Sales and profits accelerate at Amer

Amer Sports raised its sales by 6 percent to €657.4 million in the fourth quarter ended Dec. 31, but they grew by 12 percent on a currency-neutral basis, confirming its focus on the development of the soft goods category with increases of 25 percent in footwear and 21 percent in apparel. At more than €700 million for the full year, soft goods have come to represent 34 percent of the group's total turnover and are on track to reach the €1 billion goal set by the management.

The group also reported strong currency-neutral increases for the quarter of 18 percent in sports instruments and 16 percent in fitness. Sales of winter sports equipment went up by 8 percent, but ball sports rose by only 5 percent and cycling was flat.

On a regional basis, sales rose in the quarter by 13 percent in Europe, the Middle East and Africa (EMEA), by 8 percent in the Americas and by 19 percent in the Asia-Pacific region. In particular, sales in emerging markets improved by 17 percent, and consumer-direct revenues jumped by 27 percent.

The group's profitability improved greatly in the quarter. The gross margin advanced to 42.0 percent from 41.9 percent in the year-earlier period, and the operating margin (Ebit) increased to 9.8 percent from 7.6 percent, excluding non-recurring items. Cash flow went up strongly to €144 million in the quarter, thanks to lower working capital, leaving the group with net cash of €270 million at the end of the year.

The Winter and Outdoor division booked an overall sales increase of 10 percent for the quarter, with increases of 10 percent in EMEA and the Americas, and 15 percent in Asia-Pacific. The return to double-digit growth in footwear took place in all product segments and regions, with a particularly strong performance in the U.S. In the winter sports segment, cross-country skiing and alpine ski boots performed the best. The division closed the quarter with an operating profit of €52.5 million, 26 percent higher than a year earlier.

In Ball Sports, sales were flat in EMEA and the Americas but rose by 6 percent in Asia-Pacific. The very late golf season affected sales and margins. Sales of tennis racquets were flat, but there was growth in tennis balls. The management pointed to a good momentum in team sports. In Fitness, sales rose by 14 percent in EMEA, by 8 percent in the Americas and by 39 percent in Asia-Pacific, and the operating margin reached 8.2 percent.

The gains were only a little smaller for the full financial year, but Amer still outperformed its annual sales growth target of 5 percent on an organic currency-neutral basis. The group's net sales increased by 4 percent to €2,136.5 million, with growth of 8 percent in local currencies. The gross margin remained flat at 43.6 percent and the Ebit margin moved up to 7.3 percent from 6.7 percent, coming closer to the 10 percent target set by the current management thanks to higher volumes and higher cost controls.

Net income soared by 56 percent to €90.3 million for the year, with a spectacular improvement to €38.7 million in the fourth quarter from €5.4 million in the corresponding 2012 period.

By segment, the growth in currency-neutral sales was led by apparel, up by 21 percent with high double-digit growth for both Salomon and Arc'teryx. Sports instruments came next with a 17 percent increase, followed by fitness and footwear with gains of 13 and 11 percent, respectively. Winter sports equipment rose by 3 percent, while ball sports and cycling went up by only 1 percent.

Regionally, the annual sales results showed currency-neutral increases of 8 percent in EMEA, 5 percent in the Americas and 15 percent in Asia-Pacific. Sales in emerging markets jumped by 21 percent, and own retailing by 32 percent. Winter sports represented 65 percent of sales in the EMEA region.

The management noted that the group's winter sports equipment segment is moving toward an increasingly sustainable model, generating an operating margin that is close to the group's level with less impact from weather conditions than before, and that its turnaround in sports instruments and fitness has continued.

The major focus now is to improve the profitability of Wilson and the overall ball sports segment, even before pushing sales, said Heikki Takala, president and chief executive of the group, but he pointed out that its golf business is “straightening out” and “turning out to be a business worth continuing.”

Replicating the business model that it has adopted for its existing operations, it is also looking at new categories for future growth such as action sports, accessories and anything digital.

Looking at 2014, the management predicts that Amer's revenues will continue to grow by more than 5 percent, in spite of continuously challenging trading conditions, and that operating earnings will improve further.