Korea-based Fila Holdings, facing sales channel adjustments in its home market and a promotional U.S. business, generated 80 percent of its FY 22 operating profit from its stake in Acushnet Co. The group’s FY22 net profit rose 25 percent on a constant-currency basis to KRW 467,544 million (€327.3m), with Acushnet generating an 8.3 percent profit increase to KRW 349,761 million (€244.8m) as Fila’s operating profit slipped by 65 percent to KRW 85,312 million (€59.7m) from KRW 201,473 million. Annual revenues rose by 11.3 percent (0.6% in constant currency) to KRW 4,221,750 million (€2.95b), with Fila sales dropping by 3.6 percent to KRW 1,288,589 million (€902.0 m) and Acushnet year-over-year sales increasing by 19.3 percent to KRW 2,933,161 million (€2.05b).
In Q4 ended Dec. 31, Fila Holding reported an operating loss of KRW 7,915 million (€5.5m) as the gross margin declined by 110 basis points to 46.2 percent from 47.3 percent. Net income was KRW 136,164 million (€95.3m). Period revenues rose by 4.4 percent on a reported basis (-7.3% in constant currency) to KRW 896,740 million (€627.7m) as Acushnet sales grew by 22.9 percent to KRW 620,043 million (€434.0m) and Fila sales dipped by 22.0 percent to KRW 276,697 million (€193.7m).
In South Korea, Q4 revenues slipped by 22.2 percent in the final period to KRW 118,842 million (€83.2m) as gross profit declined by 440 basis points to 53.8 percent from 58.3 percent. Operating income was down by 54.7 percent to KRW 14,832 million (€10.4m) for the period, as net income came in 51.1 percent lower at KRW 10,639 million (€7.4m). For the full year, net profitability declined by 15.9 percent to KRW 64,736 million (€45.3m) from KRW 76,995 million on a 7.9 percent revenue drop to KRW 496,315 million (€347.4m).
Fila USA had a rough Q4 and FY22, negatively impacted by weaker pricing power caused by aggressive discounting from competitors and excessive inventory in the overall market. In Q4, the business suffered a KRW 37,284 million (€26.1m) operating loss and a KRW 58,317 million (€39.4m) net loss as revenues slipped by 37.1 percent to KRW 88,195 million (€61.7m). Gross margin percentage came in at 7.8 percent versus 26.8 percent in the year-ago period, as the group was impacted by higher storage costs caused by delayed product shipments.
The group’s global royalty business was the highlight of Q4 and FY22, with all global regions, except North America, posting double-digit sales gains. Total Q4 royalties rose 4.0 percent on a constant-currency basis to KRW 20,810 million (€14.6m) as EMEA royalties increased by 9.9 percent to KRW 10,071 (€7.1m). For FY22, royalties increased by 6.4 percent to KRW 79,395 million (€55.6m), with the EMEA posting a 7.8 percent improvement to KRW 38,617 million (€27.0m).
Looking at FY23, the group is expected to continue accelerating global marketing expenses around major initiatives. While Fila Korea commences a five-year strategic plan to turn around the fortunes of its business, Fila USA will focus on inventory liquidations and cost cuts ahead of its five-year growth plan. Fila Korea’s consolidated operating profit for the FY, excluding its design business, is forecast to be in a range of +10 to +20 percent, with a revenue range of -5 to +5 percent. At Fila USA, the business is expected to generate an operating loss of KRW 80 to 90 billion (€56m to €63m) this year as annual revenues decline 20 to 25 percent.
