171.1 | 5.8% | 5% |
| EMEA | $141.7 | $131.1 | 8.3% | 5% |
| Asia Pacific | $36.7 | $38.3 | -3.8% | 9% |
| Racquet Sports | $69.1 | $67.0 | 3.3% | 6% |
| Golf | $32.3 | $34.1 | -5.0% | -5% |
| Team Sports | $52.5 | $47.4 | 10.8% | 10% |
| Winter Sports | $114.5 | $108.4 | 5.9% | 2% |
| Fitness Equipment | $70.7 | $61.3 | 15.6% | 16% |
| Suunto | $20.0 | $22.3 | -9.9% | |
