May 8, 2019
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Asics has tough Q1 but sees areas of strength

May 8, 2019

Sports giant Asics saw lower sales and profits in the first quarter of the year as issues in some key Asian markets and heavy marketing spend hit it hard. In particular, its sales fell over 26% in Greater China “due mainly to a temporary impact associated with the switch to direct sales of some part of distributor sales” in the country.

Asics has been investing heavily in product innovation

Looking at the headline figures, the company saw sales falling 5.7% to ¥98.7 billion (€802m/ £692m /$901m), and they fell 2.5% on a currency-neutral basis. This was mainly due to weak sales of its Performance Running category in EMEA, despite strong sales of Onitsuka Tiger in Japan and South Korea. 

Operating income was down to ¥6.18 billion, a 27.6% drop, and ‘attributable’ profit to the parent company dropped 17.9%tp  ¥4.36 billion.

Overall, Performance Running sales, which is an area on which the company is focusing, were down 7.7% to ¥43.25 billion (or 3.8% currency-neutral). This was due to weakness in Europe and Greater China, despite steady sales in Japan and North America.

Sports Style fell 7.5% to ¥8.99 billion (-3.6% currency-neutral), because of that temporary decline in Chinese sales, although Japan and North America were strong.

Core Performance Sports sales rose just 0.1% to ¥12.6 billion (+2.6% currency-neutral) on North American strength and steady sales in Japan.

But Apparel and Equipment sales fell 12% to ¥10.7 billion (-9.7% currency-neutral) as the company cut back on product lines with low profit margins in Japan.

Meanwhile Onitsuka Tiger rose 2.3% to ¥10.77 billion (+5% currency-neutral) as both South Korea and Japan proved buoyant. 

Although operating profit for the first two categories fell, all of the categories remained profitable, except for Apparel and Equipment, which saw another loss “due to a deteriorated cost of sales ratio.”

Regionally, Japanese sales rose 0.4% and income there increased more than 30% on the back of the appeal of the Onitsuka Tiger brand. North American sales rose 4.2%, although heavy investment in marketing and a weaker cost of sales ratio meant that the operation was loss-making there.

In Europe, sales fell as much as 14% and were even down a hefty 9% on a currency-neutral basis as the Performance Running category proved weak, with profit down by more than 64% as a result. However, the EMEA region continued to see strong growth in direct-to-consumer (DTC) channels. And sales in its retail channels increased on a currency-neutral basis by 17% and in e-commerce by 130%. 

Sales in greater China fell by 26.1%, as mentioned earlier, while the Southeast and South Asian regions saw sales rising 1.6%, again due to Onitsuka Tiger. But again, marketing investments dented profits.

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