Descente, Ltd. reported that revenues for the fiscal first quarter ended June 30 rose 2.8 percent to ¥27.16 billion ($207.7 million) from ¥25.43 billion in the prior-year comparable period. Japan and South Korea reportedly “progressed as expected” and China’s performance expanded significantly due to “revenge consumption” following the re-opening in January.

Consolidated gross profit rose 5.9 percent year-over-year to ¥69.19 billion ($126.3 million). Gross margin improved 180 basis points to 60.8 percent for the period.

Consolidated operating profit declined year-over-year to ¥1.95 billion ($14.9 million), down 22.9 percent from the prior-year period. Operating margins contracted 240 basis points to 7.2 percent of sales in the quarter.

In addition to the increase in operating profit, due to the growth of the company’s equity-method affiliate companies, Arena Korea Ltd (AK) and Descente China Holding Ltd (DCH), ordinary profit increased 34.3 percent year-over-year to ¥4.49 billion ($34.3 million) for the quarter.

Total company net income grew 35.6 percent year-over-year to ¥3.19 billion ($24.4 million), or 11.7 percent of sales, from ¥2.53 billion, or 8.9 percent of sales in Q1 last year.

Japan Region
In Japan, the company said that in addition to an increase in inbound sales at directly managed stores in metropolitan areas, the athletic category increased its sales. Arena brand reportedly performed well related to World Swimming Championships. Overall Japan’s net sales decreased reportedly due to the slowdown in the golf boom from the prior-year Q1 period and the termination of the license agreement of Marmot in December 2022, but remained in line with the plan. Inbound sales increased mainly at directly managed stores in central Tokyo.

Japan region sales declined 4.3 percent year-over-year to ¥11.05 billion ($84.7 million) for the fiscal first quarter.

  • Descente brand sales declined 4.3 percent to ¥3.81 billion in fiscal Q1.
  • Le Coq Sportif sales slipped 14.5 percent to ¥2.49 billion in the quarter.
  • Munsingwear sales fell 18 percent to ¥1.53 billion in Q1.
  • Arena brand sales grew 7.5 percent in the quarter.
  • Umbro sales inched up 0.2 percent to ¥615 million.

Direct-to-consumer ratio of total sales was 44 percent in the first quarter, up 200 basis points from the end of March 2023. Directly managed stores were 18 percent of total sales in Japan, while Department Stores, B2B and Other were 15 percent and e-commerce was 11 percent of sales in the period. The company had 58 directly managed stores at quarter-end, with Descente accounting for 23 of those stores.

Korea Region
In South Korea, Umbro brand sales grew due to a “high reputation by Generation Z.” Gross profit margin improved in the athletic category as a result of improved sales ratio of regular price items. The golf category decreased due to the slowdown of the golf boom, but the golf shoes developed by Disc Busan performed well. Sales of Arena, which is operated by an equity-method affiliate, recovered as the impact of pool closures disappeared.

Korea region net sales increased 7.7 percent year-over-year to ¥12,27 billion ($93.9 million) for the quarter.

  • Descente brand sales declined 7.1 percent to ¥5.47 billion in fiscal Q1;
  • Le Coq Sportif sales decreased 8.7 percent to ¥3.13 billion in the quarter;
  • Umbro sales grew 14.7 percent to ¥2.41 billion in Q1;
  • Munsingwear sales fell 19.1 percent to ¥440 million; and
  • Arena brand sales grew 158 percent to ¥2.47 in the quarter.

China Region
In China, sales of Le Coq Sportif increased due to a boost in revenge consumption following the re-opening in January 2023.

China region net sales increased 66.4 percent year-over-year to ¥3.21 billion ($24.5 million) for the quarter. The Descente brand, operated by an equity-method affiliate, continued to perform well. Descente brand sales increased 77.8 percent to ¥21.16 billion in fiscal Q1.

  • Le Coq Sportif sales grew 17.9 percent to ¥2.43 million in the quarter;
  • Munsingwear sales increased 42.1 percent to ¥334 million; and
  • Arena brand sales dipped 0.9 percent to ¥444 in the quarter.

Looking ahead, Descente reiterated its fiscal 2023 outlook for net sales of ¥127.0 billion, a 5.3 percent increase over the 2022 results. Operating income is forecast at ¥8.5 billion, a 9.1 percent increase versus the 2022 level. Net profit is forecast and ¥11.0 billion for the year, a 4.3 percent increase versus the 2022 fiscal year result. Net profit excluding non-recurring gains is expected to increase 19.7 percent for the year.

Photo courtesy Descente