Amer Sports, which is close to completing its mega-merger with China’s Anta Sports, reported a “solid” fourth quarter with slightly lower earnings but improving sales momentum. The gains were led by its Arc’teryx and Peak Performance apparel brands, strong DTC growth, and accelerated growth in China and the U.S.

The company’s brands include Salomon, Arc’teryx, Peak Performance, Atomic, Mavic, Suunto, Wilson and Precor.

“We closed the year 2018 with a solid Q4,” said Heikki Takala, President and CEO.

Net sales in the quarter improved 11.2 percent to €874.2 million ($991 mm). In local currencies, sales were up 10 percent with a boost from the acquisition of Peak Performance. Organic growth was 5 percent.

The gains on a currency-neutral basis were led by Outdoor, its largest segment that saw a gain of 13 percent. Ball Sports’ revenues inched up 1 percent on a currency-neutral basis. Fitness was ahead 9 percent on a currency-neutral basis.

By region, EMEA sales in the quarter reached €396.3 million, up 10.0 on a reported basis and ahead 11 percent on a currency-neutral basis. Americas’ sales climbed 14.3 percent to €359.8 million and added 11 percent on a currency-neutral basis. Sales in the Asia Pacific region increased 6.3 percent on a reported basis to €118.1 million and up 5 percent on a currency-neutral basis.

EBIT excluding items affecting comparability (IAC) dipped 1.4 percent to €96.7 million from €98.1 million a year ago.

Gross margin excluding items IAC was 44.6 percent against 44.4 percent in the same period a year ago. EBIT benefited by approximately €36 million by the increased sales in local currencies and approximately €1 million from the increased gross margin. Operating expenses increased by approximately €37 million.

Other income and expenses and currencies had a negative impact on EBIT of approximately €1 million. Non-recurring items were a negative €12.9 million versus a negative €5.4 million a year ago. On a reported basis after the non-recurring charge, EBIT was €83.8 million against €92.7 million.

For the full year:

  • Net sales reached €2.68 billion, up from €2.57 billion. In local currencies, net sales grew 7 percent. Organic growth was 4 percent.
  • EBIT excluding IAC was €231.2 million, up from €214.4 million, improving from 8.6 percent of sales from 8.3 percent. IAC came to a loss of €22.3 million against a loss of €44.9 million a year ago.
  • EPS excluding IAC totaled €1.23, up from €1.18. Earnings per share came to €1.08 against €0.80.

Heikki Takala, president And CEO, said the 10 percent top-line growth in the fourth quarter and 5 percent organic growth was driven by the company’s strategic acceleration priorities and ongoing transformation. Growth was again strongest in Apparel, up 41 percent; boosted by the acquisition of Peak Performance; D2C, up 23 percent; and e-tail, ahead 5 percent.

By region, strength was led in China, up 16 percent, and the U.S., 10 percent. Fitness grew 9 percent but “profitability requires further work,” said Takala.

In the fourth quarter, he said Amer proceeded the sale of the Cycling business, which includes Mavic, and the company “continued to invest into future growth to ensure a strong pipeline of initiatives for 2019 and beyond.”

Takala said, “In 2018, we delivered again record sales and profits as we closed the ninth consecutive year of profitable growth and broad-based improvement. We continued to drive our strategic transformation. Apparel became our largest business area, and Softgoods now represents 40 percent of our sales. Modern channels (own D2C and e-tail) reached 30 percent of our sales, and China and USA now represent 45 percent of the company sales. In short, our strategies are delivering results with the vast majority of our businesses making good progress. I want to thank our organization for the strong contribution in 2018, looking forward to another good year of growth and improvement in 2019.”

Outdoor Boosted By Apparel Momentum

Further elaborating on each segment’s performance, the Outdoor segment’s net sales in the quarter totaled €574.0 million, an increase of 13 percent in local currencies. Organic growth was 5 percent.

Apparel grew by 41 percent, driven by Arc’teryx and Peak Performance. Footwear declined 6 percent, Winter Sports Equipment grew 6 percent and Sports Instruments sales added 2 percent

In 2018, Outdoor sales were €1.66 billion, an increase of 10 percent in local currencies driven by the acquisition of Peak Performance. Organic growth was 4 percent. Own retail and e-commerce continued to perform well. Strong growth in Asia Pacific continued, driven by China and Japan.

Apparel in the year grew 25 percent on a currency-neutral basis to €585.5 million, driven by Peak Performance and Arc’teryx. Footwear declined 4 percent on a currency-neutral basis to €469.5 million due to the consolidation of the global distribution footprint.

Winter Sports Equipment sales increased 8 percent on a currency-neutral basis to €446.3 million due to continued strong momentum in all brands, geographical regions, product categories and the OEM business. Sports Instruments sales on a currency-neutral basis advanced 14 percent to €160.0 million, driven by product portfolio and channel expansion.

By region in the quarter, sales on a currency-neutral basis grew 13 percent in the EMEA region, 17 percent in the Americas and 9 percent in the Asia Pacific region. In the year in local currencies, sales grew 11 percent to €967.9 million in the EMEA region, 5  percent to €438.5 million in the Americas, and 15 percent to €254.9 million in the Asia Pacific region.

In the quarter, EBIT excluding IAC in the Outdoor segment was €86.6 million, up from €81.4 million. Increased sales in local currencies had a positive impact of approximately €31 million on EBIT while increased gross margin had a positive impact of approximately €6 million. Operating expenses increased by approximately €31 million. Other income and expenses and currencies had a negative impact of approximately €1 million on EBIT.

For the full year, Outdoor EBIT excluding. IAC was €205.4 million against €178.4 million. Increased sales in local currencies had a positive impact on EBIT of approximately €71 million and increased gross margin a positive impact of approximately €16 million. Operating expenses increased by approximately €60 million.

Bats Gains Help Offset Weakness in Racquet Sports/Team Inflates For Ball Sports

In the quarter, Ball Sports’ net sales totaled €167.7 million, up from €163.0 million. In local currencies, sales inched up 1 percent. Individual Ball Sports in local currencies declined 6 percent to €59.4 million while Team Sports grew 5 percent to €108.3 million.

In 2018, Ball Sports’ net sales were €638.1 million, down from €659.0 million. In local currencies, net sales increased 1 percent. Individual Team Sports were down 3 percent in local currencies to €278.3 million; Team Sports revenues were up 4 percent to €359.8 million. The Baseball segment grew 11 percent in the year with bat business expanding 27 percent. Those gains weren’t able to offset a 4 percent decline in Racquet Sports and Team Inflates.

By region, sales on a local-currency basis in the Ball Sports segment in the quarter were down 15 percent on a currency-neutral basis in the EMEA region, up 6 percent in the Americas and down 11 percent in the Asia Pacific region.

In the year, sales on a local currency basis were down 5 percent to €110.0 million in the EMEA region, up 3 percent to €455.4 million in the Americas, and down 3 percent to €72.7 million.

In the quarter Ball Sports’ EBIT excluding IAC was €11.2 million, down from €13.8 million. Lower gross margin had a negative impact of approximately €1 million. Operating expenses increased by approximately €3 million. Other income and expenses and currencies had a positive impact of approximately €2 million on EBIT.

In 2018, Ball Sports EBIT excluding IAC was €44.8 million against €45.2 million. Increased sales in local currencies contributed to EBIT by approximately €2 million and higher gross margin had a positive impact of approximately €3 million. Operating expenses increased by approximately €4 million. Other income and expenses and currencies had a negative impact of approximately €1 million on EBIT.

Fitness Regains Top-Line Momentum

In the Fitness segment, sales were €132.5 million, increasing 9 percent in local currencies driven by strong sales in budget club customer segment.

Sales in local currencies were up 5 percent in the in the EMEA region, 10 percent in the Americas and ahead 13 percent in the Asia Pacific region. In the year, sales in local currencies were down 3 percent to €84.7 million in the EMEA region, up 5 percent to €229.9 million in the Americas region and up 9 percent to €64.2 million in the Asia Pacific region.

In the quarter, Fitness EBIT excluding IAC was €10.6 million, down from €12.4 million. Increased sales in local currencies had a positive impact of approximately €4 million on EBIT while declined gross margin had a negative impact of approximately €3 million. Operating expenses increased by approximately €1 million. Other income and expenses and currencies had a negative impact of approximately €2 million on EBIT.

In 2018, Fitness EBIT excluding IAC was €11.9 million, down from €20.1 million. Increased sales in local currencies had a positive impact of approximately €5 million on EBIT while declined gross margin had a negative impact of  approximately €9 million. Operating expenses increased by approximately €3 million. Other income and expenses and currencies had a negative impact of approximately €1 million on EBIT.

Amer’s board has recommended the shareholders approve the merger with Anta Sports. The tender offer commenced on December 20 and expires on February 28.

Regarding its outlook for 2019, Amer would only say it expects sales in local currencies as well as EBIT excluding IAC to increase from 2018. Amer wrote in its statement, “The company will prioritize sustainable, profitable growth, focusing on its strategic priorities in Apparel and Footwear, Direct to Consumer, China, and USA, whilst continuing its consumer-led transformation.”

Image courtesy Arc’Teryx