Korea-based Fila Holdings Corp. reported earnings declined 15.7 percent in the second quarter ended June 30 despite a 15.0 percent sales gain.

Sales reached KRW 1,171,903 million ($895 mm) against KRW 1,019,354 million a year ago, up 15.0 percent on a reported basis and 4.3 percent on a currency-neutral basis.

Among its segments, Fila brand sales reached KRW 342,926 million against KRW 318,843 million, rising 7.6 percent on a reported basis and 5.4 percent on a currency-neutral basis.

The numbers reflect growth in Fila’s royalty income due to recoveries in many parts of the world, partially offset by the impact of the Fila brand’s ongoing channel adjustment aligned with its five-year strategic plan. The weakness in Fila USA reflected the channel adjustment program, difficult year-ago comparisons and the “challenging market environment caused by inflation and weaker consumer spending in the U.S.” Royalty income in the U.S. also fell sharply due to the expiration of Fila’s license agreement with Kohl’s.

In Fila USA, sales were down 7.5 percent (18.1 percent currency-neutral) to KRW 117,759 million. Fila Korea sales were down 7.8 percent to KRW 128,248 million. Total Fila brand global royalty grew 14.7 percent (2.1 percent on a currency-neutral basis) to KRW 19,747 million.

Sales at Acushnet, the parent of Titleist, FootJoy, Scotty Cameron, Vokey Design, Pinnacle and KJUS, achieved sales of KRW 828,977 million compared with KRW 700,511 million a year ago. Sales were up 18.3 percent year over year on a reported basis and 5.4 on a currency-neutral basis. Acushnet sales growth was led by strong demand in North America.

Fila holds a controlling stake in Acushnet, which is publicly traded on the New York Stock Exchange.

Overall top-line growth also benefited from a favorable foreign-exchange currency rate.

Gross margins for Fila Holdings declined 310 basis points to 48.2 percent from 51.3 percent a year ago.

Operating profit for Fila Holdings came to KRW 152,390 million compared with KRW 348,641 million a year ago, down 12.3 percent on a reported basis and 21.5 percent on a currency-neutral basis.

Fila brand operating profit came to KRW 39,920 million against KRW 51,965 million, down 23.2 percent on a reported basis and 29.5 percent on a currency-neutral basis. The decline was due to gross margin pressure from supply chain constraints and the sales channel adjustments for the Fila brand.

Acushnet’s operating profits were KRW 112,470 million against KRW 121,821 million, down 7.7 percent on a reported basis and 18.1 on a currency-neutral basis. The decline reflects an increase in the accounts payable and distribution cost to support higher demand and investment in distribution/fulfillment capabilities for Acushnet.

Fila Holdings’ net income in the quarter totaled KRW 114,442 million compared with KRW 135,750 million, down 15.7 on a reported basis and 25.2 percent on a currency-neutral basis.

Photo courtesy Fila