Amer Sports, Inc. saw fourth quarter 2023 revenue increase 10 percent year-over-year (YoY) to $1.32 billion. The company said this was an expected deceleration from the third quarter and year-to-date comparative trends due to the supply chain-related sales shift that occurred from the third quarter into the fourth quarter in 2022.

Regional growth was reportedly led by Greater China, which increased 45 percent, where all three segments experienced solid growth, and the APAC region, which rose by 22 percent. The Americas region reportedly grew in mid-single-digits, led by direct-to-consumer (DTC) strength, offset by a decline in wholesale.

Overall DTC channel revenues expanded 37 percent, led by Technical Apparel (Arc’teryx) in the Americas and Greater China regions, with strength in both stores and online.

Wholesale revenues decreased 4 percent, as all three segments experienced single-digit declines said to be due primarily to the sales shift in late 2022 caused by supply chain disruptions as well as high retail inventory levels in the Americas and EMEA regions in the Outdoor Performance (Salomon) and Ball & Racquet (Wilson Sports) segments.

Technical Apparel
In the 2023 fourth quarter, Technical Apparel segment revenue increased 26 percent YoY to $550 million, driven by 42 percent DTC growth, including 33 percent omni-comp growth, partially offset by a 5 percent decline in wholesale. Omni comp is defined as year-over-year revenue growth from owned retail stores and e-commerce sites that have been open for at least 13 months. Arc’teryx continues to experience strong brand momentum across all regions, channels, consumer segments, and product categories. Regionally, Technical Apparel grew at a similar pace of 30 percent in both the Americas and Greater China regions and more than 40 percent in APAC region driven by DTC momentum.

Technical Apparel segment adjusted operating profit margin expanded 40 basis points as compared to the fourth quarter of 2022, said to be driven by gross margin expansion, partially offset by higher investment and operating expenses to support Arc’teryx’s growth. Operating profit for the segment was $128 million in the fourth quarter, compared to $100 million in the prior-year period.

Outdoor Performance
Fourth quarter Outdoor Performance revenue increased 2 percent to $523 million, said to be driven by strong top-line performance in the segment’s winter sports equipment franchise, partially offset by an expected deceleration in Salomon footwear in the wholesale channel. DTC continued to outperform the wholesale market with 33 percent growth, with wholesale negatively impacted by the supply chain-related sales shift from the third quarter into the fourth quarter in 2022. Regionally, Greater China and APAC reported “strong” increases, partially offset by declines in the Americas and EMEA regions.

Outdoor Performance segment adjusted operating profit margin contracted 460 basis points to 9.2 percent of sales, said to be driven by solid gross margin expansion, partially offset by higher investment and operating expenses to support Salomon’s growth opportunities in footwear. Segment operating was $48 million in Q4, compared to $71 million in the prior-year Q4 period.

Ball and Racquet Sports
Segment revenue declined 3 percent to $242 million in the fourth quarter as growth in EMEA and China was reportedly not enough to offset declines in Ball & Racquet’s largest channel, U.S. wholesale. The 2023 fourth-quarter growth in sportswear, golf and balls was more than offset by declines in baseball and racquet. The U.S. sports equipment market was said to be “significantly hampered in 2023” due to the combination of elevated inventories across the industry that spilled over from 2022, combined with more normalized demand growth. Management made the strategic decision in the 2023 fourth quarter to take the promotional actions necessary to begin 2024 with healthy inventories in Ball & Racquet. Wilson continues to be a market share leader in its core businesses of tennis, baseball and inflatables.

Ball and Racquet segment adjusted operating profit margin contracted 900 basis points compared to the fourth quarter of 2022 to negative 10.4 percent due to the promotional inventory actions taken. Operating profit (loss) was a loss of $15 million in Q4 2023, compared to an operating loss of $3 million in Q4 2022.

Income Statement
Consolidated gross margin for the 2023 fourth quarter was 52.0 percent of sales, compared to 50.2 percent for Q4 2022.

SG&A expense for the quarter was $634 million, compared to $469 million for Q4 2022. SG&A expense includes selling and marketing expenses and administrative and other expenses as reported for historical periods.

Operating profit for the 2023 fourth quarter was $60 million, compared to an operating loss of $58 million for Q4 2022.

The 2023 fourth-quarter net loss was $94 million, or a loss of 25 cents per diluted share, compared to a loss of $148 million, or a loss of 39 cents per diluted share, for Q4 2022. Diluted loss per share is said to reflect the share split that occurred in connection with the company’s recent IPO, but does not reportedly include additional shares issued in the IPO which occurred after the fourth quarter ended.

Adjusted gross profit margin rose 170 basis points to 52.2 percent of sales for the 2023 fourth quarter compared to Q4 2022, primarily driven by the company’s highest gross profit margin business, Arc’teryx, growing faster than the other brands, partially offset by a heavily promotional environment in the Ball & Racquet segment. Lower logistic costs, improved sourcing performance, and channel and regional mix also drove gross profit margin expansion.

Adjusted SG&A expenses as a percentage of revenues increased 410 basis points on slower sales growth and represented 42.6 percent of revenues for the 2023 fourth quarter. SG&A deleverage drove a 215 basis point decline in the 2023 fourth-quarter adjusted operating profit margin to 10.4 percent compared to Q4 2022. Key areas of expense growth include variable selling expenses, payroll, and incentives linked to sales, variable marketing expenses, higher rent costs driven by store openings, and strategic investments in IT.

Adjusted net loss was $41 million, or a loss of 11 cents per diluted share, for the 2023 fourth quarter, compared to adjusted net income of $46 million, or 12 cents per diluted share, in the prior-year period.

Full-Year Results
Revenue increased 23 percent to $4.37 billion compared to $3.55 billion in full-year 2022. Regional growth was led by Greater China, which increased 61 percent, where all three segments experienced solid growth, and APAC which increased 40 percent. The Americas region grew 15 percent and EMEA grew 14 percent, each driven by strong DTC growth.

Overall DTC expanded 49 percent year-over-year, led by Arc’teryx in the Americas and Greater China regions. E-commerce also continued its trend of double-digit growth. Wholesale revenues grew 12 percent, as Greater China and APAC ramped up.

Technical Apparel
Full-year segment revenue increased 45 percent year-over-year to $1.59 billion million driven by 57 percent DTC growth, including 55 percent omni-comp growth and 27 percent growth in wholesale. Technical Apparel’s growth was broad-based across regions, channels, and categories. Technical Apparel segment adjusted operating profit margin expanded 410 basis points year-over-year to 19.7 percent driven by gross margin expansion, combined with operating expense leverage driven by the strong top-line momentum.

Outdoor Performance
Full-year segment revenue increased 18 percent year-over-year to $1.67 billion led by EMEA, Greater China and APAC. Outdoor Performance segment adjusted operating profit margin expanded 80 basis points year-over-year to 9.1 percent driven by gross profit margin expansion, partially offset by higher investment and operating expenses to support Salomon’s growth opportunities in footwear and Greater China.

Ball and Racquet Sports
Full-year segment revenue increased 7 percent year-over-year to $1.11 billion as strength in balls was offset by slower sales in tennis, baseball, and golf. Ball & Racquet segment adjusted operating profit margin contracted 310 basis points year-over-year to 2.8 percent due to the promotional inventory actions mentioned above.

Income Statement
Consolidated full-year gross margin for 2023 was 52.1 percent of sales, compared to 49.7 percent for 2022.

SG&A expense was $1.98 billion, compared to $1.52 billion for 2022. SG&A expense includes selling and marketing expenses and administrative and other expenses as reported for our historical periods.

Operating profit for 2023 was $303 million compared to $51 million for 2022.

The net loss was $209 million, or a loss of 54 cents per diluted share, compared to $253 million, or a loss of 66 cents per diluted share. for 2022. Diluted loss per share reflects the share split that occurred in connection with the company’s recent IPO but does not include additional shares issued in the IPO as this reporting period occurred before the IPO.

Adjusted gross profit margin increased 240 basis points year-over-year to 52.5 percent of sales in 2023, primarily driven by the company’s highest gross margin business, Arc’teryx, growing much faster than the other brands, partially offset by a heavily promotional environment in the Ball & Racquet segment. Lower logistic costs, improved sourcing performance, and channel and regional mix also drove gross profit margin expansion.

Adjusted SG&A as a percentage of revenue increased 100 basis points year-over-year and represented 42.7 percent of revenues. Adjusted operating profit margin rose 140 basis points to 9.9 percent of sales. Key areas of expense growth include variable selling expenses, payroll, variable marketing expenses, higher rent costs driven by store openings, and strategic investments in IT.

Adjusted net loss was $135 million, or a loss of 35 cents per diluted share, for the year, compared to a loss of $30 million, or a loss of 8 cents per diluted share, for the prior year.

CEO James Zheng commented, “2023 was another strong year of sales growth and margin expansion for Amer Sports, but we are still in the early stages of our profitable growth journey following our transformation to a brand-direct business model. Led by our flagship brand Arc’teryx, our unique portfolio of premium sports and outdoor brands entered 2024 well positioned to deliver another strong year of profitable growth.”

CFO Andrew Page added “Amer Sports continues to enjoy the financial benefits of our transformation as the company’s revenue and EBITDA margin both experienced healthy expansion in 2023. In conjunction with our IPO in early February, we strengthened our capital structure by retiring approximately $4 billion of shareholder loans. We also refinanced the remaining $1.8 billion of third-party loans to more favorable terms and extended maturity to 2031.”

Page continued, saying, “Strengthening our balance sheet and deleveraging the business will remain a key focus while balancing investments in key growth drivers. We are off to a solid start in 2024 as we continue to enjoy benefits from our business mix shifting toward our high-margin Arc’teryx brand.”

Balance Sheet
Inventories finished 2023 up 21 percent from the end of 2022, less than the company’s 23 percent sales growth rate for the year. Going forward, inventory is expected to grow at the same rate as revenue or slower.

Outlook

Long-term Outlook Algorithm

  • Low double-digit to mid-teens annual sales growth;
  • 300+ basis points of gross margin expansion over the next 3 to 5 years; and
  • 30 to 70 basis points of annual adjusted operating margin expansion.

First Quarter 2024 Outlook
Amer Sports provided the following guidance for the first quarter ending March 31, 2024:

  • Reported revenue growth: 6 to 8 percent
  • Adjusted gross margin: approximately 53.5 percent
  • Adjusted operating margin: 9.0 percent to 10.0 percent
  • Net finance cost: $100 million to $110 million ($45 million to $50 million per quarter on an ongoing basis).
  • Effective tax rate on adjusted pre-tax income: 25 percent to 35 percent
  • Fully diluted share count: 510 million
  • Diluted EPS: $(0.01) to $0.02, this includes an $0.08 to $0.09 negative impact to EPS from non-recurring finance costs related to Amer’s refinancing in February)
  • Technical Apparel: revenue growth above 30 percent, adjusted segment operating margin slightly above 20.0 percent
  • Outdoor Performance: revenue flat year-over-year, mid-single-digit adjusted segment operating margin
  • Ball & Racquet: revenue down double-digits, low- to mid-single-digit adjusted segment operating margin

Full-Year 2024 Outlook
Amer Sports is providing the following guidance for the year ending December 31, 2024:

  • Reported revenue growth: Mid-teens
  • Adjusted gross margin: 53.5 percent to 54.0 percent
  • Adjusted operating margin: 10.5 percent to 11.0 percent
  • D&A: $258 million, including $100 million to $110 million of ROU depreciation
  • Net finance cost: $240 million to $250 million ($180 million to $190 million on an ongoing basis)
  • Effective tax rate on adjusted pre-tax income: 25 percent to 35 percent
  • Fully diluted share count: 510 million
  • Diluted EPS: $0.30-0.40 (this includes an $0.08 to $0.09 negative impact to EPS from non-recurring finance costs related to Amer’s refinancing in February)
  • Technical Apparel: revenue growth above 20 percent, adjusted segment operating margin slightly above 20.0 percent
  • Outdoor Performance: high-single-digit revenue growth, high-single-digit adjusted segment operating margin
  • Ball & Racquet: low- to mid-single-digit revenue growth, mid-single-digit adjusted segment operating margin

Other than revenue, Amer Sports said it only provides guidance on a non-IFRS basis. The company does not provide a reconciliation of forward-looking non-IFRS measures to the most directly comparable IFRS measures due to the difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations without unreasonable efforts.

Image courtesy Amer Sports/Wilson