Image credit: Visual China
On August 20th local time, Amer Sports (AS.N) released its financial performance for the second quarter and first half of fiscal year 2024.
Amer Sports is a company acquired by Anta Group in 2019 through collaboration with multiple institutions. Anta Group is its largest shareholder and regards it as the global growth engine for Anta. It owns high-end outdoor brands including Arc'teryx, Salomon, and Wilson.
According to the financial report, Amer Sports' second-quarter revenue increased by 16% to $994 million (approximately RMB 7.092 billion) compared to the same period last year; net loss of $4 million (approximately RMB 28.54 million), adjusted net profit was $25 million (approximately RMB 0.178 billion); gross margin increased by 220 basis points to 55.5% year-on-year.
In the first half of 2024, Amer Sports achieved significant financial improvement and turned losses into profits. According to the financial report, the first half of the year achieved a total revenue of $2.177 billion, a year-on-year increase of 14.14%; net profit reached $5.1 million, a significant improvement compared to the net loss of $78.1 million in the same period last year.
This "better-than-expected" performance is attributed to Amer Sports' strong growth in the Greater China and Asia Pacific regions.
Among them, revenue in the Greater China region increased by 54% year-on-year to $289 million, performing the best among all major markets. The Asia Pacific region (excluding Greater China) saw a 45% year-on-year increase to $106 million. It is worth noting that the entire group's growth stagnated and its growth rate was only 1% in the EMEA (Europe, Middle East, and Africa) and Americas.
Image source: from financial report
In China, Archaeopteryx and Salomon continue to win the favor of middle-class consumers. In fact, nearly 40% of the group's revenue comes from technical apparel mainly based on Archaeopteryx, with a year-on-year growth of 34% to 0.407 billion US dollars. In addition, taking advantage of the Olympic year's sports consumption boom, the outdoor performance department, and the ball and racket department increased by 11% and 1% year-on-year respectively.
During the Paris Olympics, the Chinese tennis player Zheng Qinwen won the gold medal using Wilson rackets, which marked an important moment for Wilson tennis and Wilson China. The company's management claimed that the sales of Wilson rackets increased 20 times that day.
Image source: from financial report
Looking further, the growth in China and other Asian regions is mainly due to the success of the brand's direct-to-consumer (DTC) channel. With the wholesale business growth slowing down and even stagnating, DTC channel sales grew by 40.3% year-on-year to 0.938 billion US dollars in the first half, rapidly rising to account for 43.08% of total revenue.
Image source: from financial report
As of June 30, 2024, the company has added a total of 49 self-owned retail stores, and online e-commerce direct sales have also increased. Among them, the number of self-owned stores for the outdoor functional trinket brand Bird's Nest has reached 203, a year-on-year increase of 17%; the number of stores for the skiing and outdoor mountain trinket brand Salomon has reached 160, a year-on-year increase of 44.1%; the number of stores for the ball and racket equipment brand Wilson has reached 26, a year-on-year increase of 117%.
However, in fact, Yamafin, which overly relies on the growth of the Chinese market, has already revealed hidden concerns.
In the Yamafin financial report, Omni-comp reflects the year-on-year revenue growth of self-owned retail stores and e-commerce websites that have been in operation for at least 13 months. During the period from June 30, 2023 to June 30, 2024, although the number of self-owned stores for outdoor functional trinkets increased from 174 to 203, Omni-comp decreased from 80% to 26%. Industry experts pointed out to Blue Whale News reporters that this may reflect a slowdown in same-store sales growth for the Bird's Nest brand.
In addition, in global markets outside of China, Yamafin's business has a low level of visibility.
In addition to the 1% growth in the first half of this year, as early as the end of last year, the performance in the Americas and Europe markets showed signs of fatigue. In 2023, the growth rates were 15% and 14% respectively, but in the fourth quarter of 2023, the previous high growth slowed sharply, with only 5% growth and 1% decline.
Although looking at the overall sporting goods industry, brands' business in the Americas has generally not met expectations. For example, Nike's sales in the North American market for the entire fiscal year ending May 31, 2024 decreased by 1%; Adidas experienced a 4% decline in the same market in the first two quarters of 2024; Lululemon's growth rate in North America also significantly slowed down, from 29% in 2022 to 12% in 2023.
But the strategic importance of the North American market should not be underestimated. This market is dominated by the economically powerful countries of the United States and Canada, and its sports consumption scene is not limited to cities, but also covers diverse geographical environments. At the same time, the active sports culture and rich terrain promote the vigorous development of outdoor sports such as rock climbing, skiing, kayaking, and marathons.
How does Amphen view this? The management responded that this is a gradual process ("a traffic story"), which means that the company needs time to gradually expand the successful experience in the Chinese market to other regions worldwide. They plan to first promote it to other Asian countries and then gradually expand marketing and opening activities to regions such as Europe and the Americas. Currently, the promotion activities in these regions have just begun.
According to Amphen, sales at the new stores opened by Solomon in Osaka and Paris in May this year have exceeded expectations. In October this year, they will try to open a pop-up store in the Soho area of New York and hope to open 1 to 5 stores in North America next year to further validate the China model. In addition, Arc'teryx will have about 60 stores in North America at the end of this year.
In addition, the management also stated during the conference call, "The potential of the North American market may exceed 200 stores. We have more stores in the China market, but there is still room for growth in the China market through optimizing the investment portfolio."
At the analyst conference after the release of the financial report, James Zheng, CEO of Amphen Sports, said, "I am very satisfied with our financial and operational performance in the second quarter of 2024. Our unique portfolio of high-end technical brands has established a presence in the global sports and outdoor markets. Led by our flagship brand Arc'teryx, we have far exceeded our own expectations in all key financial indicators, laying the foundation for our excellent performance in 2024."
Driven by performance, on the day of the financial report release, Amphen Sports' stock price on the US stock market rose by more than 10% in a single day, with a cumulative increase of 18.94% in the past two days. At the close on August 22nd, it closed at $14.15 per share, and the company's total market value rose to $7.149 billion.
Image source: Hithink Royalflush Information Network