Mixed performance for Amer Sports

Weaker demand for ball sports products and fitness equipment from the Amer Sports group led to a dip in sales and an operating loss in the seasonally small second quarter, but its sales in the second half should be supported by a double-digit hike in orders of winter sports equipment, along with the acquisition of Peak Performance and a large order of fitness gear.

The Finnish group's turnover slumped by 3 percent to €483.0 million for the quarter, but it moved up by 2 percent in constant currencies. Chinese sales across the group moved up by 21 percent and its business in the U.S. market is starting to rebound.

Amer Sports suffered an operating loss before one-off items of €25.5 million, slightly worse than the loss of €22.8 million for the year-ago quarter. Its net income was negative at €28.9 million, compared with a loss of €22.5 million.

The outdoor division saw its sales inch up by 1 percent to €244.1 million, with a rise of 4 percent in constant currencies, but the quarter brought a mixed performance.

With Atomic, Salomon and other brands, winter sports equipment generated a sales increase of 8 percent to €15.6 million. More significantly, pre-orders were up by 10 percent for the coming season, after a winter that was suitably snowy in many markets, leaving retail inventories relatively clean.

Another category that performed strongly in the outdoor division was sports instruments with the Suunto brand. Its sales jumped by 20 percent to €40.7 million, up 23 percent before exchange rate changes, owing to expanded distribution.

Outdoor apparel generated an underlying sales hike of 10 percent for the quarter, driven by the Arc'teryx brand. The turnover for outdoor apparel was up by 5 percent in reported terms to €63.5 million. The acquisition of Peak Performance at a preliminary price of 1,804 million Danish kroner (€242m-$281m) should contribute to sales growth and profit from the third quarter.

Then again, outdoor footwear sales dipped by 5 percent to €96.4 million for the quarter, off by 2 percent in constant currencies. Amer Sports explained that this was caused by the ongoing consolidation of its footwear distribution, to reduce promotional sales. But Heikki Takala, the Amer group's chief executive, added in a conference call with analysts that growth of outdoor footwear should resume next year.

The slump so far this year has mostly affected Europe, the Middle East and Africa (EMEA), while footwear sales moved up at double-digit rate in the U.S. market, where Salomon has already cleaned up its distribution.

Cycling remained problematic, with a sales decline of 11 percent to €27.9 million for the quarter. With the Mavic and Enve brands, this business saw its sales decline by 10 percent in constant currencies. The group said it suffered from lower OEM orders and sluggish demand in the wholesale business. Its sales were up for apparel, helmets and carbon wheels, but it has been affected by a shift in demand away from aluminum wheels. This is where Mavic has a strong capacity, which it has started to adjust.

The outdoor division's sales hike was driven by Asia-Pacific, with abundant demand in China. Its regional sales moved up by 10 percent to €48.4 million, gaining 15 percent in constant currencies. With a double-digit rate jump in the U.S. market, outdoor product sales were up by 4 percent in the Americas in constant currencies, but off by 3 percent in reported terms to €71.5 million. In EMEA, its sales were flat at €124.2 million, and up by 1 percent in constant currencies.

The outdoor division suffered an operating loss of €30.7 million excluding one-off items for the three months, compared with a loss of €29.4 million in the prior-year period.

The Finnish group's ball sports division suffered a sales decline of 6 percent to €159.0 million in the second quarter, flat in constant currencies. Sales dipped by 8 percent to €80.8 million for team sports, and by 5 percent to €78.2 million in individual ball sports, although both were flat in constant currencies.

The ball sports division, which includes the Wilson brand, saw its sales decrease across regional markets in reported terms. The trend remained negative in constant currencies in EMEA, down by 2 percent. On the same basis, they were off by 3 percent in Asia Pacific but they crawled up by 1 percent in America. That sufficed to flatten the division's underlying turnover since the Americas are by far the largest market for the ball sports division. Its turnover in the Americas reached €110.0 million, down by 7 percent in reported terms.

The ball sports division was affected by weak sales at lower price points, but it performed strongly in baseball and performance rackets. This contributed to an increase in its profit margin and a rise of 18 percent in its operating profit before one-off items to €11.0 million.

The fitness division saw its sales shrink by 5 percent to €79.9 million in reported terms for the quarter, but again this was flat in constant currencies. Its sales slumped by 8 percent in EMEA to €16.3 million, down by 6 percent in constant currencies. Its turnover in the Americas was off by 8 percent to €47.5 million, down 1 percent in constant currencies. But sales were up by 7 percent to €16.1 million in Asia Pacific, which was a rise of 12 percent without exchange rate changes.

The fitness division just about broke even in the quarter, after an operating profit margin of 3.0 percent excluding one-off items in the year-ago quarter. Amer Sports is more upbeat about the prospects for Precor, after it obtained a contract estimated to be worth at least $30 million over two years with Planet Fitness, the leading U.S. budget gym franchise. Amer said that the company was starting to reap the benefit of adjustments in its product range, which allow it to more efficiently target budget gyms, among others.

The Amer Sports group's own retail sales jumped by 15 percent to about €50 million. This includes growth of 11 percent for stationary stores, with a comparable store sales increase of 4 percent, while online sales soared by 22 percent. Takala said that there was a decline in sales through traditional wholesale customers, but this applied mostly to big box retailers, while the group is increasing its business with some specialists.

Due to weaker sales of outdoor footwear and cycling products, the outdoor division's sales for the first half were down by 2 percent to €625.3 million, but up by 3 percent in constant currencies. Ball sports sales were off by 9 percent to €323.2 million for the six months, and by 1 percent in constant currencies. The fitness division managed an underlying sales increase of 2 percent, but its turnover declined by 6 percent to €158.3 million in reported terms.

The Finnish group's guidance is unchanged, predicting unspecified growth for sales in constant currencies and operating profit before one-off items in the full year. The company warned that, due to various uncertainties, the growth should be uneven. More details on Peak Performance and the group's progress will be shared at its Capital Markets Day in September.