Amer Sports(AS) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Sales growth of 16% in Q2 (18% on a constant currency basis), driven by strong performance in Technical Apparel and Outdoor Performance segments [4][22] - Adjusted operating margin increased by 50 basis points to 2.9%, exceeding guidance [23] - Adjusted gross margin expanded by 200 basis points to 55.8%, driven by favorable product and channel mix, particularly from Arc'teryx [22] - Greater China region grew 54%, while Asia Pacific grew 45%, with EMEA and Americas growing 1% each [22] - Full-year revenue growth guidance raised to 15%-17%, with adjusted operating margin expected at the high end of 10.5%-11% range [32] Business Line Performance - Technical Apparel (Arc'teryx): Revenue grew 34% to $407M, driven by 39% DTC growth and strong performance in footwear and women's categories [25][10] - **Outdoor Performance (Salomon)**: Revenue increased 11% to$ 304M, with Salomon footwear and apparel growing double-digits, offset by softer Winter Sports Equipment sales [27][13] - Ball & Racquet (Wilson): Revenue grew 1% to $283M, with Tennis 360 strategy driving growth in apparel and footwear, partially offset by declines in baseball and inflatables [29][17] Market Performance - **Greater China**: Outperformed the market with 54% growth, driven by strong demand for premium outdoor and sports products [7][22] - **Asia Pacific**: Grew 45%, with strong traction in Salomon footwear and Arc'teryx DTC channels [22][14] - **EMEA**: Grew 1%, with new Arc'teryx store openings performing well, but offset by declines in Peak Performance [22][26] - **Americas**: Returned to slight growth with 1% increase, driven by DTC expansion and new product launches [22][17] Strategic Direction and Industry Competition - Arc'teryx is a breakout growth story, leveraging its DTC model and technical innovation to expand into new categories like footwear and women's apparel [5][10] - Salomon is focusing on its footwear and apparel franchise, with plans to expand its DTC footprint, particularly in China and Europe [13][16] - Wilson is executing its Tennis 360 strategy, with new product launches and retail expansion in China driving growth [17][29] - The company is well-positioned to take market share in the premium sports and outdoor market, with strong brand equity and technical innovation [4][6] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong growth and margin expansion, driven by its premium brand portfolio and DTC strategy [4][21] - The company is optimistic about the long-term growth potential in Greater China, despite macroeconomic challenges, due to strong consumer demand for premium outdoor products [7][57] - Management highlighted the importance of technical innovation and community engagement in driving brand awareness and customer loyalty [11][12] Other Key Information - Arc'teryx opened 17 net new brand stores in H1, including 13 in Q2, bringing the total to 125 owned stores globally [8][9] - Salomon opened 27 new stores in Greater China in Q2, with plans to reach 200 owned and licensed stores by the end of 2024 [14][16] - The company is focused on inventory discipline, with inventory growing only 2% year-over-year, compared to 16% sales growth [31][46] Q&A Session Summary Question: Arc'teryx growth sustainability and regional performance [35] - Arc'teryx saw balanced growth across all regions, with strong DTC momentum and traffic driving sales [36] - The brand is still in the early stages of growth, with significant expansion potential in North America, Europe, and Asia Pacific [36][37] Question: Runway for market share capture across brands [39] - Arc'teryx and Salomon have significant growth potential in soft goods, particularly in footwear and apparel, while Wilson continues to lead in its core equipment business [40] Question: Margin trajectory and SG&A leverage [39] - Gross margins are expected to remain strong, with Q3 slightly compressed due to wholesale shipments, while SG&A leverage will improve progressively through the year [41] Question: China market performance and promotional environment [43] - Both physical stores and e-commerce performed well in China, with minimal discounting and strong demand for premium outdoor products [44] Question: Inventory position and growth trends [45] - Inventory grew 2% year-over-year, with disciplined buying and strong sell-through driving lean inventory levels [46][48] Question: Europe market expectations [50] - Europe is expected to grow mid-single-digits, with challenges in Peak Performance offset by growth in Salomon and Arc'teryx [50][51] Question: Salomon DTC strategy and North America expansion [52] - Salomon is expanding its DTC footprint, with plans to open pop-up stores in North America and further test the compact shop model [52][53] Question: Q4 revenue acceleration and timing shifts [54] - Q4 is expected to be the strongest quarter, with no significant timing shifts between Q3 and Q4, following the$ 20M shift from Q3 to Q2 [54] Question: Macro climate and consumer behavior [56] - The company is seeing a bifurcation in consumer behavior, with strong demand for premium and innovative products, particularly in the sports and outdoor segment [57][58]