Fila Holdings group revenues rose 15.0 percent (+4.3% currency neutral) to a quarterly record high of 1,171,903 million Korean won (€820.3m) in the second quarter ended June 30. More than 18 percent revenue growth at Acushnet to KRW 828,977 million (€580.3m) fueled by solid demand in North America and a 14.7 percent increase in global royalties to KRW 19,747 million (€13.8m) were the primary contributors to the overall revenue improvement. Fila brand revenues increased 7.6 percent (+2.0% currency neutral) to KRW 342,926 million (€240.0m), but segment operating profit slipped 23 percent to KRW 39,920 million (€27.9m). The group operating profit margin fell to 13.0 percent from 17.0 percent in the year-ago period, and the gross profit margin came in at 48.2 percent versus 51.3 percent in Q2/21.
The EMEA, sparked by logistics that helped licensees recover from year-ago Covid-19 impacts, realized 28.9 percent license sales growth to KRW 9,744 million (€6.8) to account for more than 49 percent of all royalty revenue in the period. South America royalty revenues, helped by strong demand in tennis and running, rose by 38.0 percent to KRW 2,595 million (€1.82m); Asia royalty revenues increased by 23.2 percent to KRW 5,185 million (€3.6m); and North America royalties, hurt by supply chain constraints and the expiration of a partnership with retailer Kohl’s, dropped by 50.3 percent to KRW 1,383 million.
Fila realized a 6.3 percent decline to KRW 12,211 million (€8.55m) from KRW 13,031 million from the three percent design fees it collects from its joint venture with Anta Sports Products for the Fila brand in mainland China.
At Fila USA, revenues at the group’s North American subsidiary fell 18.1 percent to $92.96 million in local currency and 7.5 percent in the Korean won to KRW 117,759 million from KRW 127,375 million. The company said that with a channel mix re-adjustment in progress, sales were impacted by a challenging market environment fueled by inflation and weaker U.S. consumer spending. The region’s gross profit margin came in at 21.4 percent versus 26.5 percent as the subsidiary reported an operating loss of KRW 10,774 million (€7.54m) for the period against a profit of KRW 1,447 million. Fila USA’s Q2 net loss was KRW 9,021 million (€6.3m) versus a year-ago profit of KRW 526 million.
In South Korea, where the group operates on a direct mode, Fila-only revenues fell 9.6 percent year-over-year to KRW 110,462 million (€77.3m) from KRW 122,149 million due to a sales channel adjustment strategy similar to the one being utilized in the U.S. But, the quarterly sales contribution from design fees rose 7.3 percent to KRW 15,786 million (€11.1m). Despite cost-cutting efforts to offset the lost sales from the channel adjustment, the operating profit fell 7.4 percent to KRW 25,662 million (€18.0m) from KRW 27,719 million. The reported gross margin rate was 59.1 percent against 61.7 percent in the year-ago period.
Fila Holdings continues to maintain its FY22 outlook, first detailed in late February, that projects consolidated revenues and consolidated operating profit each in the -2 to +2 percentage range. The annual forecast for Fila USA has worsened, moving from +1 to -2% percent consolidated revenues to a -20 to -25 percent drop with a consolidated operating loss pegged at KRW 40 to 45 billion (€28.0-€31.5mm). The group cited the market’s strategic channel adjustment and the competitive retail landscape in the U.S. for the downward revision. Overall, the group intends to grow its consolidated revenues by an estimated 15.8 percent by FY26 from the FY21 level to more than KRW4.4 trillion, with a consolidated operating margin in the 15 to 16 percent range. Fila intends to reach those objectives by increasing its direct-to-consumer business to approximately 60 percent of all revenues and reducing its reliance on wholesale to less than 20 percent of all sales from about 40 percent in FY21.
On the personnel front, Fila Holdings intends to formally name a new head of global apparel and accessories and a new head of global footwear in the current quarter. Torsten Hochstetter, a former creative director for both Adidas and Puma, has already been installed as the head of global design. Meanwhile, Luca Bertolino, the former head of product management for Adidas and a former EMEA marketing director for Fila, is the group’s current head of global strategic marketing.
