Asics reported better-than-expected third-quarter sales and revised upward its forecasts for the full year, but warned that fourth-quarter sales would take a hit from the second wave of the Covid-19 pandemic.
Net sales rose by 4.39 percent to 103,309 million yen (€829m-$979m) in the third quarter as more people took up running after the coronavirus lockdowns. In particular, sales increased by 26 percent in Europe and 11 percent in Greater China thanks to strong increases in Performance Running.
After two quarters of losses, Asics managed to post a net profit of ¥2,858 million (€22.94m-$27.09m) for the third quarter. The gross margin contracted by 0.9 percentage points to 44.9 percent, but the company made cuts in advertising, personnel costs, rents and sales commissions.
Asics said it has enhanced inventory management by taking measures such as cancelling some production orders and changing the schedule of new product launches in the second half to optimize sales opportunities.
For the nine months to Sept. 30, Asics’ sales were down by 13.3 percent to ¥248,206 million (€1.991bn-$2.352bn). Still, online sales more than doubled year-on-year to ¥36.3 billion (€291m-$344m), driven by rises of 149 percent in North America and 131 percent in Europe.
Regionally, Japan had the worst performance during the first nine months of this year, while Europe fared best. Sales fell by 23.1 percent in Japan, by 18.9 percent in North America and by 4.3 percent in Europe. While the company generated operating losses in Japan and North America, its operating profit increased by 163.3 percent in Europe due to an improved gross margin as well as a cut in selling, general and administrative expense (more on Europe further below).
There were also better news in China as sales of performance running shoes helped lift revenues 3.8 percent over the nine months on a constant-currency basis. Sales increased in Oceania by 11.5 percent, due to strong performance in running sales as well as in the Sports Style category. Sales were off by 30.9 percent in Southeast and South Asia and by 26.4 percent in the rest of the world.
Net sales in the Performance Running segment declined by only 0.4 percent over the nine months in constant currency, down to a total of ¥122.2 billion (€980.9m-$1.158bn) as a 28 percent rise in China and a 5.4 percent increase in Europe were offset by weaknesses in Japan and North America, but the segment’s operating profit improved to ¥9,511 million (€76.36m-$90.13m). After launching the Metaracer shoe with a built-in carbon plate in April, the group launched its Blast Beyond series of lightweight models.
Currency-neutral sales went down by 9.3 percent in Sports Style, with a sharp fall in North America offsetting strong growth in China. There were declines of 27.6 percent in Apparel and Equipment and of 16.5 percent in the Core Performance category.
The lifestyle-oriented Onitsuka Tiger brand saw sales fall 25.3 percent because of a drop in foreign tourists in Japan. The division launched sneakers produced in collaboration with Valentino. Asics also opened flagship stores for the brand on Nanjing Road in Shanghai in June and on Regent Street in central London in July, with plans for new locations in Beijing, Milan and Los Angeles.
In the third quarter, Peformance Running and Sports Style showed increases of 19 percent and 5 percent, respectively, but the other categories were down.
The company said it continued to face a challenging situation, as competitions were either cancelled or scaled down, along with temporary closures of own-retail stores and a slump in personal consumption.
It warned that fourth-quarter sales would fall by around 20 percent because of the second wave of the coronavirus, which was already leading to the temporary shutdown of some European stores. In Japan and China all stores have reopened, Asics said, and almost all U.S. stores are now in operation.
Asics improved its full-year revenue forecast by 7 percent to ¥320 billion (€2.57bn-$3.03bn), which means that turnover will still be down by 15.4 percent for 2019. The company raised its sales forecasts for China and Europe by 17 percent and 9 percent, respectively.
The operating result for the year is now expected to be a loss of ¥6 billion ($58m-€49m), down from a a previously budgeted loss of ¥14 billion, leading to a net loss of around ¥17 billion ($164m-€138m).
Good growth in key European markets
The latest NPD data show that Asics remained the leading brand of running shoes in Europe, widening the gap with its main competitors in the first half of 2020. It gained three percentage points in the “made for/used for” running category in the five major European markets, with sell-out rising by 4 percent year-on-year. In particular, its market share in the price range above €90 per pair rose by six percentage points.
While Asics EMEA recorded a consolidated decline of 3.1 percent in the first nine months of this year, essentially because of store closures, its revenues from e-commerce jumped by 134.4 percent, accelerating the company’s digital transformation, and even sales to wholesale partners went up in several markets. As Asics EMEA pointed out, they rose by 11.1 percent in Germany, 3.5 percent in France, 3.0 percent in the U.K., 5.6 percent in Sweden, 7.4 percent in Denmark, 17.6 percent in Poland and 21.2 percent in Finland.
