Asics America improved its profitability in the fourth quarter while lowering the rate of its sales decline versus recent quarters.
The loss in the period for the American region was reduced to ¥858 million ($7.6 mm) from ¥4.5 billion in the same period a year ago. Revenues declined 8.7 percent to ¥25.7 billion ($228.0 bn) from ¥28.2 billion. The fourth-quarter figures were calculated by subtracting nine-month figures from full-year results.
For the year, sales in the American region decreased 17 percent (off 9 percent on a currency-neutral basis) to ¥112.9 billion ($1.0 bn). In its statement, Asics blamed the drop in the year on “the effect of changes in the retail market and intensifying competition in the U.S., in addition to the effect of foreign exchange rates.”
The American region’s income in the year decreased 42.5 percent (down 36.3 percent on a currency-neutral basis) to ¥862 million ($7.6 mm), despite efforts to reduce advertising expenses and other expenses. Asics absorbed charges earlier in the year related to bankruptcies in the sector.
Companywide, Asics’ revenues in the quarter slid 5.6 percent to ¥86.6 billion ($778.2 mm). The company showed a net loss of ¥4.03 billion ($35.7 mm), a reduction from the loss of ¥5.63 billion in the same quarter a year ago. The net loss was cut to ¥3.11 billion ($27.6 mm) from ¥4.7 billion a year ago, benefiting from improved profitability in Japan and Europe as well as in the Americas.
For the full year, consolidated sales decreased 6.9 percent to ¥399.1 billion ($3.54 bn). Domestic net sales increased 0.3 percent to ¥101.6 billion ($901.6 mm), mainly due to strong sales of running shoes, Onitsuka Tiger shoes and Asics Tiger shoes, despite weak sales of sportswear. Overseas sales decreased 9.1 percent to ¥297.5 billion ($2.64 bn), due to weak sales in the U.S. and the effect of the strong yen, despite strong sales of running shoes in East Asia and Oceania/Southeast, South Asia and steady sales in Europe. Sales of Onitsuka Tiger shoes were solid, especially in East Asia. Moreover, Asics Tiger shoes also performed favorably, mainly in the European region.
Gross profit decreased 3.1 percent to ¥176.5 billion ($1.57 bn), due partly to the effect of the foreign exchange rates. SG&A expenses decreased 2.3 percent to ¥151.1 billion ($1.34 bn), mainly due to a decrease in advertising expenses and the effect of foreign exchange rates. As a result, operating income decreased 7.2 percent to ¥25.5 billion ($226.2 mm) while ordinary income increased 3.9 percent to ¥23.4 billion ($207.6 mm), mainly due to a decrease in exchange loss. Profit attributable to owners of parent jumped 52.1 percent to ¥15.6 billion ($138.4 mm), mainly due to restructuring charges in its Japan business in the prior year.
In the Japanese region, sales picked up 3 percent in the quarter to ¥26.1 billion ($212.9 mm) while the region’s operating loss was lowered to ¥1.11 billion ($9.8 mm) from ¥1.23 billion. For the full year, net sales decreased 2.3 percent to ¥120 billion ($1.06 bn), due to the decrease in intermediary trade that is conducted internally, despite strong sales of running shoes, Onitsuka Tiger shoes and Asics Tiger shoes. As part of structural reforms in its domestic business, the Group promoted minimizing and withdrew from lower profitable products and made investments in establishing a leaner organization structure. As a result, segment income jumped 174.2 percent to ¥6.43 billion ($57 mm).
In the European region, sales were down 9.5 percent in the quarter to ¥25.74 billion ($228.4 mm), but operating earnings improved 37.8 percent to ¥1.56 billion ($13.8 mm). In the full year, sales decreased 7.3 percent (an increase of 2.8 percent on a currency-neutral basis) to ¥107.6 billion ($964.6 mm), due to the effect of foreign exchange rates, despite continuing steady sales of running shoes and the strong sales of Asics Tiger shoes. Segment income increased 3.4 percent (an increase of 14.6 percent on a currency-neutral basis) to ¥11.3 billion ($100.2 mm), mainly due to an improved gross profit margin.
In the Oceanian/Southeast and South Asian regions, sales slid 3.4 percent to ¥5.73 billion ($50.8 mm). Operating profits declined 37.2 percent to ¥460 million ($4.08 mm). In the full year, sales in the Oceanian/Southeast and South Asian regions advanced 7 percent (an increase of 19.2 percent on a currency-neutral basis) to ¥24 billion ($212.0 bn), due to the continuing strong sales of running shoes. Segment income increased 1.6 percent (up 13.1 percent on a currency-neutral basis) to ¥3.6 billion, due to the effect of increased sales.
In the East Asian region, sales in the quarter dipped 1.7 percent to ¥9.36 billion ($83.0 mm). The operating loss grew to ¥1.05 billion ($9.3 mm) from ¥554 million. Sales in the year in the East Asian region increased 3.6 percent (an increase of 18.4 percent on a currency-neutral basis) to ¥43.5 billion ($385.9 mm), due to the continuing strong sales of running shoes, Onitsuka Tiger shoes, particularly at its subsidiary in China. Segment income increased 7.6 percent (an increase of 24.2 percent on a currency-neutral basis) to ¥5 billion ($44.4 mm) due to the effect of increased sales.
In the Other Business segment, which consists of the Haglöfs outdoor brand, sales in the quarter slumped 29.1 percent to ¥1.64 billion ($14.5 mm). The loss was reduced to ¥264 million ($2.3 mm) from ¥341 million. In the year, sales for the Other Business segment decreased 18 percent (down 8.3 percent on a currency-neutral basis) to ¥9.2 billion ($81.6 mm), due to some weaker performances for Haglöfs apparel and the effect of foreign exchange rates, despite strong sales of outdoor shoes under the Haglöfs brand. Segment loss was ¥421 million ($3.7 mm), down from a loss of ¥666 million in 2015.
Looking ahead, Asics expects sales to climb 5.2 percent this year to ¥420 billion. Operating income is expected to declined 13.6 percent to ¥22 billion and net profit to slid 16.5 percent to ¥13 billion.
Image courtesy Asics
