Amer Sports, the parent company of popular sporting goods brands like Wilson and Louisville Slugger, has experienced a decline in shares following its initial earnings report. The company reported strong sales in China but a slowdown in wholesale orders, which caused shares to fall by about 5%.
In the fourth quarter, Amer Sports reported a net loss of $94.9 million, or 25 cents per share, compared to $148.3 million, or 39 cents per share, in the previous year. However, sales rose to $1.32 billion, a 10% increase from the previous year.
Amer Sports operates in three business segments: technical apparel, outdoor performance, and ball and racquet sports. Sales for technical apparel saw a significant increase of 26% year over year, driven by a 42% jump in direct sales. Sales for outdoor performance increased by 2%, primarily due to strength in the segment’s winter sports equipment franchise. However, ball and racquet sales declined by 3% as the segment faced tougher comparisons from the previous year.
Since its acquisition by a consortium of investors led by China’s Anta Sports in 2019, Amer Sports has seen substantial growth in sales, with revenue reaching $4.37 billion in 2023. However, the company has failed to turn a profit during this period, with losses narrowing from $230.9 million in 2022 to $208.8 million in 2023.
Amer Sports’ CEO, James Zheng, stated that the company is still in the early stages of its profitable growth journey. He expressed confidence in the company’s premium segment of the sports and outdoor market, noting that Amer Sports’ brands resonate strongly with consumers worldwide. Zheng also highlighted the company’s highest-margin brand, region, channel, and category as growing the fastest.
China has been a significant driver of Amer Sports’ growth, with sales in the region increasing from 8.3% of total revenue in 2020 to 14.8% in 2022. In the nine months leading up to September 30, 2023, nearly 20% of sales came from China. However, concerns have been raised about the sustainability of this growth, as it occurred during the region’s reopening from the Covid pandemic and may not be sustained over time.
Amer Sports’ supply chain is heavily exposed to China, with the majority of its products sourced from suppliers in the Asia-Pacific region. The company acknowledges that its regional sales growth has been uneven, with sales in Europe, the Middle East, and Africa representing a decreasing percentage of total revenue, while sales in China and the APAC region continue to grow.
The company’s CFO, Andrew Page, remains optimistic about the growth potential in China, stating that the market is less mature and that Amer has spent more time growing its presence there. He believes there is still a meaningful runway for growth in the region and that consumer demand will continue to be strong.
Looking ahead, Amer Sports expects reported revenue to grow between 6% and 8% in the first quarter of the year. For the full year, the company anticipates sales to grow by a mid-teens percentage. However, it also projects a double-digit percentage decline in sales for its ball and racquet segment.
Despite the decline in shares following the earnings report, Amer Sports remains optimistic about its future growth prospects. The company’s focus on premium products and its strong presence in China position it well for continued success in the sports and outdoor market. As it continues its profitable growth journey, Amer Sports aims to become a major player on the global stage.
