Mizuno’s Americas Region Returns To Profitability In Six Months

Mizuno Corp. reported that sales in the Americas dropped 16 percent in the second quarter ended September 30 but the region returned to the black in the six months.

Revenues in the three months fell to  ¥4.2 billion from  ¥5 billion. The figures were achieved by subtracting first-quarter results from six-month figures. Profitability figures for the first quarter weren’t attainable.

In the half, however, the region showed an operating profit of ¥300 million against an operating loss of ¥100 million in the 2017 half. Mizuno had lost ¥1 billion in the 2016 first half in the region and ¥100 million in the 2015 first half.

Mizuno said the Americas region, led by Mark O’Brien since the beginning of 2017, will become the next president of Mizuno USA at the end of the year.

“returned to profitability as a result of sales emphasizing profitability, stock control and organizational restructure.”

Revenues in the Americas region in the latest half sunk 20.5 percent to ¥9.3 million from ¥11.7 billion in the same period a year ago. The decline marked the third straight year of declines. Revenues were down 10 percent in the 2016 first half in the region and 20.2 percent in the 2015 first half.

The future focus in the Americas region is on further improvement in profitability. Mizuno, however, also cautioned that the region is facing the “challenge for new products and new sales channels.”

Companywide, Mizuno’s operating profits were down both in the second quarter and six months due to lower earnings in its home market of Japan, which accounts for about 70 percent of sales.

In the quarter, sales were down 3.9 percent to  ¥44.1 billion, pulled down by the Americas 16 percent tumble. Sales dipped 2.5 percent in Japan to  ¥31.4 million and were down 4.2 percent to  ¥4.6 billion in the Asia/Oceania region. EMEA revenues were up 5.1 percent to 4.1 billion.

Operating earnings were down 8.7 percent to  ¥2.1 billion. Benefiting from lower taxes, net earnings rose 6.7 percent to  ¥1.6 billion.

In the half, companywide sales declined 5.3 percent to ¥86.9 billion.

Operating profits reached ¥3.5 billion, down 9.5 percent year-over-year. Gross margin improved to 42.0 percent from 41.0 percent. SG&A expenses were reduced 2.0 percent to ¥33.7 million year over year but expanded as a percent of sales by 130 basis points to 38.0 percent. Net income reached ¥2.4 billion, off 3.8 percent. Lower tax expense lessened the impact of lower operating profits.

By region, sales in Japan in the half fell 3.2 percent to ¥60.5 billion from ¥62.5 billion. Operating income slumped 35.2 percent to ¥2.2 billion. Mizuno said Japan saw weak sales in sporting goods stemming from the shrink of sports participation. Sales also declined in running and walking footwear. Steady growth was seen in sports facility service business. Looking ahead on the Japan region, Mizuno said it’s focusing on the development of lifestyle related products and new sales channels, as well as applying sporting technology such as carbon processing to other business fields.

In the EMEA region, revenues advanced 6.8 percent to ¥7.9 billion from ¥7.4 billion a year ago. Operating income improved to ¥300 million from ¥100 million a year ago. The EMEA region benefited from healthy sales of indoor footwear, such as ones used for handball and volleyball. The EMEA region plans to focus on expansion of tennis and indoor sports shoes business, as well as the development of casual footwear.

In the Asia/Oceania region, sales dropped 8.8 percent to ¥9.3 billion. Operating profits were ¥600 million versus ¥500 million a year ago. Weak sales were seen in running shoes in China and Taiwan that offset continued growth in South Korea. A focus going forward in the region is on the extension of the competitive sports business. (e.g. football, badminton, table tennis), as well as improvement in Southeast Asia.

Among categories, sales of Footwear 8.0 percent in the half to ¥25.3 billion from ¥27.5 billion a year ago. Apparel slid 4.4 percent to ¥26.3 billion from ¥27.5 billion. Equipment sales reached ¥20.2 billion against ¥21.8 billion, a decline of 7.3 percent. In the Service/Others segment, sales rose 1.3 percent to ¥15.2 from ¥15.0 million.

Image courtesy Mizuno