Asics Corporation released its 2023 financial report and suggested that in addition to Performance Running, 2023 was also a year in which the spillover effect of the Asics brand into Core Performance Sports and SportStyle was evident. In addition to calling out significant year-over-year (YoY) growth in all categories, Asics also pointed to the fact that category profits, which had been in the red until a few years ago, exceeded ¥10 billion for the first time in each category and considered it a significant milestone achievement for the Japan-based brand.

“With the Asics brand at the core, we believe that the composition of our growth will become even clearer in the future, not only in Performance Running but also in Core Performance Sports and SportStyle as a whole,” the company wrote in its year-end financial report. Still, North America heavily relies on the Performance Running and Core Performance Sports categories.

The company continued to say that the Asics brand has begun to firmly penetrate markets in Southeast and South Asia and South America, which it sees as future growth drivers from a regional perspective. Although these regions account for a small percentage of the company’s overall sales, Asics said the speed of its growth is remarkable.

Asics also called out its Onitsuka Tiger business, which the company reported has also made great strides “as a rare Japanese luxury lifestyle brand.” In addition to steady growth in Greater China and Southeast and South Asia, where the brand is well-established, the company reported that 2023 saw a full recovery in inbound demand for the first time since 2019, just before the pandemic, and growth in Japan doubled compared to the previous year. Onitsuka Tiger also saw category profits exceed ¥10 billion for the first time.

Consolidated net sales for the year increased 17.7 percent to ¥570.46 billion, which it said was due to strong sales in all categories, including the fluctuation in the FX rate.

Category Review

  • Performance Running net sales increased 10.7 percent to ¥285.93 billion due to strong sales in all regions. Category profit reportedly increased 1.7 percent to ¥50.02 million, primarily due to the impact of the increase in net sales.
  • Core Performance Sports net sales increased 33.2 percent to ¥72.15 billion for the year, reportedly due to the strong sales in all regions. Category profit reportedly increased 35.0 percent to ¥12.81 billion, mainly due to the impact of the increase in net sales.
  • SportStyle net sales increased 36.3 percent to ¥59.26 billion for the year, said to be due to the strong sales in all regions. Category profit increased 87.5 percent to ¥12.05 billion, mainly due to the impact of the increase in net sales.
  • Apparel & Equipment net sales increased 2.6 percent to ¥36.19 billion due to the strong sales in Greater China and Oceania regions. The category returned to profitability in 2023, posting an operating profit of ¥1.00 million, mainly due to an improvement in gross margin.
  • Onitsuka Tiger net sales increased 40.2 percent to ¥60.304 billion due to strong sales in all regions. Category profit increased significantly 107.6 percent to ¥15,360 million, mainly due to the impact of the increase in net sales.

Regional Review

  • Japan region net sales increased 10.1 percent to ¥135.85 billion due to the strong sales of the Onitsuka Tiger and Core Performance Sports categories. Segment income increased significantly, up 111.6 percent to ¥12.80 billion, mainly due to an improvement in gross margin and to the impact of the increase in net sales.
  • North America region net sales increased 8.8 percent to ¥114.62 billion due to the strong sales of the Performance Running and Core Performance Sports categories. Segment income increased significantly to ¥1.44 billion, mainly due to an improvement in gross margin and the impact of the increase in net sales described above.
  • Europe region net sales increased 13.7 percent to ¥147.98 billion, which the company attributed to the strong sales in all categories. Segment income increased 26.1 percent to ¥14.19 billion, mainly due to the impact of the increase in net sales.
  • Greater China region net sales increased 24.4 percent to ¥77.62 billion in 2023 due to strong sales in all categories. Segment income increased 30.2 percent to ¥13.11 billion, mainly due to the impact of the increase in net sales.
  • Oceania region net sales increased 15.5 percent to ¥38.46 billion for the full year, said to be due to the strong sales in all categories. Segment income increased 19.8 percent to ¥6.24 billion, mainly due to the impact of the increase in net sales.
  • Southeast and South Asia regions net sales increased 47.0 percent to ¥27.12 billion in 2023 due to strong sales in all categories. Segment income increased 66.6 percent to ¥4.97 billion primarily due to the impact of the increase in net sales.
  • Other regions net sales increased 14.2 percent to ¥49.84 billion in 2023, which was said to be due to the strong sales of the Performance Running category and Onitsuka Tiger category. Segment income increased 20.7 percent to ¥4.40 million, mainly due to the impact of the increase in net sales.

Income Statement

  • Gross profit increased 23.3 percent to ¥296.90 billion due to the impact of the increase in net sales.
  • Gross margin rose 230 basis points to 52.0 percent of sales in 2023, compared to 49.7 percent in 2022.
  • Operating income increased 59.4 percent to ¥54.215 billion due to the impact of the increase in net sales.
  • Ordinary income increased 63.9 percent to ¥50,67 billion, said to be primarily due to the impact of the increase in net sales and profit.
  • Profit attributable to owners of the parent company increased 77.4 percent to ¥35.27 billion, mainly due to the impact of the increase in net sales and profit, as well as due to gain on sale of shares of subsidiaries and associates resulting from the sale of Haglöfs AB (read SGB Media‘s coverage here).

Balance Sheet

  • Total assets at year-end increased 9.2 percent from the end of the previous fiscal year to ¥464.12 billion, total liabilities increased 2.0 percent from the end of the previous fiscal year to ¥257.32 billion, and total net assets increased 19.7 percent from the end of the previous fiscal year to ¥206.80 billion.
  • Current assets increased 9.3 percent to ¥323.52 billion, mainly due to increased cash and deposits.
  • Non-current assets increased 9.0 percent to ¥140.59 billion, mainly due to increased software.
  • Current liabilities decreased 4.6 percent to ¥143.65 billion, mainly due to decreased short-term borrowings.
  • Non-current liabilities increased 11.8 percent to ¥113.67 billion, mainly due to increased bonds payable.
  • Net assets increased 19.7 percent to ¥206.80 billion, mainly due to increased retained earnings.

As for cash flows as of December 31, 2023, cash and cash equivalents increased ¥47.50 billion from the end of the previous fiscal year to ¥113.30 billion. The respective cash flow positions and main factors behind the changes are as follows:

Cash flows from operating activities
Net cash provided by operating activities was ¥90.10 billion, an increase of ¥111,523 million compared with the previous fiscal year. Major sources of cash were said to include ¥50.57 billion from profit before income taxes, ¥17.37 billion for a decrease in inventories, ¥8.48 billion for a decrease in trade receivables, and ¥16.50 billion from depreciation and amortization, while major uses of cash were reportedly ¥12.72 billion for income taxes paid.

Cash flows from investing activities
Net cash used in investing activities was ¥4.64 billion, a decrease of ¥9.84 billion compared with the 2022 fiscal year. Major sources of cash were ¥7.96 billion for proceeds from the sale of shares of subsidiaries resulting in a change in scope of consolidation, while major uses of cash were ¥10.34 billion for purchases of intangible assets and ¥5,185 million for purchases of property, plant and equipment.

Cash flows from financing activities
Net cash used in financing activities was ¥40.25 billion, an increase of ¥42.57 billion compared with the previous fiscal year. Major sources of cash were ¥24.87 billion for a net increase in the issuance of bonds, while major uses of cash were ¥22 billion for the repayments of short-term borrowings, ¥18.54 billion for the repayments of lease liabilities, ¥15 million for the redemption of bonds and ¥9 billion for cash dividends paid.

Forecast for the fiscal year ending December 31, 2024
Based on the “Mid-term Plan 2026” formulated in November 2023, the company aims for sustainable growth towards achieving “Vision2030” by further promoting “Global x Digital,” setting numerical targets for the fiscal year ending December 2026, including “consolidated operating income of ¥80 billion or more,” “consolidated operating income ratio of around 12.0 percent,” and “ROA of around 10 percent.”

Outlook
Regarding the performance for the fiscal year ending December 2024, although there is uncertainty in the external environment, Asics said it expects an increase in revenue and profit by incorporating growth in Core Performance Sports, SportStyle and Onitsuka Tiger, with Performance Running as the core business.

  • Sales to increase 3.4 percent to ¥590 billion;
  • Operating income to expand 7.0 percent to ¥58 billion;
  • Operating margin to increase 30 basis points to 9.8 percent of sales;
  • Ordinary income to increase 4.6 percent to ¥53 billion; and
  • Net income to grow 2.1 percent to ¥36 billion.

From a category perspective for 2024, Asics is forecasting:

  • Performance Running to grow 5 percent to ¥300 billion;
  • Core Performance Sports to expand 11 percent to ¥80 billion;
  • SportStyle to increase 15 percent to ¥68 billion;
  • Apparel & Equipment to decline 3 percent to ¥35 billion; and
  • Onitsuka Tiger to increase 11 percent to ¥67 billion.

From a regional perspective for 2024, Asics expects:

  • Japan region sales to grow 2 percent to ¥138 billion;
  • North America sales to decline 3 percent to ¥111 billion;
  • Europe region to be flat at ¥148 billion;
  • Greater China region to jump 20 percent to ¥93.5 billion;
  • Oceania region to decline 2 percent to ¥37.5 billion; and
  • Southeast and South Asia regions to surge 22 percent to ¥33 billion.

 Image courtesy Asics. Pictured Conan Gray, Onitsuka Tiger’s brand ambassador