Mizuno Corp. operating profits declined 9.5 percent in the first half ended September 30 as a slight improvement in gross margins couldn’t offset the drag from a 5.3 percent in sales. The Americas region returned to profitability.
Companywide, sales declined 5.3 percent to ¥86.9 billion. In Japan, sales decreased due to weak sales of sporting goods and golf although sports facility service business keeps growing. In Americas, sales decreased due to a focus on sales emphasizing profitability. In Europe, sales grew with good sales seen in indoor sports such as handball and volleyball. In Asia/Oceania, sales decreased due to weak running sales in China and Taiwan.
Operating profits reached ¥3.5 billion, down 9.5 percent year-over-year. The improvement of gross margin ratio (up 1.0 point vs last year) and the reduction of expenses were not sufficient to offset the decrease in gross margin.
Gross margin improved to 42.0 percent from 41.0 percent. SG&A expenses were reduced 2.0 percent to ¥33.7 million from ¥33.0 million a year ago but expanded as a percentage of sales by 130 basis points to 38.0 percent.
Ordinary profit reached ¥3.5 billion, down 12.4 percent. The decline was due to the decrease of operating profits and a shrink of foreign exchange gains.
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 fell 3.2 percent to ¥60.5 billion from ¥62.5 billion. Operating income slumped 35.2 percent to ¥2.2 billion from ¥3.4 billion.
Mizuno said Japan saw weak sales in sporting goods stemming from the shrink of player population. Sales also declined in running and walking shoes business. 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 Americas regions, revenues dropped 20.5 percent to ¥9.3 million from ¥11.7 billion. The region showed an operating profit of ¥300 million against an operating loss of ¥100 million a year ago.
Mizuno said the Americas region, “returned to profitability as a result of sales emphasizing profitability, stock control and organizational restructure.”
The future focus in the Americas region is on further improvement in profitability. Mizuno, however, also noted that the region is facing the “challenge for new products and new sales channels.”
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.
Mizuno said the EMEA region benefit from “good sales performance in indoor sports shoes. (e.g. handball and volleyball),” as well as a reduction of purchase costs that contributed to the improvement of gross margin ratio. 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 million from ¥10.2 million. 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 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
