Amer Sports ended the year with a strong quarter for its winter sports, outdoor and fitness products, which made up for weakness in the ball sports business and enabled the Finnish group to report gains in sales for the full year.

The group's turnover for the quarter moved up by 4 percent to €803.1 million, up by 9 percent in constant currencies. Its earnings before interest, tax (Ebit) and one-off items reached €92.6 million, which was an increase of 14 percent for the quarter. But after other items, including costs of €6.7 million for restructuring measures and a write-down of deferred tax assets amounting to €10.4 million, due to adjustments in tax rules, the quarterly net profit dipped by €0.7 million to €47.2 million.

The quarterly sales gain was driven by a jump of 7 percent to €527.3 million in the outdoor category, amounting to a rise of 11 percent in constant currencies. With brands such as Salomon and Atomic, the quarter was buoyed by robust winter sport equipment sales, which were up by 12 percent in constant currencies for the quarter.

Heikki Takala, the Amer group's chief executive, said in a conference call with analysts that favorable weather conditions led to a strong uptick in central Europe and growth in all regions. He added that rental and retail sales were equally strong, which bodes well for pre-orders ahead of the next winter season.

The fitness division, driven by the Precor brand, contributed a sales rise of 4 percent to €114.6 million for the quarter, up by 12 percent in constant currencies, as it started reaping the delayed benefits of product launches last year. The ball sports division, including the Wilson brand, suffered a 6 percent sales drop to €161.2 million, but its turnover moved up by 1 percent in constant currencies.

Amer Sports Consolidated Income Statement

(Million Euros, Year Ended Dec. 31)

 

2017

2016

%
Change

Outdoor

1,670.9

1,601.8

4.3

Ball Sports

653.2

671.1

-2.7

Fitness

361.1

349.2

3.4

NET SALES

2,685.2

2,622.1

2.4

Cost of Sales

1,478.3

1,409.7

4.9

License Income

5.7

6.8

-16.2

Other Operating Income

7.0

8.8

-20.5

R & D Expenses

120.2

97.5

23.3

Selling & Marketing

744.2

731.1

1.8

Admin. & Other Expenses

186.9

194.6

-4.0

Finance Expense

26.3

31.8

-17.3

Pre-Tax

142.0

173.0

-17.9

Tax

48.7

46.1

5.6

NET

93.3

126.9

-26.5

Euro/Share (Diluted)

0.80

1.07

-25.2

The group's outdoor and fitness brands generated the strongest demand for the full year. They pushed Amer's total sales up by 2 percent to €2,685.2 million, which was a rise of 4 percent in constant currencies. On this basis, the group's turnover advanced by 4 percent in Europe, the Middle East and Africa (EMEA), by 2 percent in the Americas and by 8 percent in Asia-Pacific.

The outdoor category alone chalked up sales of €1,670.9 million for the year, up by 4 percent in euros and by 5 percent in constant currencies, with apparel leading the way. Buoyed by the Arc'teryx brand, apparel sales jumped by 11 percent to €479.7 million, with an increase of 12 percent in constant currencies. Footwear sales were less robust, up by 2 percent to €501.3 million, due to the consolidation of the Amer group's distribution and a cautious wholesale market.

 

Amer Sports - Net Sales and EBIT by segment

(Million Euros, Year Ended Dec. 31)

 

2017

2016

Change

Outdoor

Net Sales

1,670.9

1,601.8

4.3

EBIT margin

10.7%

12.3%

-1.6pp

Ball Sports

Net Sales

653.2

671.1

-2.7

Ebit Margin

6.9%

6.7%

0.2pp

Fitness

Net Sales

361.1

349.2

3.4

Ebit Margin

5.6%

4.9%

0.7pp

Pushed up by the brisk demand in the last quarter, winter sports equipment contributed a sales increase of 7 percent to €414.0 million for the year, up by 9 percent in constant currencies, including the acquisition of Armada in March.

Sales of sports instruments under the Suunto brand were flat for the year at €141.6 million, despite a sudden growth spurt at the end of the year. Demand for the latest Spartan product family pushed up sales of sports instruments by 25 percent in the last quarter, with particularly buoyant demand online and in Asia-Pacific.

The weakest category in the outdoor division was cycling, which mostly consists of the Mavic brand. Sales tumbled by 11 percent to €134.3 million, down by 10 percent in constant currencies, due to reduced OEM orders as well as high industry and retail inventories in the cycling market.

The sales rise for the entire outdoor division was spread across the group's three geographic areas, with increases of 4 percent in EMEA, 6 percent in the Americas and 10 percent in Asia-Pacific, all in constant currencies. However, its operating profit before one-off items declined by 9 percent to €179.3 million, amounting to a drop of 1.6 percentage point in underlying operating margin to 10.7 percent.

  

Amer pointed out that it expanded at strong double-digit rates in its strategic priority areas of apparel, own retail sales, online sales and China. The group's turnover in the country jumped by 15 percent to about €120 million. Connected devices, another priority, raised their sales at a double-digit rate to reach about €300 million. The only priority market that fell short was the U.S., where the group's sales were roughly flat.

The Amer group's direct-to-consumer sales reached €254.1 million for the year, amounting to an increase of 25 percent in constant currencies, including growth of 37 percent for online sales and 19 percent for retail sales, with comparable store sales growth of 7 percent.

Amer had 288 branded retail stores at the end of the year, half of them operated by local partners and 80 percent full-priced, and split about evenly between Europe, Asia-Pacific and the Americas. The company also ran 86 online stores at the end of the year, up from 69 at the end of 2016, mostly due to the launch of Mavic stores in EMEA and expansion in Suunto.

However, Amer's gross profit margin excluding one-off items slumped by 1.0 percentage point to 45.3 percent, due to unfavorable currency exchange rate changes. Its Ebit tumbled by 18 percent to €168.3 million, including one-off items of €46.7 million, compared with €16.9 million in 2016. But even without these one-off costs, the group's Ebit declined by 3 percent to €215.0 million – amounting to an underlying Ebit margin of 8.0 percent of sales, down by 0.5 percentage points. Amer Sports ended the year with net profit of €93.3 million, down from €126.9 million.

The Finnish group anticipates that sales in constant currencies and operating profit excluding one-off items will increase this year, but the quarterly growth will be uneven. Apart from the continued impact of product launches in fitness and sports instruments, Amer pointed to improved prospects in the winter sports business, expansion in cycling apparel and the lateral moves of its outdoor brands into the fashion market.

More on ball sports and fitness in Sporting Goods Intelligence Europe