Winter, outdoor sales dampen Amer’s results

Amer Sports' sales fell by 5 percent in the fourth quarter to €556.9 million due to a 10 percent decline to €375.0 million in the winter and outdoor business. The division was hit by a shift of deliveries to the third quarter and a slow start to the winter season because of warm weather, which affected in-season orders for winter sports equipment. Financial analysts were expecting quarterly sales to reach €578 million. On a constant currency basis, group sales were up by 2 percent in the quarter.

Amer's quarterly sales rose by 12 percent to €205.4 million in the Americas, fell by 16 percent to €273.8 million in the Europe, Middle East and Africa (EMEA) region and increased by 6 percent to €77.7 million in Asia-Pacific. Comparable sales rose by 19 percent in the Americas, declined by 9 percent in EMEA and were up by 6 percent in Asia-Pacific.

Gross profits decreased less than revenues, lifting Amer's gross margin to 42.4 percent in the fourth quarter from 40.8 percent a year earlier. The Ebit margin, excluding non-recurring items, fell to 8.3 percent from 9.6 percent a year earlier and the net profit profits slipped to €31.1 million from €38.1 million.

In the full year, the group's sales rose by 8 percent to €1.881 billion. The increase reached 9 percent at constant currency rates. The gross profit margin widened to 43.5 percent from 42.6 percent, and the Ebit margin rose to 7.2 percent from 6.2 percent. The net profit rose to €90.9 million from €68.9 million.

In its guidance for 2012, Amer said that the slow start to the winter season is likely to impact 2012 pre-orders. However, pre-orders for the spring/summer collections were up by 28 percent for apparel and rose by 14 percent for footwear. The two product categories carry high margins and are the group's key earnings spinners. Amer forecast that full-year revenues will rise in local currencies in 2012, but the management declined to give a guidance on earnings because of uncertainty on forthcoming winter sports equipment orders.

The company noted that the sell-through of winter products was lower than a year earlier throughout the industry in November and December, but the situation has changed with the colder weather, and booking levels are high at key ski resorts. The consensus of financial analysts' forecasts is that Amer will approach 2012 sales of €2.0 billion and a net profit of €100 million. Handelsbanken is more upbeat, anticipating earnings of €.03 billion and a bottom line of €101 million. All analysts see the group achieving an Ebit margin of 7.5 percent this year. Amer's long-term target is to lift the Ebit margin to 10 percent.

In 2012,the group's ball sports division should improve, especially in tennis and notably thanks to innovation in the product line and apparel. Team sports are seen enjoying a positive momentum supported by expanded distribution, marketing efforts and new products. The fitness division will be supported by investments made in the sales force and geographical expansion. Overall, the group will benefit from its program to shave annual costs by €10-15 million. A large portion of the savings will come from the recent capacity enhancement at the group's winter sports equipment factory in Bulgaria.

Amer will also focus on Russia, Greater China and Latin America, where the group booked a sales increase of about 40 percent in 2011. The three markets increased their share of the company's full-year revenues to 7 percent from 5 percent a year earlier.

The group aims to boost its knowledge of the action sports market, covering snowboarding, skateboarding and similar sports. In December, Amer bought Nikita, a women's snowboard-inspired brand that complements its Salomon snowboard and Bonfire apparel businesses. The company estimates that its brand portfolio has to be improved to better serve young consumers, and addressing the action sports market will be a key focus for the years to come.

In the fourth quarter, the group's revenues in the winter and outdoor division decreased by 10 percent to €375.0 million. At constant currencies, the decline reached 4 percent. Sales of winter sports equipment was down by 19 percent to €205.0 million, footwear grew by 8 percent to €51.0 million, apparel was up by 4 percent to €65.8 million, cycling increased by 10 percent to €29.5 million and sports instruments declined by 11 percent to €23.7 million.

Sales of winter and outdoor products increased in the Americas by 11 percent to €77.9 million. They fell by 18 percent to €241.9 million in EMEA and rose by 7 percent to €55.2 million in Asia-Pacific. At constant foreign exchange rates, winter and outdoor revenues rose by 20 percent in the Americas, dropped by 11 percent in EMEA and rose by 7 percent in Asia-Pacific. The segment's Ebit, excluding non-recurrent items, dropped to €45.0 million in the quarter from €61.2 million a year earlier.

The ball sports division increased quarterly revenues by 2 percent to €109.0 million, underpinned by team sports. On a currency neutral basis, sales were up by 7 percent. Sales in racquet sports declined by 7 percent to €41.1 million, team sports boosted sales by 12 percent to €57.1 million and golf revenues declined by 12 percent to €10.8 million.

Sales in the Americas were up by 4 percent to €75.1 million, EMEA fell by 7 percent to €17.2 million and Asia-Pacific rose by 1 percent at €16.7 million. At constant foreign exchange rates, revenues rose by 9 percent in the Americas, by 2 percent in EMEA and by 1 percent in Asia-Pacific. The division booked negative Ebit of €0.7 million in the fourth quarter compared with a €2.7 million loss a year earlier.

Amer has been restructuring its racquet sports activities, directly taking over some markets previously served through distributors. The move impacted sales in China during the quarter.

The fitness business grew by 22 percent to €72.9 million. Currency-neutral sales were up by 30 percent. Sales were higher in all geographies, with the Americas up by 26 percent to €52.4 million, EMEA by 15 percent to €14.7 million and Asia-Pacific by 12 percent at €5.8 million. At constant foreign exchange rates, revenues rose by 26 percent in the Americas, by 15 percent in EMEA and by 12 percent in Asia-Pacific. Ebit before extraordinary items rose to €4.5 million from €4.3 million for the division.