EXEC: Asics North America slowed by supply chain grunts in first half

Asics reported an operating loss in its North America segment during the six-month period due to reduced gross margins as well as higher operating expenses related to higher e-commerce sales. Sales were down 2.7% on a currency-neutral basis, impacted by supply chain disruption.

Reported sales in the six months rose 11.3% to 47,631 million yen ($357 million) from 42,797 million yen a year ago due to changes in exchange rates, according to the Asics Corp income statement The segment’s operating loss of 562 million yen compared to an operating profit of 1,944 million yen a year ago.

Subtracting the first quarter results from the half-year results, North American sales in the three-month second quarter were 26,519 million yen compared to 23,977 million yen a year ago, a gain of 10.6%. . Operating profit was 212 million yen, down 85.6 percent from 1,471 million yen a year ago.

According to a statement from Asics North America, which includes the United States, Canada and Mexico, one of the highlights of the quarter was the achievement of a third consecutive quarter with double-digit growth in the channel of e-commerce.

Double-digit e-commerce growth contributed to a 64% year-over-year increase in OneAsics memberships. Earlier this year, the brand launched “members-exclusive” products for OneAsics members. This benefit has a 30-day window where members can access certain products before they become available to consumers. To date, running and performance tennis products have been the most popular items in the program.

From a product perspective, the core performance sports category saw double-digit growth in the second quarter in the North American region. The region benefited from improved product availability, which translated into increased sales in the tennis and golf categories. Specifically, there was a balanced share of sales between the top four golf models, Gel-Ace Pro M, Gel-Kayano Ace, Gel-Course Glide, and Gel-Course Ace.

Elsewhere in the region, the Performance Running and Sportstyle categories were more impacted by residual supply chain challenges, although several products performed well this quarter. In performance running, the Gel-Nimbus 24 model was the top-selling style in the wholesale channel, while the Metaspeed series saw year-over-year growth, with the Metaspeed sky+ shoe becoming the model best-selling franchise. Conversely, at Sportstyle, Tiger Runner, Japan S and Gel-Kayano 14 shoes all saw growth in the wholesale channel.

“As barriers associated with the global supply chain continue to impact our wholesale and retail channels, we are entrenched in the year-over-year category increases we are seeing in the specialty of racing, team sales and more,” said Richard Sullivan, President and CEO. , Asics North America. “Looking ahead to the third and fourth quarters of 2022, our valued partners across the business will continue to drive the expected successes of the Asics North America region.”

Company-wide, Asics raised its guidance for the year in part due to momentum in most regions, including North America, in the Performance Running category.

In the six months, the Japanese sporting goods giant’s sales reached 225,080 million yen, up 7.4%. The gains came despite production disruptions caused by some plant closures and were punctuated by strong sales of the Performance Running category in some regions.

Gross profit increased 5.7% to 111,486 million yen due to revenue growth. Gross margins eroded slightly to 49.5% from 50.3% a year ago.

Operating income decreased by 20.1% to 19,166 million yen, mainly due to an increase in commission costs. Net profit, however, improved 9.8% to 13,562 million yen due to reduced extraordinary losses caused by the impact of COVID-19.

Subtracting the first-quarter results from the half-year results, Asics company-wide sales in the three-month second quarter were 119,751 million yen compared to 102,929 million yen a year ago, a gain of 16.3%. Operating profit was 9,109 million yen, down 3.0% from 9,389 million yen a year ago. Net profit was 4,837 million yen, up 159% from 1,865 million yen a year ago.

In other regions during the six months, net sales in Japan decreased 2.2% to 56,503 million yen due to weak sales in all categories except Onitsuka Tiger. Segment revenue decreased 11.4% to 3,086 million yen, mainly due to the impact of lower sales.

In the Europe region, half-year sales increased by 9.0% to 63,030 million yen due to the effect of exchange rates. Segment revenue decreased 22.0% to 7,148 million yen, mainly due to gross margin erosion and higher advertising spend.

Sales in the Greater China region increased 3.4% to 28,945 million yen due to strong Performance Running sales and currency effects, despite weak sales in the Onitsuka Tiger category. Segment revenue fell 3.0% to 5,962 million yen, mainly due to lower gross margins and higher SG&A expenses resulting from the currency effect.

Sales in the Oceania region jumped 17.6% to 15,444 million yen due to strong sales in all categories except the Sports Style category. Segment revenue increased 44.6% to 2,944 million yen, mainly due to improved gross margin, as well as higher sales.

Sales in Southeast and South Asia regions jumped 73.8% to 8,056 million yen due to strong sales in all categories. Segment revenue jumped 683.0% to 1,430 million yen, mainly due to an improvement in gross margin, as well as sales gains.

In other regions, sales increased 28.9% to 20,286 million yen due to strong sales in all categories except Apparel & Equipment. Segment revenue climbed 127.3% to 1,442 million yen, mainly due to higher sales.

Looking ahead, Asics’ updated outlook for the current year calls for:

  • Sales of 460,000 million yen, a 13.8% year-on-year gain. Previously, sales were expected to reach 420,000 million yen, a year-on-year increase of 3.9%.
  • Operating profit of 27,000 million yen, a gain of 23.0%. Previously, operating profit was expected to reach 23 trillion yen, a gain of 4.8%.
  • Ordinary income of 26,000 million yen, a gain of 17.3%. Previously, ordinary income was to be 22,500 million yen, a gain of 1.5%.
  • Net profit of 18,000 million yen, a gain of 91.4%. Previously, net profit was expected to be 13,500 million yen, a gain of 43.6%.

Asics said in a separate statement that the upward revision in sales reflects the strength of Performance Running with strong growth, particularly in North America, Europe, Oceania and Southeast and South Asia in the second trimester. Asics wrote: “The current steady growth is expected to continue for the remainder of the year. Accordingly, net sales are revised to exceed previous guidance, including a favorable revision to assumed exchange rates. »

Operating profit and ordinary profit are also expected to exceed previous expectations due to increased sales in the regions mentioned above, despite the impact of the “soaring distribution costs” in North America and Europe.

Net income was also revised upward in part due to an expected revision to deferred tax assets which resulted in higher royalty income from subsidiaries.

Photo courtesy of Asics

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