Robust demand for the Arc'teryx brand, winter sports equipment and sports instruments from Suunto enabled an upbeat guidance last week for the Amer Sports group's outdoor division in the second half of the year, after a mixed performance in the first half.
The division's sales in this seasonally small quarter inched up by 1 percent to €244.1 million, amounting to a rise of 4 percent in constant currencies, with a strong performance from the Finnish group's own retail business.
Outdoor footwear sales driven by the Salomon brand dipped by 5 percent to €96.4 million, and they were 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, said 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. The U.S. makes up just under 20 percent of the group's outdoor footwear sales.
This contraction in footwear contrasted with an underlying sales hike of 10 percent for the apparel category, 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 (€242.1m-$283.0m) should contribute to sales growth and profit from the third quarter. Jon Hoerauf, general manager for the Arc'teryx brand, has been appointed to lead an apparel division with the Canadian brand, Peak Performance and Salomon apparel, as reported earlier.
The outdoor division's most buoyant category for the quarter was sports instruments with the Suunto brand. It managed a sales jump of 20 percent to €40.7 million, up 23 percent before exchange rate changes, owing to expanded distribution.
Winter sports equipment generated an underlying sales increase of 13 percent but this is a small quarter for the category at just €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.
Cycling remained problematic, with a sales decline of 11 percent to €27.9 million for the quarter. Chiefly consisting of the Mavic and Enve brands, this business saw its sales decline by 10 percent in constant currencies. The group said it continued to suffer from lower OEM orders, as well as sluggish demand in the wholesale business. It has been raising its sales in 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 sales increase for the whole outdoor division was driven by Asia-Pacific, where sales moved up by 10 percent to €48.4 million. Pushed by abundant demand in China, regional sales were up by 15 percent in constant currencies. The group's sales of outdoor products moved up at double-digit rate in the U.S. market. This helped to raise sales in the Americas by 4 percent in constant currencies, but they were off by 3 percent in reported terms to €71.5 million.
In EMEA, easily the outdoor division's largest market, 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 outdoor brands outperformed its ball sports division, which suffered a sales decline of 6 percent to €159.0 million in the second quarter, flat in constant currencies. The division, which includes the Wilson brand, 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 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. While it managed an operating profit margin of 3.0 percent in the year-ago quarter, it just about broke even this time around. Amer Sports is more upbeat about the prospects for Precor and other fitness brands, after it obtained its largest ever two-year customer contract, estimated to be worth at least $30 million, with Planet Fitness.
Taken all together, the Amer Sports group's turnover slumped by 3 percent to €483.0 million, 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.
The group's own retail sales jumped by 15 percent to about €50 million. This includes growth of 11 percent for physical stores, with a comparable store sales increase of 4 percent, while online sales soared by 22 percent. Takala added that Amer Sports was making about 30 percent of its sales through what he describes as modern channels, consisting of own retailing offline and online, as well as online sales through other customers and brick-and-mortar sales. The chief executive 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.
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.
Due to the weaker sales of outdoor footwear and cycling products in the first quarter, the outdoor division's sales for the first half were down by 2 percent to €625.3 million. That was still an increase of 3 percent in constant currencies, with increases of 16 percent in Asia-Pacific and 1 percent in EMEA, against a decline of 2 percent in the Americas. On the same basis, footwear sales were off by 4 percent and cycling by 11 percent, while apparel sales jumped by 5 percent. Winter sports equipment was up by 16 percent and sports instruments by 24 percent. The division's operating profit before one-off items amounted to just €3.0 million, but that was an improvement against a loss of €2.6 million for the same six months last year.
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 will be uneven. More details on Peak Performance and the group's progress will be shared at its Capital Markets Day in September.