Amer Sports saw a strong business emerge in its Winter & Outdoor footwear and apparel segment in the second quarter as strong futures bookings in the segment, which includes the Salomon and Arcteryx brands, translated to healthy shipments that drove sales up in double-digits for the period. However, that bright spot, along with the Wilson Team Sports business, were the only positive trends for the consolidator of sporting goods hardgoods brands that also includes Precor, Suunto, Mavic and Atomic as revenues in the quarter inched up ever so slightly in reported euro terms and declined 6% in local currencies.
It is a tough time to be in golf and high-end fitness, and Amer was hit particularly hard as rounds played declined and the golf market went very promotional in the U.S. and consumers stopped purchasing many of the key products produced by Precor.
Roger Talermo, company president and CEO, offered in a release that, “Market conditions in the sporting goods industry during the second quarter remained as difficult as during the start of the year. The U.S. market continued to suffer more than the European market and in general, there is less demand for high-ticket items. This was evident in both our Fitness and Golf businesses that saw the largest sales decline within Amer Sports.”
Amer Sports stated in an earlier release that their full-year outlook is “clouded by the uncertainty in consumer demand in general.” Pre-season orders in Winter Sports Equipment for fall/winter are roughly flat to last year's level, which may indicate market share gains in Europe as the overall business contracts. However, the companys other businesses, which include Wilson Sports, Precor and Suunto, will have their profitability “affected by the challenging market conditions.”
The company called out the U.S. market and the Fitness segment in particular as challenging segments. They indicated that unless market conditions start to improve materially during the rest of the year, their current view is that the operating profit for the full-year 2009 will be below last year's level. The expected improvement in Winter Sports Equipment due to previously implemented cost efficiency measures is more than offset by weakness in the companys other businesses.
Overall Amer Sports revenue increased 0.9% to 287.7 million ($392 mm) for the second quarter from 285.1 million ($445.7 mm) in the year-ago quarter. Consolidated gross margins slid 330 basis points to 37.7% of sales in the second quarter, compared to 41.0% of sales in Q2 last year. The EBIT loss widened nearly four-fold in the period to a loss of 29.4 million ($40 mm) from a EBIT loss of 7.8 million ($12 mm) in the year-ago period. The 2008 EBIT numbers included a gain from the sale of a headquarters building so comparisons are difficult. The consolidated net loss doubled to 23.2 million ($32 mm) from a net loss of 11.4 million ($18 mm) in the 2008 second quarter.
On a regional basis, the Americas remains the toughest region, with the U.S. the most affected by the downturns in golf and fitness.
The Americas business was down 1.2% in euro terms to 138.5 million ($189 mm) and the EMEA region was off 0.7% to 108.4 million ($148 mm). Asia Pacific continues to grow off a smaller base, increasing revenues 5.9% in euro terms to 37.8 million ($51 mm) in the second quarter.
However, in local currency terms, net sales decreased 12% in the Americas, increased by 2% in EMEA and decreased 4% in Asia Pacific.
In the Winter and Outdoor segment, total revenues inched up 1.9% in the quarter to 106.6 million ($145 mm), and were flat in local currency terms. Apparel & Footwear sales grew 24.9% to 49.2 million ($67 mm), Cycling was down 5.4% at 24.6 million ($34 mm), Sports Instruments declined 5.3% to 21.4 million ($29 mm), and Winter Sports Equipment fell 31.3% to 11.4 million ($16 mm) in the segments smallest quarter. In local currencies, Apparel & Footwear jumped 24%, Cycling and Sports Instruments both declined 8%, and Winter Sports Equipment revenues fell 34% after posting a double-digit increase in Q2 last year.
Talermo noted that Winter Sports Equipment pre-bookings, while flat to last year in a down market, did see some regional differences. He indicated that the U.S. and the North American market was harder hit, but they had “very good progress” in the European markets, especially the Alpine European markets due to the very good snow situation last winter.
Apparel & Footwear's growth came after strong Spring/Summer bookings. “We could ship them, dealers took them, and seemingly it has gone very well,” said Talermo. However, he also indicated that Apparel & Footwear pre-bookings for Fall/Winter were less robust so they do not anticipate a similar performance in H2.
The Cycling component (Mavic) business has now reportedly “stabilized its delivery situation,” according to the CEO. “It started very low especially on the OEM side,” said Talermo. “Now it's actually going pretty stable compared to how the year began.”
Sports instruments (Suunto) revenues were hit particularly hard in the U.S., but the diving business was also hurt by reduced travel to international diving locations. Talermo said the training category, heart rate monitors and outdoor products were “holding up to last year's level in their sales.”
EBIT for the quarter in the Winter and Outdoor segment showed a loss of 29.2 million ($40 mm), a bit more than the loss of 26.7 million ($42 mm) in the year-ago period.
In the Ball Sports (Wilson Sports) division, revenues were up 3.7% in the quarter to 135.7 million ($185 mm), and were down 4% in local currencies. In Wilsons home currency U.S. dollar terms, revenues declined 9.7% for the quarter. Increases were seen in Racquet Sports, up 4.0% to 65.1 million ($89 mm), and Team Sports, which jumped 18.2% in euro terms to 48.6 million ($66 mm), while the Golf business fell 19.1% to 22.0 million ($30 mm) after a near-20% decline in the business in Q2 last year. In local currencies, Racquet Sports dipped 2% and Golf fell 22% for the period, while Team Sports posted a 5% increase in local currency terms. In U.S. dollar terms, Racquet Sports sales decreased 9% and Golf fell nearly 30%, while Team Sports sales rose 3% for the quarter.
Wilsons EBIT was down 34.5% in the quarter to 7.4 million ($10 mm), compared to 11.3 million ($18 mm) in Q2 last year. EBIT was down 43% in U.S. dollar terms.
Talermo said that the U.S. was again the culprit when it came to the Racquet Sports decline. He said the good news was that Asia Pacific had a very good quarter, but it was “more of a pipeline fill-in, especially in China” where they have expanded distribution. They are now working through their own subsidiary in China.
The CEO said the Team Sports business was “good news” going forward, but the EBIT numbers are pressured by a channel mix that has “shifted downwards and towards national retailers.” He said that it's evident that “consumers are downgrading” and the distribution pattern is “not equal to what it was in the previous year.”
In the Fitness (Precor) segment, sales fell 14.5% to 42.4 million ($58 mm), and were down 23% in local currencies. In Precors home currency U.S. dollar terms, revenues plummeted 26% for the period. The Precor EBIT loss expanded more and five-fold to 2.2 million ($3 million) against an EBIT loss of 600,00 ($1 mm) in the year-ago period.
