The year got off to a strong start for Amer Sports, which lifted its turnover by 5 percent in constant currencies for the first quarter. The rise was driven by increased apparel and footwear sales as well as winter sports equipment and sports instruments, while restructuring measures in ball sports contributed to soaring profits.

The Finnish group's quarterly sales reached €575.9 million, which was a rise of 15 percent in reported terms. Its turnover in constant currencies advanced by 8 percent in Europe, the Middle East and Africa (EMEA). It moved up by 6 percent in Asia-Pacific, including a jump of 19 percent in China. Impacted by weaker sales of ball sports and fitness equipment, the group's turnover inched up by just 2 percent in constant currencies in the Americas. Own retail sales soared by 39 percent for the quarter.

Nearly all categories in the outdoor division chalked up double-digit sales increases in constant currencies. With brands such as Arc'teryx, Salomon, Atomic, Mavic and Suunto, the entire division's sales reached €341.9 million, up by 19 percent in euros and by 14 percent in constant currencies.

Excluding the impact of currency exchange rates, apparel sales surged by 22 percent, while footwear sales were up by 13 percent, with expansion across all areas. The improved weather conditions in the quarter helped to lift sales of winter sports equipment by 17 percent, while sales of sports instruments were up by 10 percent.

The Outdoor division's growth was most impressive in the Americas, up by 22 percent in constant currencies, compared with 12 percent in EMEA and 10 percent in Asia-Pacific. Ebit before one-off items more than doubled to €21.4 million for the division, up from €9.5 million.

Heikki Takkala, the group's chief executive, hastened to add in a conference call that this rise could not be replicated for the full year in winter sports equipment, for which sales are relatively small in this quarter. Takkala said the impact of the relatively late winter would affect pre-orders, for which the group was not expecting growth. He added that sales of outdoor footwear and apparel would probably increase at double-digit rates but not at the latest quarterly level.

Amer Sports Consolidated Income Statement

(Million Euros, Quarter ended March 31)

 

2015

2014

%
Change

Winter and Outdoor

341,9

287,5

18,9

Ball Sports

164,1

150,7

8,9

Fitness

69,9

63,3

10,4

NET SALES

575,9

501,5

14,8

Cost of Goods Sold

311,7

279,2

11,6

Licence Income

1,4

1,0

40,0

Other Operating Income

0,5

1,4

-64,3

R&D Expenses

17,7

19,0

-6,8

Selling & Marketing

159,8

140,6

13,7

Admin. and Other Expenses

55,0

44,5

23,6

Net Interest

8,3

9,2

-9,8

Pre-Tax

23,9

11,4

109,6

Tax

6,7

3,2

109,4

NET

17,2

8,2

109,8

Euro/Share (Diluted )

0,15

0,07

 

In ball sports, with brands such as Wilson and De Marini, the group's sales amplified by 9 percent to €164.1 million in reported terms but they were off by 5 percent in constant currencies as Amer cleaned up unprofitable parts of the business. Takkala said that the restructuring measures should impact the ball sports division for the whole year.

The ball sports unit's turnover in constant currencies was flat in Asia-Pacific, but it dwindled by 7 percent in EMEA and by 5 percent in the Americas. However, the group emphasized that sales had increased in categories that it earmarked as focus areas as part of the restructuring measures for ball sports, particularly performance tennis and baseball.

Sales of individual ball sports products contracted by 6 percent in constant currencies. While sales of performance racquets increased at a double-digit rate, this rise was offset by the decline in sales of products at lower price points.

Meanwhile, sales of team sports products dropped by 4 percent in constant currencies, as Amer pulled out of some low-margin sales. The company is expanding in baseball and softball through the acquisition of Louisville Slugger, a leading supplier for equipment related to these sports with sales of $75 million in 2014.

The transaction is meant to spur profitable growth in team sports through scale and synergy effects but the deal was completed in April, meaning that it did not impact the quarterly performance. The group said it still favored organic expansion but the acquisition proved that it has the financial wherewithal to accelerate beyond that.

The restructuring measures already yielded improvements in profit margins. Ebit excluding one-off items in the ball sports segment amounted to €18.3 million, up from €13.2 million for the same quarter last year.

In the area of fitness equipment, driven by the Precor brand, currency exchange rates enabled the company to lift its sales by 10 percent to €69.9 million, but in constant currencies they were down by 5 percent for the quarter.

The drop was mostly attributed to the fact that the group's fitness division moved from third-party sales to in-house sales in the U.S. market, which resulted in de-stocking of the current dealer inventories. The company also mentioned significant changes in some countries in EMEA, which resulted in short-term sales declines but aimed to make the business more scalable. Ebit before one-off items for the fitness division shrank to €1.3 million, down from €3.4 million for the same quarter last year.

The entire group's gross profit margin advanced by 1.6 percentage points to 45.9 percent and the Ebit margin amounted to 5.8 percent excluding one-off items, up by 1.7 percentage points. The one-off items in the quarter consist of €1.4 million related to the restructuring program announced in July. The group ended the first quarter with net profit of €17.2 million, more than twice the level of €8.2 million in this quarter last year.

The Finnish group predicts that its sales in constant currencies and its Ebit margin before one-off items will increase for the full year compared with 2014. The remaining expenses of about €4.5 million for the restructuring program detailed in July will be incurred in the second quarter. The focus will remain on footwear and apparel.