Descente saw its profits surge in the third fiscal quarter ended Dec. 31, 2021, with net income soaring by 172.8 percent to 4,828 million yen (€37.8m-$45.7m). This was mainly due to extraordinary income of ¥7,535 million linked to the reorganization of its Descente China Holding joint venture with Anta Sports Products and Itochu. However, sales dropped by 28.2 percent from the year-ago quarter to ¥66,638 million (€522.2m-$630.2m), despite a recovery in Japan. The company lowered its full-year revenue guidance as a result.
In the latest quarter, Descente’s gross margin improved by 0.4 percentage points to 52.0 percent, and the operating margin grew by 1.9 percentage points to 3.7 percent.
The company indicated that its sales declined in all categories, mainly due to coronavirus-related restrictions and the cancellation or downsizing of various events and competitions. The group’s sales declined the most in Japan and South Korea during the first nine months. Sales of the Descente brand grew in China, but were down in Japan and South Korea. Arena, Le Coq Sportif and Umbro struggled in all regions, but Le Coq and Umbro experienced growth in the third quarter in Japan and Korea, respectively.
The company said the importance of its business in South Korea and China increased in recent years, so it has divided its Asia segment into South Korea, China and Others, starting with the first quarter of the 2020 fiscal year.
In contrast, Descente has decided to eliminate all U.S. and European subsidiaries that were included in the Europe/Americas segment because the relative importance of the business in these regions has declined. These regions are now included in the Other segment, affecting comparisons with the previous financial year.
The group lowered its guidance for the present financial year because the outlook for the business impact of the Covid-19 remains uncertain. Sales are now expected to decline by 23 percent from the prior year, instead of a previously forecast decline of 19 percent. However, Descente continues to expect net income of ¥5,000 million (€39.2m-$47.3m) for the year.