Descente Ltd. reported a loss in the fiscal six months ended September 30 as sales were down 34.9 percent in the six months.
Sales reached ¥42,897 million, down from ¥65,926 million a year ago. The operating loss was ¥2,449 million against operating earnings of ¥2,638 million a year ago. The net loss was ¥1,265 million versus net earnings of ¥2,210 million a year ago.
In its statement, Descente said although sales and profits declined compared to the previous fiscal year, both sales and profits exceeded its forecasts provided on July 15. Descente said, “In the first half of FY2020, as in the first quarter of the fiscal year, the company was affected by the spread of COVID-19, and faced harsh business conditions, due to decline in consumption related to the cancellation or downsizing of various events and competitions. Also, the outlook for the future remains uncertain.
“Although e-commerce sales expanded in Japan and China due to increased demand for consumption from staying at home, real store sales declined significantly due to the impact of COVID-19, resulting in a year-on-year decrease in net sales. Although gross profit decreased significantly due to a decline in net sales, SG&A expenses also decreased due to a reduction in marketing expenses resulting from event cancellations, etc., and a decrease in sales commissions linked to sales in South Korea. But operating income did not cover the significant decrease in gross profit, and decreased year-on-year.”
Descente China Holding Limited (DCH), an equity-method affiliate, recorded an increase in earnings due to favorable business performance despite COVID-19, and e-commerce sales doubled from the previous year. On the other hand, other equity method affiliates saw an expanded loss which resulted in a decrease in ordinary profit.
By region, sales in Japan were ¥19,652 million, down 32.9 percent. Descente said about the Japan region, “Since July, our sell-through has been on a recovery trend, but overall sales at real stores declined partly due to a decrease in inbound customers. In order to strengthen our sell-through capabilities, we have switched some of our business dealings with clients from consignment transactions to digestion transactions. In view of the sales situation during the first half of the fiscal year and future sales forecasts, we have reduced the inventory of autumn-winter products by canceling and adjusting part of production and orders. In-house e-commerce sales increased significantly from the previous year due to various measures such as a campaign to celebrate the second anniversary of the establishment of the website and customer inducement through live commerce. But even including reductions in SG&A expenses such as advertising and sales promotion expenses, they did not cover the decrease in sales at real stores, resulting in a significant decrease in both sales and profit.”
South Korea’s sales were ¥21,009 million, down 35.9 percent. Descente said, “Although sell-through has been on a recovery trend since April, sales declined from January to March due to the impact of COVID-19. We implemented new measures, the launch of online-only products, and reduced SG&A expenses to a certain extent, such as a decrease in sales commissions linked to sales, but as a result, sales and operating income decreased significantly.”
China’s sales were down 22.9 percent to ¥2,006 million. Descente said, “At one time, there were signs of recovery from the impact of COVID-19, but sales in Hong Kong declined after April due to the impact of the second wave. A review of overall SG&A expenses such as distribution costs and government support measures contributed to decreasing the loss from the previous year.”
In the Others segment, sales were ¥228 million, down 82.0 percent. Descente said, “Although net sales decreased year-on-year due to the withdrawal of Inoveight Group and the suspension of Descente Athletic Americas Inc., Descente North America Inc. and Singapore Descente PTE Ltd., losses decreased due to a decrease in fixed costs of the above subsidiaries.”
Descente did not change its outlook for the fiscal year. The company expects sales of ¥101,000, down 18.9 percent; operating earnings of ¥500 million, up 31.7 percent; and net earnings to reach ¥5,000 million, flat against year-ago levels.
Further details can be read here.
Photo courtesy Descente
