Shimano, Inc. again slightly lowered its outlook for the 2023 full year after reporting earnings declined in the first half on a 13.3 percent revenue decline, accelerating the decrease seen in the first quarter. 

Sales in the Bicycle Components segment were down 17.7 percent in the first half, about even with the Q1 decline, while Fishing Tackle segment sales were up 7 percent for the period, in line with the Q1 gain.

Net sales decreased 13.3 percent to ¥263,250 million from ¥303,686 million in the year-ago half. Operating income performance degraded in the second quarter, decreasing 33.4 percent to ¥53,908 million.

Ordinary income decreased 25.7 percent to ¥68,409 million and Net income, attributable to owners of the parent, decreased 26.5 percent to ¥50,378 million, a sequential trend improvement from the first quarter.

Shimano cited many issues that affected results for the first half, including “the prolonged turmoil in Ukraine, interest rate hikes by the central banks of various countries to tame inflation, financial uncertainty in the U.S., and other factors exerted downward pressure on the global economy.” 

From a regional perspective, Shimano sees the following:

  • In Europe, inflation rates slowed down as energy prices fell and consumer confidence started to pick up, although at a low level;
  • In the U.S., personal consumption was sluggish due to uncertainty against a backdrop of political ferment;
  • In China, the normalization of economic activities progressed since the lifting of restrictions on activities; and
  • In Japan, the social situation progressed in its normalization, as seen in the increased number of foreign tourists, and economic recovery was supported by wage increases, public spending and continued easing of monetary policies, among others.

In this environment, Shimano said demand for bikes and fishing tackle continued to be weak and for the first half of fiscal year 2023.

Bicycle Components
Shimano said that although the strong interest in bicycles cooled down, interest in bikes continued as a long-term trend. On the other hand, the company said market inventories generally remained high, despite ongoing supply and demand adjustments.

Segment net sales decreased 17.7 percent from the same period of the previous year to ¥204,986 million, and operating income decreased 39.5 percent to ¥42,093 million. The declines in sales and operating profits were an acceleration of the declines seen in the first quarter.

  • In the European market, retail sales of completed bicycles were said to be “somewhat low,” partly due to the impacts of unfavorable weather conditions in early spring. Market inventories generally remained at high levels;
  • In the North American market, the company said retail sales of completed bicycles remained weak and market inventories were said to be at “a consistently high level”;
  • In the Asian, Oceanian and Central and South American markets, although interest in bicycles was said to be “firm,” sales were described as remaining “somewhat sluggish” due to cooling consumer confidence due to rising inflation;
  • In the Chinese market, sales were said to remain strong, especially for road bikes, owing to the continued popularity of outdoor sports cycling; and
  • In the Japanese market, sales were described as sluggish, affected by the soaring price of completed bicycles due to yen depreciation and other factors and market inventories remained somewhat high.

Still, the Shimano Group reported it received a favorable reception for high-end models for road bikes, including the Shimano 105, sport e-bike components, Shimano Steps series, and other products.

Fishing Tackle
Although the global high demand for fishing tackle cooled, Shimano said interest in fishing continued, gaining recognition again as an outdoor leisure activity.

Segment net sales increased 7.0 percent from H1 last year to ¥58,027 million, and operating income increased 4.5 percent to ¥11,843 million. These results reflected a more moderate increase than seen in the first quarter.

  • In the Japanese market, willingness to buy new products was said to be strong among long-time fishing enthusiasts, and demand for high-priced products remained firm;
  • Overseas, while sales in the North American market softened as demand cooled down, European market sales remained strong backed by stable demand;
  • In the Asian market, Shimano said sales continued to be “favorable,” supported by the spread of fishing culture and strong interest in fishing, and coupled with the resumption of economic activity, there was growing momentum for fishing trips; and
  • In the Australian market, the year reportedly started with “favorable” market conditions; however, sales became somewhat stagnant due to slowing demand. Under these market conditions, order-taking was brisk for the new spinning reels Vanquish and the highest-end model lure fishing rods World Shaula Limited and other products.

Net sales from the Others segment decreased 4.9 percent to ¥236 million and the segment posted an operating loss of ¥28 million yen, following an operating loss of ¥7 million yen for the H1 period last year.

Shimano reported that the consolidated business performance forecasts have been revised downward once again (after a first-quarter revision) in light of current trends in the first half of fiscal year 2023, where market inventories remain high.

“Against this backdrop, retail sales got off to a slow start due to unfavorable weather conditions in the European market in early spring, which is expected to cause a delay in recovery in demand for the Company’s products in the second half of the year,” the company said in its first half 2023 report. “Moreover, production cutbacks at factories are making it difficult for us to absorb the rise in manufacturing cost ratio. Meanwhile, other factors, such as the recording of non-operating income associated with the depreciation of Asian currencies caused by the ongoing U.S. dollar’s appreciation, have been also taken into account.”

Looking ahead, Shimano expects sales of ¥450,000 million in 2023, down slightly from the ¥460,000 million forecast at the end of the first quarter and against ¥500,000 million under its previous guidance at year-end 2022.

Operating income is now seen reaching ¥70,000 million, down from the ¥83,000 million forecast after Q1 and the ¥105,000 million initial forecast. Ordinary income of ¥93,000 million, down from the ¥96,500 million Q1 forecast and versus ¥119,500 million previously forecast at 2022 year-end. Net income is now forecast at ¥69,000 million, just down slightly from the ¥69,500 million Q1 forecast but down more sharply from the ¥86,500 million initial forecast.

Under the updated guidance, sales for 2023 are expected to decline 28.4 percent from ¥628,909 million in 2022, and net income to decline 46.2 percent from ¥128,178 million in the prior year.

Photo courtesy Shimano