The upheavals in the U.S. retail market adversely affected footwear sales of the Amer Sports group in the first quarter. After a small dip in the last quarter of 2016, they moved up by just 3 percent to €156.6 million in the first three months of this year, amounting to a rise of 2 percent in constant currencies.
Heikki Takala, the Amer group's chief executive, suggested in a conference call with analysts that the lackluster demand had been caused by cautious ordering among U.S. retailers. Pre-orders were sluggish but sell-through of footwear was strong and online sales advanced at double-digit rate.
The Finnish owner of Salomon, Arc'teryx, Atomic, Wilson and many other brands saw its turnover increase by 4 percent to €661.6 million for the quarter. This amounted to a rise of 2 percent in constant currencies, driven by an increase of 14 percent for apparel.
Own retail sales jumped by 27 percent, with an increase of 43 percent for online sales and a comparable store sales rise of 6 percent. Amer Sports enjoyed double-digit sales growth in China and in winter sports equipment, although the first quarter is relatively small in this category, and the fitness division has started to rebound.
However, the group's gross profit margin was down by 2.1 percentage points to 45.3 percent for the quarter, which was blamed on less favorable hedging rates on the U.S. dollar. This factor had an impact of €15 million on the group's earnings before interest and tax (Ebit), which shrank by 17 percent to €38.2 million before one-off items. It spent €6.7 million on its restructuring program for the quarter, while it had to write down €6.3 million due to the situation with The Sports Authority in the same quarter last year. Amer Sports' net profit slipped by 16 percent to €19.5 million.
The outdoor division raised its quarterly sales by 6 percent to €396.2 million, which was a rise of 4 percent in constant currencies. It was spread evenly in geographic terms, with increases of 4 percent in the Americas and in Europe, the Middle East and Africa (EMEA), while underlying sales were up by 3 percent in Asia-Pacific.
Amer Sports said that the outdoor division's sales were affected by high trade inventories in the U.S. market, which mostly impacted footwear and cycling sales. Apart from the sluggish increase of 2 percent in footwear, the group's turnover in cycling products, mostly from the Mavic brand, was down by 6 percent in constant currencies.
The Arc'teryx brand fueled the uptick of 14 percent in apparel sales, while the favorable winter conditions in many key markets pushed up sales of winter sports equipment by 18 percent in constant currencies. The Suunto brand suffered an underlying sales decline of 26 percent in the sports instruments category, due to the timing of product launches. The outdoor division's Ebit contracted by nearly 24 percent to €28.8 million excluding one-off items.
The growth of the outdoor division was paired with an underlying sales decline for the group's ball sports division, driven by the Wilson brand, while the group's fitness division started to reap the benefits of a flurry of product launches, after some delays.
Takala said that the issues in the U.S. retail market encouraged the group to ramp up investments in its omni-channel strategy, explaining that consumer habits are changing more rapidly than anticipated. The extra investments in the Finnish group's digital transformation will weigh on short-term profit margins but they should yield more long-term benefits.
Takala said that the investment was required to adjust the organization, to build databases faster, to bring more consumers into the funnel and improve conversion. The group particularly wants to interact more directly with consumers, including the expansion of online sales with an extra ten to 15 online stores by the end of this year.
The company predicts that its sales will increase in constant currencies for the year, but the growth is projected to be biased toward the second half of the year. Operating profit before one-off items is projected to be stable, as it includes extra investment for the group's digital development.