Business news : Amer Sports Reports Apparel, Fitness, China and Russia Propelled Q2 Growth

Amer Sports reported net sales reached €353.8 million ($455 mm) in the second quarter, up 12 percent from the April-June 2011, or 5 percent on a currency-neutral (c-n) basis. The increase was driven by double-digit growth in Apparel, Fitness and Sports Instruments and high growth rates in China, Russia and own retail.

The Finnish company said gross margin improved 80 basis points to 43.1 percent. Earnings before interest and taxes (EBIT) was negative €19.9 million (-$26 mm), compared to negative €10.9 million (-$16 mm) in the year earlier quarter. Earnings per share came in at -€0.19, compared to -€0.12.

The company said its net sales outlook is unchanged. In 2012, Amer Sports' net sales in local currencies are expected to increase from 2011 in line with the company's annual 5 percent growth target. Amer Sports 2012 EBIT excluding non-recurring items is expected to be approximately at the level of 2011 despite the uncertainty in the winter sports market and the ongoing investments into the future growth. 

For the full year, Apparel net sales growth is estimated to be over 20 percent. In Footwear, sales growth is estimated to be approximately 5 percent due to retailers' inventory reduction. In Apparel and Footwear, the company no longer provides semi-annual pre-order figures as Amer Sports considers that these are not a reliable indicator of the future growth. In Winter Sports Equipment, Amer Sports has gained market shares and strengthened its market position but pre-orders for the season 2012/13 are down by 13 percent due to the late and mild winter in the previous season.

The company said that it continuously drives synergies and scale and continues to invest into future growth with focus on softgoods, sales coverage, emerging markets, and own retail, to support Amer Sports' sales and gross margin improvement. Such investments, however, require up-front operational expenses that eat into short term profits. Amer Sports 2012 EBIT excluding non-recurring items is expected to be approximately at the level of 2011 despite the uncertainty in the winter sports market and the ongoing investments into the future growth.

“We achieved solid growth in the second quarter, despite deterioration in trading conditions especially in Europe where several major retailers are reducing inventories and pre-orders,” said Heikki Takala, president and CEO. “We continued to improve our gross margins and to drive cash flow through working capital reduction.

As examples of the strategic investments in past 12 months, Takala cited the opening of some 20 new own retail stores and 20 new e-commerce stores. The company has put in place entirely new category market organizations in Russia, China and Brazil and significantly increased its product initiative pipeline, especially in Salomon, Arc'teryx and Wilson for 2013 and onwards.

“Whilst all these investments represent incremental cost and admittedly burden especially the seasonally low second quarter results, they have a positive sales and gross margin contribution already in the current year, enabling us to by-pass our 2 billion euro sales milestone in 2012,” he said. “Importantly, these investments complete most of our capability needs by the end of 2012 and they contribute to our scale and synergies in the years to come, in line with the company's strategic glidepath.”

We continue to execute our strategy with confidence as we see that it's working."

Net sales and EBIT January-June 2012 :Amer Sports' net sales in January-June 2012 were EUR 843.6 million (January-June 2011: EUR 764.7 million). Comparable net sales increased by 6% in local currencies, particularly due to sales growth in Apparel, up by 32%, Footwear, up by 8%, Fitness, up by 6% and Sports Instruments, up by 12% excluding divested businesses.  

(SportsOneSource Media)