The Outdoor segment of Amer Sports, which also includes winter sports equipment and sports instruments, had the strongest performance in the group during the critical fourth quarter. Segment sales grew by 14 percent in euros to €574.0 million and by 13 percent in local currencies, generating 6 percent higher adjusted operating income (Ebit) of €86.6 million.
For the full financial year, Outdoor revenues – including those of Salomon and Atomic – rose by 8 percent to €1,661.3 million, representing 62 percent of the group's total sales, and they went up by 10 percent in local currencies. The segment's annual Ebit went up by 15 percent to €205.4 million excluding extraordinary items.
The segment's strong performance was driven by the acquisition of Peak Performance and the ongoing growth of Arc'teryx, which propelled a 21 percent increase in outdoor apparel sales to €585.5 million in 2018.
On the other hand, sales of outdoor footwear were off by 6 percent to €469.5 million for the year, a decline that Amer attributed to a consolidation of the brand's footprint. It was the first decline in many years. Jean-Marc Pambet, president of Salomon, explained that it had been decided at the end of 2017 to work with fewer e-tailers in Europe and North America and to better control cross-border trade in Europe and North America to preserve brand equity.
Within the Outdoor segment, winter sports equipment sales rose by 7 percent to €446.3 million. Sales of sports instruments, led by Suunto, rose by 13 percent to €160 million.
As it turns out, Peak Performance generated Ebit of €16.5 million in 2018 on sales of €145 million. Amer paid a multiple of 14.9 times Ebit for Peak Performance, competing against Anta Sports Products, which is offering a price of 22 times Ebit for all of Amer's shares along with other investors. The offer expires on Feb. 28, but it may be extended if the number of shares tendered is insufficient. The offer document was posted on Anta's and Amer's websites on Feb. 8.
Thanks to Peak Performance, softgoods grew to represent 40 percent of Amer Sports' total revenues in the past year, in line with one of the group's strategic objectives along with the development of the direct-to-consumer (DTC) business and expansion in China and the U.S.
According to Amer's recently released annual report, the group's total sales of softgoods went up by 10 percent last year to €1.1 billion, in line with its long-term target in this category, which aims to raise it to 50 percent of total revenues. Alongside a €84 million contribution from Peak Performance since its acquisition, Arc'teryx continued to grow at a strong rate of 11 percent.
Softgoods were a key driver of the group's growth in China, where its total revenues reached €150 million, according to the annual report.
Across all the categories, DTC revenues grew by 19 percent on an organic basis to 12.2 percent of total revenues last year, with digital up by 24 percent. Brick-and-mortar sales went up by 14 percent, with a 7 percent rise on a comparable store basis.
At the end of last year, Amer Sports had 364 stores trading under the group's brands, compared with 288 a year earlier, and about half of them were directly operated. The door count includes 78 Peak Performance stores.
Sales in China rose by 16 percent in 2018. The U.S. and China, which are the world's two largest sporting goods markets, accounted for 45 percent of Amer's total sales. Salomon has been observing the Chinese market closely for expansion opportunities, and with Anta's powerful backing, China's share of Amer's sales is certain to grow strongly if the tender offer is successful.
The Americas were the fastest-growing region for Amer's Outdoor segment last year, rising by 17 percent to €149.8 million. Segment sales improved by 12 percent to €344.6 million in the EMEA region and by 9 percent to €79.6 million in Asia-Pacific, driven by China and Japan.
For the full year, Amer reported a 4 percent increase in total revenues to €2,678.2 million, with growth of 7 percent in local currencies.
The group's operating profit declined by 10 percent to €83.8 million in the fourth quarter, but it was off by only one percent before extraordinary items. The quarterly net income dipped by one percent to €51.0 million.
For the whole financial year, Amer reported an improvement in the gross margin of 0.5 percentage points to 45.6 percent. The operating margin increased by 0.3 percentage points to 8.6 percent. The group's net income went up by 33 percent to €124.9 million for the year.
The acquisition of Peak Performance last June increased the group's net indebtedness ratio to 2.49 times Ebitda before extraordinary items from 1.64 times at the end of the previous year.
Amer says it makes 24 percent of its products in-house and 12 percent at hybrid factories.
Looking at 2018, Amer simply says it expects sales and operating profits to continue to rise. (More in SGI Europe.)