Amer Sports has raised its target for organic growth, aiming to reach sales of €3.5 billion without acquisitions in 2020, with at least mid-single digit annual organic sales growth in constant currencies. The target issued last year called for the same level of sales to be achieved through a combination of organic growth and buys.
This is not to say that the group has given up the thought of further acquisitions, but they would represent further upside potential. When setting the previous target, the company had worked out that acquisitions would add about €200 million in turnover.
The Finnish group's financial targets and priorities are unchanged, but the sales target was adjusted as Amer Sports held a presentation for investors in Helsinki last week, detailing the progress of its strategic development plans. Heikki Takala, the group's chief executive, said that its ambition was to grow toward the €4 billion mark in sales in the next five years or more.
Amer Sports is launching a targeted restructuring program intended to free up operating expenses of about €20 million, which will be allocated to the expansion. The company says it will incur costs of €20 million to €25 million for the restructuring measures, which will be recognized in the second half of 2016 and the first half of 2017, and implemented by the end of 2017.
The group told analysts that the acceleration was targeting sales in the range of €1.5 billion for apparel and footwear by 2020 compared with less than €300 million in 2009 and a current annual level in the range of €1 billion. The strategy focuses on the Arc'teryx and Salomon brands, which are both expanding across more consumer segments. Among the latest examples in the market, Arc'teryx has moved into the trail running category.
The diversification strategy adopted by Salomon has worked out well, since the brand's sales have doubled in eight years to about €827 million in 2015, which was an increase of 8 percent. The brand is targeting sales of €1 billion by 2020.
The increase in recent years has been driven by apparel and footwear as Salomon expanded into trail running and turned to more urban consumers with a running range this year. Its apparel and footwear make up about 75 percent of sales, compared with 50 percent in 2009.
The Salomon products displayed at the brand's stand in Friedrichshafen adopted the mountain athletics fits and appearances that have been taken up by quite a few other outdoor apparel brands this year to target more urban consumers. The “Time to Play” pay-off adopted by the French brand earlier this year is going in the same direction of broadening the Salomon brand's positioning. Salomon has also diversified from a geographic standpoint. France makes up less than 10 percent of its sales and the U.S. became its largest market last year.
Other growth drivers for the entire Finnish group's turnover in footwear and apparel are own retail sales, as well as Mavic and Wilson. Mavic unveiled an expanded range of apparel at Eurobike, with a target to rank among the three leading performance cycling apparel brands in Europe, the Middle East and Africa by 2020.
Another target calls for the group's sales to reach $1.5 billion in the U.S. market by 2020, up from about $700 million in 2009 and the current annualized level of about $1.0 billion. The U.S. growth is to be driven by apparel and footwear, as well as increased sales in some areas of the ball sports market, particularly baseball. Fitness is another category where Amer intends to scale up.
The Chinese market is anticipated to roughly double its contribution to group sales at €200 million in 2020. The same goes for own retail sales, which should thus reach more than €400 million. The group has more than 260 own retail locations and it intends to add more than 25 per year. Amer Sports also runs more than 60 online stores, which it wants to expand with more traffic and conversions. Own retail sales already account for about 20 percent of the group's apparel and footwear sales. These categories should remain in focus but the group intends to pilot its own retailing in other categories, aided by new tools for customization.
The expansion plans also call for sales of connected devices and services to double to more than €600 million. Suunto, the group's brand of sports instruments, and Precor, the fitness equipment brand, are both preparing to launch more digital products and services. The Finnish group is integrating sensors into products for basketball and football, among others. More broadly, it intends to ramp up its Amer Sports Connected Digital Ecosystem.
The unchanged financial targets call for annual growth of earnings before interest and tax (Ebit) ahead of net sales growth, excluding items affecting comparability. The ratio of free cash flow to net profit should reach at least 80 percent and the net debt to Ebitda ratio should not reach more than three times.
