Sales of outdoor apparel and footwear at the Amer Sports group have taken a break from the double-digit increases delivered in the first half of this year, but the outdoor category remained strong and it supported the growth of the entire Finnish group in the third quarter.

The Amer group's sales reached €736.8 million for the three months, which was an increase of 3 percent in reported terms and 4 percent in constant currencies, and an organic growth at the same rate. The group's managers are apparently satisfied with the performance, amid unfavorable conditions in several categories.

The outdoor division's turnover moved up by 6 percent to €505.7 million in the quarter. It amounted to an increase of 6 percent in constant currencies, compared with 12 percent in the first half. The increase for the three months was driven by a rise of 8 percent to €146.3 million for outdoor apparel, mostly with the Arc'teryx and Salomon brands, and outdoor apparel sales would have firmed up by 11 percent without the divestment of Bonfire and Nikita last year.

However, there was a slowdown in the growth of outdoor footwear sales, which increased by 16 percent in constant currencies for the first half and moved up by just 4 percent for the third quarter. That amounted to sales of €144.6 million, up by 2 percent in reported terms.

Heikki Takala, the Amer Sports group's chief executive, explained in a conference call with analysts that some deliveries had shifted from the third to the second quarter, which distorted the comparisons. This is partly due to changes in warehousing, as the group is investing in distribution capacity to deal with its expansion, and it shifted some deliveries to cope with a warehouse switch more efficiently. The investments in warehousing relate to the U.S. and European markets, and should be ready around the middle of 2017.

Amer Sports Consolidated Income Statement

(Million Euros, Third Quarter ended September 30)

 

2016

2015

%
Change

Outdoor

505.7

476.6

6.1

Ball Sports

147.0

147.8

-0.5

Fitness

84.1

89.3

-5.8

NET SALES

736.8

713.7

3.2

Cost of Goods Sold

383.9

378.5

1.4

License Income

1.4

2.2

-36.4

Other Operating Income

4.1

0.8

412.5

R & D Expenses

22.5

19.8

13.6

Selling & Marketing Expenses

183.6

163.3

12.4

Administrative & Others Expenses

48.2

51.6

-6.6

Net Finance Expense

8.0

7.7

3.9

Pre-Tax

96.1

95.8

0.3

Tax

25.6

26.7

-4.1

Net Result

70.5

69.1

2.0

Earnings/Share (Diluted)

0.60

0.59

1.7

Driven by the Atomic and Salomon brands, sales of winter sports equipment progressed by 3 percent to €140.5 million, but Amer Sports indicated that this included a shift in deliveries to the third quarter and pre-orders had somewhat declined. The cycling business, operating chiefly under the Mavic brand, raised its sales by 10 percent to €34.3 million for the quarter, but this turnover would have fallen by 8 percent without the acquisition of Enve Composites. Sales of sports instruments, driven by the Suunto brand, surged by 23 percent to €40.0 million.

The performance of the outdoor division was strongest in Europe, the Middle East and Africa (EMEA), where sales advanced by 9 percent in constant currencies, while they moved up by 3 percent in the Americas and 4 percent in Asia-Pacific. The division's Ebit margin excluding one-off items moved up by 1.4 percentage points to 20.9 percent for the quarter.

The outdoor division still performed markedly better than ball sports, which include the Wilson brand. The division's turnover reached €147.0 million, which was flat in constant currencies and down by 1.0 percent in reported terms, mostly due to weakness in tennis and golf. The turnover of the fitness division, which chiefly consists of the Precor brand, slipped by 6 percent to €84.1 million, with a decline of 4 percent in constant currencies but many new products coming up in the fourth quarter. More details on these categories in SGI Europe.

The Finnish group's retail sales jumped by 28 percent for the quarter, with store openings in the U.S. as well as China and Mexico. More store openings are scheduled in the fourth quarter in the U.S., China and Italy. Sales of the group's stationary stores inflated by 24 percent for the quarter, while online sales shot up by 36 percent, including the launch of an online store for Arc'teryx in Japan, among others.

Amer Sports saw its sales move up by 7 percent in constant currencies in EMEA, while they inched up by 1 percent in the Americas and increased by 3 percent in Asia-Pacific, with a sales jump of 21 percent in China. The company was under more pressure in the U.S. market, not least due to the inventories left over after the mild winter and the retail bankruptcies that unsettled the market.

The group's gross margin increased by 1.0 percentage point to 48.0 percent, as price increases started to come through and some of the company's currency hedging still had an impact. Amer has continued to invest in items such as marketing automation and cloud-based customer relationship management, which should help to create a company-wide database and thus leverage sales. The group's Ebit excluding one-off items gained €3.0 million to €106.5 million.

The one-off items amounted to extra costs of €2.4 million, as part of the targeted restructuring plan launched by Amer Sports in August. These measures are meant to free up operating expenses of about €20 million, which will be reallocated to fund growth, but they will be paired with restructuring costs of €20 to €25 million spread over the second half of 2016 and the first half of 2017. Amer ended the quarter with a net profit of €70.5 million, compared with €69.1 million for the same three months in 2015.

Adding up the first three quarters of the year, the Amer group's sales were up by 6 percent to €1,849.7 million, which was an increase of 7 percent in constant currencies, with organic growth of 6 percent. The outdoor division's turnover improved by 8 percent to €1,111.1 million for the nine months, up by 9 percent in constant currencies. This includes increases of 11 percent for footwear and 14 percent for apparel, while winter sports sales were flat, cycling was up by 8 percent and sports instruments by 10 percent.

The group's gross margin was up by 1.0 percent to 46.9 percent and its Ebit margin advanced by 0.3 percentage points to 7.6 percent for the nine months, excluding one-off items of €8.7 million, against €8.0 million for the same period last year. The nine months ended with net profit of €79.0 million for the Finnish company, up from €68.3 million.

Amer reiterated its projection that sales and the Ebit margin excluding one-off items will both increase for the full year, in spite of the uneasy conditions in some markets. At an investor day in August, the management reaffirmed its financial targets for 2020 but raised its guidance for sales over the five-year period. While it previously estimated that it could raise its turnover to €3.5 billion through organic sales and acquisitions, the company adjusted the forecast to estimate that it should reach the same level organically – and any acquisitions would be on top of the €3.5 billion.