Asics profit dips 17 percent in Q1 (updated)

Asics Corp. recorded declines in operating income and net income for the first quarter ended March 31 as total revenues dipped 1.1 percent to 105,329 million yen (€811.0m) from ¥106,549 million. Strong sales growth of 12.2 percent in North America could not offset significant supply shortages and logistical disruptions caused by factory shutdowns in 2021. With the results, the company reiterated its financial year 2022 outlook, first issued on Feb. 10, that calls for 3.9 percent revenue growth to ¥420.0 billion (€3.23b), a 4.8 percent expansion of operating income to ¥23.0 billion (€177.1m), and a nearly 44 percent gain in net income to ¥13.5 billion (€103.9m). The performance run segment will fuel the annual gains, and overall profitability will improve despite higher logistics costs and marketing investments. 

Net income fell 17 percent in the first quarter to ¥8.7 billion (€67.2m), and operating income was down 31 percent to ¥10.1 billion (€77.4m), bringing the operating margin down to 9.5 percent against 13.7 percent in the year-ago period. Despite the Shanghai, China and other lockdowns, retail sales improved 22.6 percent to ¥17.1 billion (€131.7m). E-commerce revenues jumped threefold from the comparable 2019 period. They were 12.7 percent higher year-over-year at ¥15.7 billion (€120.9m) as North America (+26.5 percent) and Greater China (+11.4 percent) posted increases as Japan (-2.2 percent) and Europe (-10.7 percent) declined.

Net income for the European region slipped 26 percent to ¥4,052 million (€31.2m) on higher advertising expenses, and a deterioration in the gross profit ratio as sales came in essentially flat at ¥30,894 million (€237.9m) on weak sales within the Sports Style and Onitsuka Tiger categories. On a currency-neutral basis and excluding the Onitsuka Tiger segment, Asics EMEA sales fell 5.2 percent due to supply chain congestion that hurt product availability despite strong demand. Asics EMEA said it does not expect supply chain issues to impact its overall 2022 financial plan.

Meanwhile, in North America, the first quarter regional loss was ¥774 million (€5.9m) due to higher logistic costs and expenses related to higher e-commerce sales. Paced by the performance running segment, North American sales rose 12.2 percent to ¥21,112 million (€162.6m). It was the fifth consecutive quarter of net sales growth in the region. The two styles in the Metaspeed series experienced their strongest quarterly growth since their early 2021 launch, and tennis and wrestling paced the region’s core performance sports category during the period.

In Greater China, strong sales within performance running could not offset weak sales of Onitsuka Tiger products. The region reported flat year-over-year revenues of ¥13,579 million (€104.6m) but a 4.3 percent increase in profitability to ¥3,621 million (€27.9m).

The global performance run category produced a 0.5 percent currency-neutral sales gain to ¥58.7 billion (€452.0m) as the brand focused on the distribution of its Gel-Kayano, Metaspeed and Magic Speed styles and realized double-digit growth in North America, Greater China, Oceania and South America where category sales soared 32 percent. Segment profit declined 1.1 percent year-over-year to ¥13.2 billion (€101.6m), impacted by brand sponsorship investments in the Los Angeles and Tokyo Marathons. Category sales were flat in Europe at ¥22.0 billion (€169.4m), up 18 percent in China at ¥7.0 billion (€90.9m) and down 42 percent in the Japanese home market at ¥1.7 billion.

Elsewhere, sales in the core performance sports category slipped 3.3 percent to ¥10.2 billion (€78.5m) and were 7 percent off-plan as sales of various new products were shifted to the second quarter as limited production capacity was directed to the performance run category. Segment profit fell 50 percent to ¥1.5 billion (€11.6m). Going forward, Asics intends to create category demand through better utilization of contracted professional tennis players, the development of various track spikes with “unified coloring” for this year’s World Athletics Championship in Oregon, and through the creation of new demand by strengthening the brand’s position in work shoes.

Sport style segment sales declined less than 1 percent to ¥8.1 billion (€62.4m) and missed an internal target due to persistent logistics issues and the performance run category utilizing all limited production capacity. There was double-digit growth in Greater China and South America. Segment profit to ¥1.3 billion from ¥1.6 billion was attributed to sales declines in Europe. Actions planned for the segment include a skateboarding project with a professional team and products with global appeal, and stronger use of digital media to accelerate the brand’s positioning as a lifestyle brand. Apparel and equipment segment sales were flat in the first quarter at ¥8.7 billion (€67.0m), with double-digit growth in North America, Europe and Greater China offset by a decline in Japan due to a supply shortage. The segment’s European sales came in at ¥2.7 billion (€20.8m), up 35 percent, and ¥1.0 billion in North America.