Performance of sports & activewear companies in FY23

Moderate: Growth in Either Sales or Profits

Amer Sports, Inc. (NYSE: AS)

Anta Sports Products Limited (HKD: 2020 & RMB: 82020) is a Chinese retail conglomerate that owns Amer Sports, Inc (NYSE: AS), which further owns a portfolio of companies including Atomic, Arc’teryx, ArmadaEnve Composites, Peak Performance, Salomon and Wilson.

Amer Sports published its annual results for FY23, which ended on December 31, 2023, on the SEC (US Securities and Exchange Commission) website. According to this report, the total revenue for the fiscal was $4,368.4 million—an increase of 23.1 per cent compared to $3,548.8 million in FY22. The company's net loss continued but improved from $252.7 million last year to $208.8 million in 2023, while the positive adjusted EBITDA also increased by 34.9 per cent from $453 million to $611 million.

Strong: Growth in Both Sales and Profits

ASICS Corporation (TYO:7936)

Kobe-headquartered Japanese sports group ASICS Corporation ended its FY23 on December 31, 2023, and announced results on February 9, 2024.

ASICS's net sales increased by 17.7 per cent to ¥570,463 million (~$3,774 million) due to strong sales in all categories and fluctuations in the exchange rate; operating income increased by 59.4 per cent to ¥54,215 million ($359 million) due to the impact of the increase in net sales; and ordinary income increased by 63.9 per cent to ¥50,670 million (~$335 million) mainly due to the impact of the increase in net sales and profit. Category-wise, Performance Running increased by 10.7 per cent, Core Performance Sports grew by 33.2 per cent, SportStyle increased by 36.3 per cent, Apparel & Equipment increased by 2.6 per cent, and Onitsuka Tiger also grew by 40.2 per cent.

In November 2023, ASICS announced its Mid-Term Plan (MTP) 2026 covering the three-year period from 2024. Earlier, in 2020, ASICS had set its long-term vision, Vision 2030, aimed at creating a healthy world, both mentally and physically, supporting involvement with exercise and sports throughout one's lifetime.

Weak: No Growth in Either Sales or Profits

Gildan Activewear Inc (NYSE & TSX: GIL)

Montreal-based Gildan Activewear, Inc announced results for Q4 and full FY23, annual guidance for 2024, and a dividend increase of 10 per cent for 2024 on February 21, 2024.

A leading manufacturer of everyday basic apparel, Gildan supplies activewear, underwear and socks, to a broad range of customers encompassing wholesale distributors, screen printers or embellishers, retailers that sell them to consumers through their physical stores and/or e-commerce platforms, and to global lifestyle brand companies.

In Q4, FY23, Gildan’s sales were $783 million (+9 per cent) consisting of Activewear sales of $644 million (+8 per cent) and Hosiery & Underwear sales of $139 million (+11 per cent), operating margins of 22.8 per cent, and adjusted operating margin of 19.7 per cent—up 90 basis points versus last year.

For the full year, net sales of $3,196 million were expectedly down 1 per cent y-o-y, reflecting a decrease of 3 per cent in Activewear sales of $2,668 million, primarily due to lower sales volumes. The company generated operating income of $644 million or 20.1 per cent of sales ($603 million in 2022 or 18.6 per cent of sales), which included the benefit of a $77 million net insurance gain, a $41 million non-cash reversal of a portion of a prior-year hosiery-related impairment charge, and a $25 million gain from the sale and leaseback of one of company’s US distribution facilities, partly offset by higher restructuring costs of $46 million. On an adjusted basis, the operating income was $553 million or operating margin of 17.3 per cent compared to $639 million and 19.7 per cent, respectively, last year.

For 2024, the company expects revenue growth to remain flat to up by low single digits; the adjusted operating margin to be slightly above the high end of the company's 18-20 per cent annual target range; capital expenditure (capex) to be approximately 5 per cent of sales; and adjusted diluted earnings per share (EPS) to be in the range of $2.92 to $3.07, up significantly between 13.5 per cent and 19.5 per cent year-on-year.

Weak: No Growth in Either Sales or Profits

Adidas AG (ETR: ADS)

The global sports giant Adidas AG reported a 2 per cent drop in its currency-neutral sales in the fourth quarter of FY23, which included a 5 percentage point drag from the devaluation of the Argentine Peso, as announced on March 13, 2024. The gross margin increased by 5.5 percentage points to 44.6 per cent, but the company incurred an operating loss of €377 million (~$408 million).

The Herzogenaurach-headquartered sports company had flat currency-neutral revenues in 2023 compared to 2022, which was significantly better than the initially expected high-single digit decline and also ahead of the company's October 2023 guidance of a low-single digit sales decline.

In euro terms, revenues declined by 5 per cent to €21,427 million or ~$23,186 million (2022: €22,511 million). The company's operating profit dropped to €268 million (~$290 million) in 2023 (2022: €669 million), reflecting an operating margin of 1.3 per cent compared to 3 per cent in 2022. The company had projected an operating loss of €700 million in its initial guidance, against which the reported operating profit was around €1 billion higher than expected. The sale of parts of the remaining Yeezy product in the second and third quarters of 2023 positively impacted Adidas' operating profit by an amount of around €300 million. The net loss from continuing operations was €58 million (~$63 million) compared to a net income of €254 million in 2022. Consequently, both basic and diluted earnings per share (EPS) were negative at €0.67 (2022: €1.25).

For the 2024 outlook, the company expects currency-neutral revenues to increase at a mid-single digit rate, assuming the remaining Yeezy inventory will sell at cost. The underlying Adidas business is expected to grow at a high-single digit rate; and operating profit is expected to remain around €500 million or ~$542 million, accounting for significant translational and transactional foreign exchange (FX) headwinds.

Fibre2Fashion News Desk (WE - SB)