GuruFocus -
- Sales Growth: 17% increase in Q3, led by Arc'teryx.
- Adjusted Operating Margin: 14.4% in Q3, above expectations.
- Gross Margin: Increased 410 basis points to 55.5% in Q3.
- Adjusted Net Income: $71 million in Q3 compared to a net loss of $13 million in the prior year.
- Adjusted Diluted EPS: $0.14 in Q3, up from $0.03 last year.
- Technical Apparel Revenue: Increased 34% to $520 million, led by Arc'teryx.
- Outdoor Performance Revenue: Increased 8% to $534 million, driven by Salomon footwear and apparel.
- Ball & Racquet Revenue: Increased 11% to $300 million.
- Store Expansion: Arc'teryx opened 9 net new stores in Q3, total 134 stores globally.
- Greater China Sales Growth: 56% increase in Q3.
- Net Debt: $2 billion at the end of Q3.
- 2024 Revenue Guidance: Raised to 16% to 17% growth.
- 2024 Adjusted Gross Margin Guidance: Increased to 55.3% to 55.5%.
- 2024 Adjusted Diluted EPS Guidance: Raised to $0.43 to $0.45 per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amer Sports Inc (NYSE:AS) reported a strong 17% sales growth in Q3, led by its flagship brand, Arc'teryx.
- The company achieved a 14.4% adjusted operating margin, surpassing expectations.
- Arc'teryx and Salomon footwear are executing well against growth opportunities, with Arc'teryx opening 9 new brand stores globally in Q3.
- Greater China saw a remarkable 56% growth, outperforming the market and benefiting from strong consumer confidence.
- The company is experiencing strong gross margin expansion driven by brand pricing power and a favorable mix shift towards high-margin franchises.
- Outdoor Performance segment faced softer trends in Salomon Winter Sports Equipment, impacting overall performance.
- Adjusted SG&A expenses increased, representing 42.3% of revenues in Q3, due to investments in growth plans.
- The company is facing challenges in the North American market for Salomon footwear, which is still in preliminary stages of market penetration.
- Winter Sports Equipment sales are expected to grow at a slower pace due to cautious orders and market conditions.
- The effective tax rate remains high at 52%, impacting net income despite improvements in other areas.
A: Jie Zheng, CEO: The Chinese consumer market, especially in our segments, is still booming. We estimate high single-digit growth in the sports industry in China, with outdoor segments growing more than the industry average. Consumers in Tier 1 and Tier 2 cities are increasingly treating outdoor activities as part of their lifestyle, which benefits brands like Arc'teryx and Salomon.
Q: What changed over the last 90 days with Arc'teryx that has you most excited?
A: Stuart Haselden, CEO of Arc'teryx: The opening of our Broadway store in Soho, Manhattan, is a significant milestone. It represents an evolution in our retail experience, including the first dedicated sales floor. We're also excited about the ongoing success in our footwear business and the 50% growth in our women's category.
Q: Can you elaborate on SG&A investments in the fourth quarter and how to think about SG&A relative to sales next year?
A: Andrew Page, CFO: We are investing in high-return areas like new Arc'teryx and Salomon stores in China, Wilson stores in APAC, and our Tennis 360 concept. We expect SG&A to be flat leverage next year, focusing on talent acquisition, retention, and technology to drive sustainable growth.
Q: Could you talk more about the footwear opportunity and potential to expand into wholesale?
A: Stuart Haselden, CEO of Arc'teryx: We see significant potential in expanding our footwear business through wholesale channels. It's important for brand awareness and aligns with how consumers shop for footwear. We've reset our expectations higher based on 2024 learnings, aiming for footwear to reach 20% of revenues in the coming years.
Q: Can you discuss the promotion of Guiyang to CEO of Salomon and his vision for the brand?
A: Jie Zheng, CEO: Guiyang has over 28 years of experience with Salomon, excelling in sales, product innovation, and operational excellence. His vision includes accelerating footwear growth globally, winning in Europe, and building a strong digital platform. We have high confidence in his leadership for Salomon's next growth phase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.