Sales of outdoor shoes declined at the Amer Sports group in the first quarter, as the owner of the Salomon brand continued to clean up its distribution, in an effort to reduce promotional sales.
Footwear sales were down by 9 percent to €141.1 million for the three months, which was a decline of 5 percent in constant currencies. Amer Sports said that the cutbacks in footwear distribution were meant to secure sustainable growth for this part of its business, which chiefly consists of Salomon footwear.
| Amer Sports Consolidated Income Statement | |||
| (Million Euros, Quarter ended March 31) | |||
| 2018 | 2017 | % | |
| Outdoor | 381.2 | 394.7 | -3.4 |
| Ball Sports | 164.2 | 185.0 | -11.2 |
| Fitness | 78.4 | 84.5 | -7.2 |
| NET SALES | 623.8 | 664.2 | -6.1 |
| Cost of Goods Sold | 331.9 | 367.3 | -9.6 |
| Licence Income | 1.1 | 1.3 | -15.4 |
| Other Operating Income | 0.6 | 1.8 | -66.7 |
| R&D Expenses | 23.3 | 26.8 | -13.1 |
| Selling & Marketing | 176.5 | 195.0 | -9.5 |
| Admin. and Other Expenses | 53.4 | 49.4 | 8.1 |
| Net Interest expense | 7.4 | 5.2 | 42.3 |
| Pre-Tax | 33.0 | 23.6 | 39.8 |
| Tax | 8.4 | 6.1 | 37.7 |
| NET | 24.6 | 17.5 | 40.6 |
| Euro/Share (Diluted ) | 0.21 | 0.15 | 40.0 |
Heikki Takala, the group's chief executive, told investors that the clean-up was continuing, as the company wants to focus on full-price distribution and online sales. He said that the group was implementing better market segmentation and it made significant cuts in promotional sales, which has contributed to a more attractive mix and improved margins for footwear.
Outdoor apparel sales led by the Arc'teryx brand were down for the three months by 4 percent to €119.3 million, but they moved up by 3 percent in constant currencies. The company said that the order book for the Canadian outdoor apparel brand is strong and that its sales should increase at double-digit rate again for the full year. Arc'teryx was the key driver behind a 20 percent rise in the Amer group's Chinese turnover to €37.7 million.
The Finnish group's outdoor division as a whole suffered a sales decline of 3 percent to €381.2 million, but this amounted to a rise of 2 percent in constant currencies. It was driven by buoyant sales of winter sports equipment. Takala acknowledged that it was a seasonally small quarter for winter sports, but he added that robust sales in the winter bode well for the remainder of the year. Sales of sports instruments jumped by 20 percent to €33.7 million, but the cycling division and its Mavic and Enve brands remained under pressure. The group said that it was adversely impacted by lower OEM orders.
The outdoor division's sales surged by 17 percent in constant currencies in Asia-Pacific and they moved up by 1 percent in Europe, the Middle East and Africa (EMEA) but they suffered a 6 percent hit in the Americas. This was chiefly due to seasonal volatility in Latin America, while U.S. sales were up at single-digit rate. The division's operating profit (Ebit) before one-off items was up by 26 percent to €33.7 million, amounting to an increase of 2.0 percentage points in the Ebit margin to 8.8 percent.
The sales dip of the outdoor division contributed to a drop of 6 percent to €623.8 million for the Amer Sports group in the quarter. This amounted to a rise of 1 percent in constant currencies, including an increase of 4 percent for the fitness division and a decline of 1 percent for the ball sports business.
The group told analysts that it accelerated reforms to raise its online sales as well as its North American and Chinese business. Its direct-to-consumer sales jumped by 17 percent to €57 million for the three months. Own retail sales were up by 16 percent, about half of that coming from comparable store sales growth, while online sales advanced by 22 percent. What Amer Sports described as modern sales channels accounted for about 30 percent of sales.
The ball sports division, which includes the Wilson brand, was worst affected by exchange rate changes. The division's sales shrank by 11 percent in to €164.2 million. This is because most of its sales take place in the Americas, where its underlying turnover was actually flat, but all regions were down in reported terms.
Takala claimed that the group continued to gain market share across all categories in ball sports, but the market remained weak. The reported sales dip of 11 percent was across the individual ball sports and team sports entities, but in constant currencies the former slipped by 4 percent, while the latter managed a 1 percent sales increase. The division's operating profit slipped by 6 percent to €14.9 million for the three months, but that amounted to an improvement in the operating margin.
The Amer group's fitness division, driven by the Precor brand, saw its operating profit excluding one-off items almost evaporate for the quarter. It was down to €0.1 million, compared with €0.7 million for the year-ago period. Sales were down by 7 percent to €78.4 million for the quarter, but they were up by 4 percent in constant currencies. On this basis, the division's turnover increased by 6 percent in the Americas and by 2 percent in EMEA, while it fell by 4 percent in Asia-Pacific. With its expanded product range, Takala said that the fitness division was able to compete adequately for orders in all segments.
Due to its improved channel mix and fewer discounts, the Amer Sports group's gross profit margin firmed up by 2.1 percentage points to 46.8 percent. This helped to raise the operating profit excluding one-off items to €40.4 million, up by 14 percent. The increase even amounted to 40 percent including one-off costs of €6.7 million for the first quarter in 2017.
The group said that wholesale market uncertainties would lead to uneven development throughout the year, but it does expect to raise its sales in constant currencies and its operating profit excluding one-off items for the year.
