Asics, the Japanese brand of running shoes, is holding talks with retail partners to alter its distribution strategy around Europe in the coming months. The company indicated that this would enable it to refine its distribution and improve service levels by putting the right products in the right stores, but at the same time it might decide to entirely pull out of specific retail channels.
This comes just weeks after Adidas said that it would quit selling to European retailers who display Adidas-branded products in a food environment – in other words, supermarkets. The European distribution changes at Asics will apply to both the Asics and Onitsuka Tiger brands.
Europe was among the strongest regions for Asics last year, while results were otherwise mixed for the group. Its European sales increased by 12.3 percent for the calendar year – although this includes the revenues of Haglöfs, the Swedish outdoor brand, since it was taken over by Asics last July. Haglöfs operates mostly in Europe.
Asics Europe enjoyed expansion in most countries, including double-digit sales increases in Russia, Spain, the U.K., Scandinavia and Poland, and strong single-digit growth Germany, Austria and France. The improvement was driven by significant double-digit sales growth in running footwear – itself fueled by products at higher price points, as well as new categories such as trail-running.
Asics Europe said it outperformed the running market, while robust growth in other sports, from handball to field sports and tennis, enabled it to become one of the three largest sports footwear brands in Europe, based on NPD figures.
Furthermore, Asics Europe boasted that it had seen significant double-digit growth in its sales of performance apparel, and its accessories business even doubled. Its lifestyle team was strengthened during the year and will operate as a separate business unit, a move that should lead to faster growth in this segment.
The details emerged as the Asics group reported that its consolidated sales increased by 4.9 percent to 235,349 million yen (€2.04bn-$2.89bn) for the fiscal year until the end of March 2011. Its turnover would have increased by 9.1 percent in constant currencies. On the other hand, the group's sales were inflated by the acquisition of Haglöfs, which added revenues equivalent to 4,363 million yen in the reporting period. Without Haglöfs, the group's sales would have increased by nearly 3 percent.
The year was marked by the introduction of more functional running shoes and an enhanced range of women's running apparel. The company opened an Asics flagship store in Amsterdam and an Onitsuka Tiger store in Madrid, and it established a subsidiary in Canada to take over its own distribution in the country.
On the weaker side, the group's sales in Japan slumped by 5.6 percent to ¥88,040 million (€763.9m-$1.08bn), due to sluggish sales of fashion footwear and athletic apparel. Asics was hurt in Japan by deflation and uncertainty about employment – and its prospects in the market have become unpredictable for the current fiscal year after the earthquake and tsunami that devastated part of the country in March.
Still, the group's operating income in Japan increased by 8.6 percent to ¥5,076 million (€44.0m-$62.4m) for the full year ended last March. This was achieved through reductions in selling, general and administrative expenses.
Meanwhile, the Asics group's international sales increased by 12.4 percent to ¥147,308 million (€1.28bn-$1.81bn), owing to stronger sales of running footwear in Europe, the Americas and Australia.
Based on a regional chart with a slightly different perimeter than the above split between Japanese and international sales, the group's European sales inched up by 0.3 percent in reported terms to ¥55,542 million (€481.9m-$683.1m) for the fiscal year. This is equivalent to an increase of 12.3 percent in constant currencies. The company's operating income in Europe increased by 21 percent in constant currencies and by 8 percent in yen to ¥8,552 million (€74.2m-$105.2m), equivalent to a whopping operating profit margin of 15.4 percent.
Asics did even better in the Americas, where its sales jumped by 19.8 percent in constant currencies, equivalent to a rise of 12.4 percent in yen to ¥59,604 million (€517.2m-$733.0m). Again, the improvement was driven by running shoes. Its operating income there rocketed by 52.2 percent to ¥4,698 million (€40.8m-$57.8m), an increase of 62.3 percent in constant currencies, which implies an operating profit margin of 7.9 percent.
In Asia-Pacific, the company's sales improved by 21.5 percent to ¥23,234 million (€201.6m-$285.7m). Its operating profit in the region soared by 79.7 percent to ¥3,483 million (€30.2m-$42.8m), equivalent to an operating profit margin of a 14.5 percent.
The entire group's gross profit improved by 9.4 percent to ¥103,122 million (€894.8m-$1.27bn), thanks to the larger proportion of juicier international sales. Its operating income reached ¥21,573 million (€187.2m-$265.3m), amounting to an increase of 22.7 percent. The group's net income jumped by 32.7 percent to ¥11,046 million (€95.8m-$135.8m).
In spite of the uncertainties around the situation in Japan, the company predicted that it would end the first half of its present financial year with a sales increase of about 6.5 percent. Consolidated net sales are expected to reach ¥254,000 million (€2.20bn-$3.12bn) for the full year ending inf March 2012, an increase of 7.9 percent.
Asics warned that its operating income should decline to about ¥10,500 million (€91.1m-$129.1m) in the first half, amounting to a fall of 14.3 percent, but was confident that it would end the fiscal year with a rise of 4.3 percent in its operating income, to ¥22,500 million (€195.2m-$276.7m). As for its net income, Asics predicted that it would increase by 1.7 percent for the first half and by 22.2 percent in the full year.
