Asics sales and profits fall despite strength in key areas

By

Sandra Halliday

Published
May 9, 2018

It looks like times were tough for Japanese sports giant Asics during Q1 as the company’s consolidated net sales and profits were down. But at least the percentage profits fall was less than the sales drop with the company keeping a close eye on costs during the period.

Consolidated net sales fell 7.4%, or 9.4% at the previous year’s exchange rate, to hit ¥104.6 billion. Domestic net sales fell 7.1% to ¥28.6 billion, mainly due to it cutting sportswear product lines that had low profit margins, which should feed through to better results in the long term. Meanwhile a tough American market meant that overseas sales fell 7.6% to ¥76 billion, or a worse 10.3% using that prior year’s exchange rate.

The revenue falls came even though it saw strong sales of running shoes and Onitsuka Tiger shoes in the East Asian region and “steady” sales of Onitsuka Tiger shoes in the Oceanian/Southeast and South Asian regions.

What did that all mean for profits? The company’s gross profit was down 3.2% to ¥49.8 billion, “mainly due to lower sales despite an improved cost-of-sales ratio,” it said.

But while it kept careful control of costs, selling, general and administrative expenses increased 7.9% as it opened new retail stores and this meant that operating income plunged 35.4% to ¥8.5 billion. ‘Ordinary’ income decreased 47.2% to ¥7.4 billion on the back of foreign exchange losses. Meanwhile, profit attributable to the parent company dropped 43.2% to ¥5.3 billion.

So was there any good news? As mentioned, certain product areas were buoyant and some regions performed better than others, although some clearly face big challeneges. Japanese sales fell 7%, American sales were down a massive 26.6% as the US proved weak, and the Oceanian/Southeast and South Asian regions dropped 6.3% due to a difficult Australian market.

But sales in Europe rose by 3.7% (albeit with a drop of 5.8% currency-neutral). And the East Asian region was up 5.7%. Meanwhile, in its ‘other’ business, sales increased 12.6% due to steady sales of outdoor wear and other items under the Haglöfs brand.

Despite the difficulties in some markets, the company stayed active on the product and marketing front. In the US, it launched HyperGel-Kenzen running shoes featuring HyperGel. This is a new midsole offering “excellent cushioning [and] resilience, as well as casual design suitable both for running and daily use.” It ran campaigns and held a number of events using influencers to back the launch.

In China, the group ran marketing campaigns for the Asics and Onitsuka Tiger brands, also using influencers to raise label recognition.

Meanwhile, in the own retail store business, it opened an Asics flagship in Shibuya, Tokyo, and for Onitsuka Tiger it introduced Nippon Made custom order, a service enabling shoe customisation. And it also opened flagship stores in Ginza, Tokyo, and Namba, Osaka. In addition, the group opened a flagship store in Toronto, Canada and its retail store numbers reached 877 worldwide. J