Asics reins in profits forecast as sales prove tough, despite China strength

Sports giant Asics really does have a challenge on its hands. The company has reported bleak nine-month figures and has also downgraded its full-year profit expectations as net sales fell 4.7% to ¥295.68 billion in the period to the end of September. That meant operating income was down 37.1% to ¥15.36 billion and net profit was down 47.55% to ¥8.288 billion. 


Asics

The company said that it “recognises the need for business restructuring in the group in order to recover business results” and added that “there is a possibility of recording an extraordinary loss as the company is considering disposing of assets in Japan and overseas.” That could mean stock clearance for slow-moving inventory, “impairment of unprofitable retail stores” and selling strategic shareholdings.

So what’s gone wrong? The company said that sales in the Americas fell significantly while Japanese sales were also down, and they fell in EMEA too, albeit by a relatively small percentage. At least they rose in East Asia due to double-digit growth in China. Those performances came as sales of its core running shoes fell 7% but Onitsuka Tiger was up 30%.

The company said it’s facing tough times at retail in the future too, especially in the Americas and EMEA, even though a focus on Singles Day this month should see Chinese sales continuing to climb.

But it was relatively upbeat despite all of this. In a separate release covering the EMEA region, for instance, the company talked about “positive results in key strategic areas for the first three quarters of 2018 after a slow start to the year.”

It said its business transformation is “delivering positive results in emerging markets, [in] Asics brand stores and Asics e-commerce sales,” in an earnings report that contained good news as well as bad.

But there’s no getting away from the fact that the region saw consolidated net sales falling 4% (or 2.7% currency-neutral).

Better news came as it said that Asics  brand stores reported 11% growth in EMEA, its e-commerce sales saw a stunning uplift of 85% and it enjoyed increases in emerging markets with South Africa up 2%, Russia up 17% and the Middle East surging 131%. The latter was boosted by it opening its first brand store in the Middle East at The Avenues Mall in Kuwait

Across the brand’s core product categories, running shoes remained stable, tennis shoes increased 2.4% and Onitsuka Tiger footwear managed “standout results” with a 28% rise.

The company also continued to deliver a number of brand and business initiatives to drive growth across key performance and lifestyle categories in Q3 with the addition of its “innovative” FlyteFoam Lyte and FlyteFoam Propel midsole material to two core running shoe models (the Dynaflyte 3 and Roadhawk FF 2.) The two new shoe models followed the successful Q2 launch of the flagship Gel-Kayano 25 shoe.

Meanwhile in tennis, it “gained significant exposure” from its partnership with Novak Djokovic. It helped that he won the 2018 men’s singles at Wimbledon and the US Open wearing Gel-Resolution Novak shoes.

The company also went for a vintage revival and in Lifestyle, it re-released the Gel-Kayano 5 OG model from 1999.

EMEA CEO Alistair Cameron said: “We have radically transformed our business to drive future growth by building closer consumer connections, prioritising strategic business initiatives and becoming more responsive in a rapidly changing world. We are encouraged by the growth in key strategic areas and with our strategic partners after a tough start to the year. We are confident that our new focus will continue to deliver results.”

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