Descente Ltd. reported net income rose nearly five times faster than sales in the fourth quarter ended March 31 thanks to currency effects that made it more competitive in Korea and favorable winter weather in its home market of Japan.
The Japanese maker of snow sports apparel and a distributor of more than a dozen licensed athletic, golf and outdoor brands, reported net sales reached ¥36.8 billion ($307 mm) in the fiscal fourth quarter ended March 31, up 8.2 percent from the year earlier. Gross margin surged 550 basis points to 57.4 percent.
SG&A expense rose to 47.0 percent of net sales, up from 45.0 percent in the fiscal fourth quarter of 2014. Operating margin was 10.4 percent, up 250 basis points. Descente reported net income of ¥2.42 billion ($20 mm), up 39.9 percent.
For the full fiscal year ended March 31, Descente's sales in Japan grew 5.2 percent to ¥56.3 billion ($512 mm) while segment income rose 26.0 percent to ¥1.04 billion ($9 mm).
In Asia, sales rose 32.3 percent to ¥65.8 billion ($599 mm) for the year ended March 31, while segment income rose 45.9 percent to ¥8.17 billion ($74 mm), with big gains in Korea. Demand in China also remained strong.
Break even in North America
In North America, where Descente focuses primarily on selling ski wear under its owned Descente brand, sales reached ¥1.10 billion ($10 mm), up 23.8 percent compared with fiscal 2014. The segment nearly broke even for the second year in a row with a loss of ¥154 million, or less than $150,000.
Global Athletic Wear and related product sales reached ¥78.2 billion ($712 mm), up 19.1 percent from fiscal 2014. In Japan, sales of Descente and La Coq Sportif were flat and Umbro and Ally declined, while Descente and Le Coq Sportif sales were strong in Korea.
Global Golf Wear and related product sales were flat at ¥33.7 billion ($307 mm) as Munsing and Le Coq Sportif sales declined in Japan, but Le Coq Sportif performed well in Korea.
Sales of Outdoor Clothing and related products grew 5.6 percent ¥11.2 billion ($102 mm) compared with fiscal 2014.
Slower growth in Fiscal 2016
While Descente expects the economic recovery to continue in Japan, the company said the outlook in the rest of its markets is less certain. The company forecast Fiscal 2016 net sales will grow in the 12 percent range for the second consecutive year to ¥138 billion. Operating income is expected to grow in the 9.5 percent range to ¥10.5 billion, down greatly from the 45.7 percent seen in fiscal 2015. Net income growth is also expected to slow to the 11 percent range and reach ¥7.3 billion, or ¥96.9 per share.
In addition to its own brand, Descente’s companies and affiliates manufacture and distribute more than a dozen apparel brands for cycling, golf, outdoor, racquet, snow sports and volleyball under license for the Asian markets, including China, Hong Kong and Korea. Licensed brands include Cutter & Buck, Le Coq Sportif, Marmot, Munsingwear and Umbro.
