Asics Corporation has reported a 5.9 percent increase in total sales to 186.3 billion yen (€1.86bn-$2.45bn) for the third quarter ended Dec. 31, with growth of 10.3 percent in local currencies, but operating income declined by 10.8 percent and net income dropped by 2.3 percent to ¥8.76 billion yen (€87.4m-$115.0m). Pre-tax income fell by 4.0 percent to ¥15.3 billion (€152.7m-$200.9m).
The gross margin was off by 0.3 percentage points to 44.0 percent, and the operating margin declined by 1.7 percentage points to 9.0 percent, mainly due to higher amortization and advertising expenditures. The group now expects the full year to show a small 0.4 percent decline in net profit to ¥11 billion (€109.8m-$144.5m) on 6.2 percent higher revenues of ¥250 billion (€2.50bn-$3.28bn), with the operating margin falling to 8.2 percent from 9.2 percent the year before.
Domestic sales rose by 4.1 percent to ¥62.9 billion (€627.8m-$826.0m), driven by running and basketball shoes. Sales in other countries increased by 6.8 percent to ¥123.3 billion (€1.23bn-$1.62bn), thanks to the acquisition of Haglöfs in mid-2010 as well as ongoing progress in running in Europe and the Americas. Excluding the impact of the strong yen, overseas sales rose by 13.5 percent in constant currencies.
Translated into yen and excluding an undefined “other” business, European revenues increased by 8.1 percent to ¥50.0 billion (€499.1m-$656.6m). They would have been higher by an additional ¥2.3 billion (€23m-$30.2m). The acquisition of Haglöfs and higher sales of running shoes were the key factors of growth in the region. On the other hand, the operating margin fell in the region to 15.2 percent from 20.8 percent in the year-earlier period, due apparently to investments in advertising, the development of its apparel sector and the company's new European head office.
At 23.7 percent, the operating margin remained higher in Oceania, although sales were down there by 25.1 percent. A margin of 3.8 percent was posted in Japan. In the Americas, the margin declined to 7.8 percent on 1.7 percent higher revenues of ¥46.8 billion (€467.1m-$614.6m). Sales jumped by 61.1 percent in East Asia to ¥955 million (€9.5m-$12.5m), delivering an improved margin of 9.6 percent.
By product, sales of sports shoes increased by 4.1 percent, up by 9.2 percent in local currencies, and represented 75.4 percent of the quarterly turnover. Apparel revenues went up by 11.5 percent in yen and by 13.4 percent on a currency-neutral basis, making up 17.7 percent of the total. Slightly higher increases were recorded for sports equipment, which represented 6.9 percent of the overall revenues.
Sales of sports shoes rose by 6.6 percent in Japan and at a currency-neutral rate of 10.1 percent elsewhere. Apparel revenues were up by 0.2 percent in Japan and by 38.4 percent in constant currencies overseas, with running wear up by 18.4 percent globally to ¥5.0 billion (€49.9m-$65.7m). In particular, sales of running shoes grew by 8.5 percent to ¥83.3 billion (€831.5m-$1.09bn) worldwide, with currency-neutral increases of 13.8 percent in Japan, 23.0 percent in Europe and 15.8 percent in the Americas. On a global basis, sales of other athletic shoes rose by 6.7 percent to ¥22.4 billion (€223.6m-$294.2m), while sales of Onitsuka Tiger non-athletic footwear declined by 14.5 percent to ¥6.5 billion (€64.9m-$85.4m).
Among various recent actions, Asics noted the opening of its first Asics store in Brazil, which took place in São Paulo last summer, and of an Onitsuka Tiger store in Taiwan. The group has established a new subsidiary in Hong Kong to boost the revenues and profits of its apparel segment. It has launched a new business, called “Kids Sports Challenge,” to measure children's sporting abilities and develop in this field, and it has started an “Asics Business Leader School” as an internal training program.
Separately, Asics has announced the formation of two new subsidiaries in India and Singapore to help expand its sales in Asia, conducting marketing activities to raise the brand's image. The new Indian operation should start in New Delhi in April under the management of Hirosuke Matsumoto. Asics will have a 75 percent stake in the company, with Marubeni Corporation, the fifth-largest trading house in Japan, owning the balance. Reliance Footprint, which is based in Mumbai, brought Asics to India through an exclusive distribution agreement at the beginning of 2010, but the cooperation apparently did not work out as well as initially expected.
