China has become the second-largest market for Arc'teryx, after a buoyant year that saw the brand's global sales move up to about €340 million, amounting to a strong double-digit sales increase in constant currencies.
Arc'teryx has contributed much of the increase of the Amer Sports group's outdoor apparel division. As detailed in the previous issue, the division's turnover jumped by 11 percent to €479.7 million last year, up by 12 percent in constant currencies.
Amounting to a six-fold sales increase in the last seven years, the growth at Arc'teryx has been driven by expansion of the product range and distribution, with intensified retail partnerships and own retail outlets.
Jon Hoerauf, the Arc'teryx brand's president and general manager since 2016, said that its turnover climbed by more than 20 percent in China last year, and he predicts a similar level in 2018. The U.S. remains easily the largest market for Arc'teryx despite flattish sales in constant currencies last year, but China moved ahead of Canada.
The sharpest rise in Chinese demand last year came from online retailing. While the brand has yet to open its own online store in China, it has been selling through T-Mall for several years and started selling through JD.com in 2017.
Another growth driver in China was the Canadian brand's own retail business. After three openings in 2017, it will expand from 16 to 21 stores this year, complementing more than 75 franchised stores. The brand's Chinese development plans call for five to six own store openings per year, along with eight to ten franchised stores.
The shift in demand has encouraged Arc'teryx to increasingly localize its brand content and to organize more events in China, consisting of clinics and events targeting consumers. While the brand already has two “academies” in Chamonix and in Jackson Hole, it is considering a global academy in China in the next few years as well.
Buoyant demand in China last year was paired with a double-digit growth rate in constant currencies in Europe, which makes up about 30 percent of the Arc'teryx brand's turnover. Hoerauf said that south European countries delivered the strongest growth rates. The brand had a particularly strong year in Spain, but demand continued to rise in several Nordic and German-speaking countries as well. This year started off strongly in southern Europe and the Nordics, with re-orders driven by the weather situation.
Hoerauf is forecasting mid-single digit European sales expansion in constant currencies this year and some growth in the U.S. market, which was flat for Arc'teryx in 2017. The growth will be accompanied by a continued focus on profitability, through a more judicious channel and regional mix and a smarter supply chain.
Arc'teryx has identified further growth opportunities in footwear, a category it started exploring just three years ago, and the women's business. It makes up about 32 percent of the brand's global turnover, with some of the strongest rates in the Nordics, Switzerland and Germany.
Around the end of last year, the company formed a cross-functional team of eight women who will be intensifying the brand's efforts in the women's category, be it for product development, marketing or other activities. The “urban astute” customer is another group increasingly targeted by Arc'teryx with its Veilance range, sold separately from outdoor channels.
The retail expansion should continue beyond China as well. The target is to have 100 stores at the end of 2020, compared with about 56 at the end of last year.