Mixed results for fashion & sportswear brands as H1 2024 ends

Strong: Growth In Both Sales & Profits

Ralph Lauren | (NYSE: RL)

Ralph Lauren Corporation, a company that designs, markets, and distributes luxury lifestyle products, reported an EPS of $2.61—up 33 per cent from $1.96 in the prior year on a reported basis—and $2.70, up 15 per cent from $2.34 on an adjusted basis, excluding restructuring-related and other net charges, for Q1 FY25. In the reported quarter, revenue increased by 1 per cent to $1.5 billion on a reported basis (3 per cent in constant currency). Foreign currency negatively impacted revenue growth by approximately 170 basis points.

The gross profit of $1.1 billion, or 70.5 per cent of sales, and the adjusted gross margin were 170 basis points above the prior year. The gross margin expansion was driven by favourable product, channel, and geographic mix shifts, lower cotton costs, and AUR growth across all regions. Operating income of $209 million translated into a 13.8 per cent operating margin on a reported basis. On an adjusted basis, operating income was $216 million, representing an operating margin of 14.3 per cent—90 basis points above the prior year.

Considering the strong first-quarter result, the company expects second-quarter constant currency revenues to grow in a range of around 3 to 4 per cent, year-on-year. For a full FY25 outlook, revenue growth is expected to stay in the range of 2 to 3 per cent over FY24, with foreign currency negatively impacting growth by approximately 150 basis points. The New York-headquartered company further expects the operating margin for the full fiscal to expand by 100 to 120 basis points in constant currency, driven by gross margin expansion and operating expense leverage.

The company's brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Double RL, Polo Ralph Lauren, Lauren Ralph Lauren, Polo Ralph Lauren Children, and Chaps.

Goldwin Inc | (TYO: 8111)

Tokyo Stock Exchange-listed sports and activewear company Goldwin reported its first-quarter results for FY25 on August 6, 2024. Reporting under Japanese GAAP, the company ended the first quarter with ¥24,601 million (~$170.18 million) in net sales, growing 6.3 per cent over ¥23,150 million (~$160.15 million) during the same quarter of the previous fiscal. Strong sales continued due to inbound demand in the fashion field, including the Goldwin brand and The North Face Purple Label. The ratio of net sales attributed to inbound tourists was approximately 22 per cent, up 6.9 per cent year-on-year.

Ordinary profit of ¥4,258 million (~$29.46 million) was up 2.1 per cent year-on-year, mainly due to the strong performance of Young One Outdoor Corporation, an equity-method affiliate in South Korea, which increased its share of profit of entities accounted for by ¥509 million year-on-year to ¥2,340 million. Profit attributable to owners of the parent also increased by 9.4 per cent to ¥3,660 million.

The full-year consolidated financial results forecasts for FY25, ending March 31, 2025, remained unchanged.

ASICS Corporation | (TYO:7936)

ASICS reported consolidated financial results for the first half of FY24 in mid-August. The aggregate performance of the first two quarters, spanning the period from January 1, 2024, to June 30, 2024, was marked by an 18 per cent growth in revenue, a 75 per cent increase in operating profit, and a 70.3 per cent increase in profit attributable to owners of the parent. The revenue of the Japanese sports company over the six-month period increased from ¥290,079 million (~$2,007 million) in H1 FY23 to ¥342,199 million (~$2,367.26 million) in H1 FY24; operating profit increased from ¥33,610 million (~$232.51 million) to ¥58,996 million (~$408.12 million); and profit attributable to owners of the parent grew from ¥24,796 million (~$171.53 million) to ¥42,219 million (~$292.06 million).

The forecast of consolidated business results for the full fiscal ending December 31, 2024, includes net sales of ¥660,000 million (~$4,565.75 million), up 15.7 per cent; an operating profit of ¥95,000 million (~$657.19 million), up 75.2 per cent; profit attributable to owners of the parent of ¥58,000 million (~$401.23 million), up 64.4 per cent; and a basic EPS of ¥79.80.

The company carried out a 4-for-1 stock split for its common stock on the effective date of July 1, 2024.

Adidas AG | (ATR: ADS)

The German sports behemoth Adidas AG ended its Q2 FY24 on June 30, 2024, during which its currency-neutral revenues increased by 11 per cent year-on-year, reflecting the strong momentum of the underlying Adidas business, which grew by 16 per cent. The Yeezy inventor's share in sales was €200 million (~$221.51 million), compared to around €400 million (~$443 million) in the same quarter of the previous fiscal. Sales in footwear and apparel increased by 17 per cent (on a currency-neutral basis) and 6 per cent, respectively, driven by strong double-digit growth in footfall.

The gross margin for the quarter stood at 50.8 per cent (50.9 per cent in Q2 FY23), and 50.5 per cent excluding the Yeezy impact. The Bavaria-based company’s operating profit amounted to €346 million (~$383.21 million), or 5.9 per cent of sales, growing from €176 million (~$195 million), or 3.3 per cent of sales, in Q2 FY23. The sale of parts of the remaining Yeezy inventory contributed around €50 million to this.

On a half-yearly basis, currency-neutral revenues grew by 10 per cent year-on-year, and the gross margin improved by 3.2 percentage points to 51 per cent, compared to 47.9 per cent in the last fiscal. For the first half of the fiscal, operating profit amounted to €682 million (~$755.34 million) (~€236 million in 2023) or 6 per cent of sales (2.2 per cent in 2023).

Two weeks before announcing the results, Adidas had raised its top and bottom-line guidance as a result of better-than-expected performance in Q2. Now, the company’s revised expectation for currency-neutral revenues is an increase at a high-single-digit rate, up from the previous rate of mid-to-high-single-digit. The company expects operating profit to reach a level of around €1 billion (~$1.1 billion) against the earlier expectation of €700 million (~$775.28 million).

Moderate: Growth In Either Sales Or Profits

Canada Goose Holdings | (NYSE, TSX: GOOS)

Toronto-based luxury performance goods company Canada Goose Holdings Inc announced its financial results for the first quarter of fiscal 2025 in early August. In the quarter, total revenue increased by 4 per cent to $88.1 million (~$65.48 million) compared to the same period in the prior year. The growth was 3 per cent on a constant currency basis, led by a 13 per cent growth in DTC revenues to $63.1 million (~$46.9 million). The company successfully reduced operating expenses from last year’s $154.9 million (~$115.13 million) to $149.5 million (~$111.12 million), primarily due to cost savings resulting from the workforce reductions implemented in 2024 and costs incurred associated with the Transformation Program during the fiscal. The operating loss improved by 3 per cent in value terms to $96.9 million, compared to $99.7 million in the prior year period. Net loss also improved from $85 million to $74 million.

Canada Goose maintained the FY25 guidance issued with Q4 and FY24 results on May 16, 2024, which included low-single-digit revenue growth, with an approximate 25-75 distribution split between H1 and H2 FY25. The consolidated gross margin percentage is expected to remain flat compared to 2024.

Gildan Activewear Inc | (NYSE & TSX: GIL)

Announcing its second-quarter financial results for FY24 on August 1, 2024, the Canadian sports and activewear company Gildan Activewear Inc reported net sales of $862 million (~$639.63 million)—a 3 per cent increase year-on-year, at the higher end of the previously provided guidance of flat to low single-digit growth. The sales growth was primarily led by activewear sales of $737 million, while international sales increased by 7 per cent.

The company generated a gross profit of $262 million (~$194.41 million), or 30.4 per cent of net sales, compared to $217 million (~$161.02 million), or 25.8 per cent of net sales, in the same period last year, representing a 460-basis point improvement, which was primarily driven by lower raw material and manufacturing input costs. The company generated operating income of $141 million (~$105 million), or 16.4 per cent of net sales, reflecting the negative impact of expenses for the proxy contest, leadership changes, and other related matters. This compares to $183 million (~$136 million), or 21.7 per cent of net sales, last year, which included a net insurance gain of $74 million and restructuring charges of $30 million.

Combining the first and second quarters, the company’s cumulative net sales for the first half of FY24, ending June 30, 2024, were $1,558 million (~$1,156 million), up 1 per cent year-on-year, and an operating income of $246 million (~$182.54 million), or 15.8 per cent of sales, was generated.

For the full fiscal 2024, the NYSE and Toronto Stock Exchange-listed company expects revenue growth to be flat to up low-single digits and adjusted operating margin to be slightly above the high end of its target of 18 to 20 per cent.

The company also shared its three-year outlook, estimating net sales growth at a CAGR in the mid-single-digit range.

Weak: No Growth In Sales & Profits

Under Armour Inc | (NYSE: UA, UAA)

Baltimore-headquartered sports company Under Armour reported a 10 per cent decline in revenue for Q1 FY25, at $1.2 billion, due to a decline in both North America (down 14 per cent) and international (down 2 per cent) revenues, as well as a decline across channels—wholesale (down 8 per cent), DTC including e-commerce (down 12 per cent), and owned & operated stores (down 3 per cent). Lower discounting levels in the DTC business increased the company’s gross margin by 110 basis points to 47.5 per cent, only to be offset by unfavourable foreign currency impacts, channel and regional mix, and headwinds caused by prior year supply chain benefits.

In an overall weak performance, the NYSE-listed company reported a net loss of $305 million. Among other reported metrics, inventory was down 15 per cent to $1.1 billion, while diluted loss per share was $0.70.

The company’s FY25 updated outlook expects revenue to be down at a low double-digit percentage rate, including a 14–16 per cent decline in North America (earlier 15–17 per cent) and a low-single-digit per cent decline in international business. At the same time, the operating loss is expected to be in the range of $194 to $214 million.

Fibre2Fashion News Desk (WE - SB)