In its first earnings call since filing an IPO earlier this year, Amer Sports, parent company of Arc’teryx, Salomon, Atomic, and other brands, said its losses declined in the fourth quarter on strong performance from Arc’teryx and sales in China.
Amer Sports revenue totaled $1.32 billion in the fourth quarter of 2023, up 10%. For the full year 2023, the company’s total revenue was $4.39 billion, up 23% compared to last year.
Regional growth was led by Greater China, increasing 45% for the quarter. In 2023, sales in China made up 40% of Amer’s total sales, making up the largest region by sales and profits.
In a conference call with investors, Amer Sports executives offered insights into the company’s operations and goals for its outdoor brands.
Arc’teryx’s Growth Story
During the call, Amer CEO James Zheng said the company sees Arc’teryx as a “breakout growth story with unprecedented growth and profitability for the outdoor industry.”
“It’s truly charting new territory with its disruptive DTC model and very strong competitive position,” he added. “The growth and profitability of this franchise will fuel Amer Sports for years to come.”
In Q4 2023, revenue increased 26% year-over-year to $550 million in Amer’s technical apparel segment, driven by 42% DTC growth, including 33% omni-comp growth, partially offset by a 5% decline in wholesale.
“Omni comp” is defined as year-over-year revenue growth from owned retail stores and e-commerce sites that have been open at least 13 months.
Zheng said the brand’s DTC channel experienced strong traffic. He highlighted opening flagship stores in Osaka, Beijing, Toronto, and most recently a 20,000-square-foot store in Shanghai. The company is “accelerating its DTC expansion,” Zheng added.
Omar Saad, vice president of finance and investor relations, said Amer is opening more Arc’teryx stores this year than any year in the past.
Arc’teryx is also pushing its footwear launch with its first in-house design.
“Arc’teryx continues to experience strong brand momentum across all regions, channels, consumer segments, and product categories,” according to the company.
Regionally, technical apparel grew at a similar pace of 30% in both the Americas region and Greater China and more than 40% in APAC, driven by DTC momentum.
Also on the call, Stuart Haselden, CEO of Arc’teryx, said the company “sees a long runway for the brand in every region.” In North America, the brand has just under 50 stores, with the potential for more than 200, he said. The company also sees additional store runway in Europe and Asia, he added.
“But we also see the continued focus on product innovation,” Haselden said. “While we have an exciting channel expansion story, the investments that we’re making and the leadership position that we have in the market and product innovation are critical to how we see our success developing as well.”
Salomon Up As Well
Salomon continues to perform well in both owned retail and partner stores, according to Zheng.
“There continues to be signs that Salomon brand footwear is generating strong brand heat in key communities,” he added.
Zheng also highlighted the Phantasm 2 running shoe selling out in 30 days, as well as the success of Salomon athlete Courtney Dauwalter “as the best trail runner on the planet.”
In the outdoor performance segment, revenue increased 2% to $523 million for the quarter, driven by strong top-line performance in the segment’s winter sports equipment franchise and partially offset by an expected deceleration in Salomon footwear in the wholesale channel.
DTC continued to outperform the wholesale market with 33% growth, with wholesale negatively impacted by the supply chain-related sales shift from the third quarter into the fourth quarter in 2022.
Regionally, Greater China and APAC experienced strong increases, partially offset by declines in the Americas and EMEA regions.
Amer Q4 2023 Results
The 10% revenue increase for the quarter ended Dec. 31 was an expected deceleration from the previous quarter and year-to-date comparative trends.
All three segments – technical apparel, outdoor performance, and ball & racquet – experienced solid growth in China for the quarter, and the APAC region rose by 22%.
The Americas grew mid-single digits led by direct-to-consumer strength, offset by a decline in wholesale.
By channel, DTC expanded 37% led by technical apparel in the Americas region and Greater China, with strength in both stores and online.
Wholesale revenue decreased 4%, as all three segments experienced single-digit declines due primarily to supply chain disruptions as well as high retail inventory levels in the Americas and EMEA in the outdoor performance and ball & racquet segments.
Gross margin for in the fourth quarter was 52%, compared to 50.2% in the prior-year period.
Adjusted net loss was $41 million for the quarter, compared to adjusted net income of $46 million in the prior-year period.
Amer Full-Year 2023 Results
Amer’s regional growth was led by Greater China, which increased 61%, where all three segments experienced solid growth, and APAC, which increased 40%. Americas grew 15% and EMEA grew 14%, each driven by strong DTC growth.
By channel, DTC expanded 49% year-over-year led by Arc’teryx in the Americas region and Greater China. E-commerce also continued its trend of double-digit growth.
Wholesale revenue grew 12%, as Greater China and APAC ramped up.
Gross margin for 2023 was 52.1%, compared to 49.7% for 2022.
Adjusted net loss was $135 million for the year, compared to $30 million for the prior-year period.
Inventory ended 2023 up 21% from the end of 2022, less than the company’s 23% sales growth rate for the year. Going forward, inventory is expected to grow at the same rate as revenue or slower.
Looking Ahead
CFO Andrew Page said strengthening Amer’s balance sheet and “deleveraging the business will remain a key focus while balancing investments in key growth drivers.”
“We are off to a solid start in 2024 as we continue to enjoy benefits from our business mix shifting toward our high-margin Arc’teryx brand,” he added.
For 2024, Amer expects revenue growth in the mid-teens.
For the technical apparel segment, the company expects revenue growth above 20%, and for the outdoor performance segment it’s predicting high-single-digit revenue growth.
