Asics Americas First-Quarter Sales Slump on New Pressures

Asics America suffered a 5.5 percent decline in sales on a currency-neutral basis in the first quarter with a decline of 7.7 percent on the same basis in the United States.

In a statement, Asics America blamed the sales decline on “some dynamic shifts” within the industry. These include point-of-sale data that showed performance footwear sales across retail were down in February and March. Further, the industry is seeing a major shift as brick-and-mortar retailers feel the competition from online retailers, forcing large national sporting goods stores to file for Chapter 11 bankruptcy in March.

“Our industry is experiencing some dynamic shifts, and we are taking a close look at our business to not only respond to industry changes, but lead in its evolution,” said Gene McCarthy, Asics Americas’ president and CEO, in a statement. “We have been a leader in performance running for more than 65 years and to ensure future growth and momentum, we are making some necessary changes, including the acquisition of the fitness tracking app Runkeeper and hiring top talent from across the industry.”

In a separate statement, Asics Corp. reported revenues in the Americas region, which includes the U.S., Canada, Mexico and Brazil, declined
8 percent to ¥31.5 billion ($288.1 million). The corporate parent attributed the decline to the “effect of changes in the retail market and intensifying competition, in addition to the effect of foreign exchange rates.”

Operating earnings in the Americas region tumbled 64 percent to ¥1.07 billion ($9.8 million) and were down 63.1 percent on a currency-neutral basis. The corporate parent said the profit decline in the Americas was mainly due to an increase in its cost-of-sales ratio and a recording of allowance for doubtful receivables, presumably tied to the bankruptcies of Sports Authority and Sport Chalet. The declines came despite
efforts to reduce advertising expenses and other expenses.

Asics America noted in its statement that the company’s February acquisition of the RunKeeper fitness app, which has more than 33 million registered users in the United States and worldwide, will get the brand “closer to the consumer and support their fitness journey.”

The Asics lifestyle division saw an increase of 36.7 percent in the Americas region in the Asics Tiger shoes category fueled by strong sales of the Asics GEL-Lyte III and GEL-Kayano Trainer. Asics America also launched the sleek FuzeX collection aimed at younger runners. Finally, its global brand campaign, ‘Want It More’, designed to support the brand’s global strategy to reach a wider, younger audience beyond running, was introduced.

Companywide, Asics Corp.’s first-quarter sales inched up 0.3 percent to ¥117.8 billion ($1.08 billion). Gross profit decreased 0.8 percent to ¥52.2 billion ($477.5 million) due to an increase in cost of sales ratio mainly caused by the effect of fluctuations in foreign currency exchange rates.

Domestic sales decreased 0.2 percent to ¥32 billion ($292.3 million), mainly due to weak sales of sportswear and equipment, despite strong sales of running shoes, Onitsuka Tiger shoes, and Asics Tiger shoes. Overseas sales increased 0.5 percent to ¥85.8 billion ($786 million), due to strong sales of running shoes and Asics Tiger shoes, despite the effect of foreign exchange rates caused by the strong yen.

Selling, general and administrative expenses decreased 1.2 percent to ¥36.8 billion ($336.5 million) mainly due to a decrease in advertising expenses and the effect of foreign exchange rates. As a result, operating profits inched up 1.5 percent to ¥15.4 billion ($140.8 mm). Net income climbed 9.5 percent to ¥9.3 billion ($85.1 mm).

In its home market in Japan, sales, including intersegment revenues, slumped 4.3 percent to ¥36.3 million ($332 million). Operating income vaulted 45.8 percent to ¥3.6 million ($32.9 million). Asics said the region’s performance benefited from de-emphasizing lower-margin products and its lean organization structure.

In Europe, sales inched up 0.5 percent to ¥31.8 billion ($291 million) and increased 6.7 percent on a currency-neutral basis. Steady sales of running shoes helped offset the effect of foreign exchange rates. Operating income was off 4.2 percent to ¥4.04 billion ($37 million) but increased 1.6 percent on a currency-neutral basis. The net earnings decline was mainly due to the impact of an increase of purchasing costs arising from the effect of foreign exchange rates.

In the Oceania/SouthEast and South Asia area, sales improved 15.3 percent to ¥7.3 billion ($66.8 million) and increased 26.5 percent on a currency-neutral basis.

Operating profits climbed 21.5 percent to ¥1.5 billion ($13.7 million) and climbed 33.3 percent on a currency-neutral basis.

In East Asia, sales grew 23.2 percent to ¥12.3 billion ($112.5 million) and 34.2 percent on a currency-neutral basis. Operating earnings surged 71.7 percent to ¥2.56 billion ($23.4 million) and climbed 85.6 percent on a currency-neutral basis.

In Other Business segment, sales decreased 9.5 percent to ¥3.05 billion ($28.1 million). The decline was due to some weaker performances such as outdoorwear under the HaglöFs brand and the effect of foreign exchange rates. The segment showed a loss of ¥47 million ($430,000) against earnings of ¥131 million the prior year.

Asics maintained its guidance for the half and full year. It expects sales to decline 1.2 percent in the first half to ¥219 billion while operating income is projected to decline 27.7 percent to ¥10.5 billion. With a second-half rebound, sales for the full year are expected to increase 2 percent to ¥437 billion and earnings are projected to expand 80.7 percent to ¥18.5 billion.