A few months after dismissing its CEO following a period of poor sales in North America, Asics America released its first financial report of FY19, showing growth in the performance running category in the U.S. market, despite ailing sales worldwide.
In a Nutshell: Apart from the trouble it has faced due to falling sales, Asics has been active in the sustainability space this year. In January, it entered into a deal to produce Japan’s Olympic uniforms for the 2020 games from recycled apparel it will collect from the Japanese populace in the lead up to the games. Asics also brought sustainability to marathons in February, offering to recycle and repurpose apparel and footwear collected after a race.
Meanwhile, Asics America has increased its focus on the performance running category, reducing its operating margin while pushing popular performance styles like the GEL-Quantum line and its new “Metaride” running shoe. To boost sales in Q1, Asics said it increased both marketing and promotional activity in North America for performance running styles, leading to a decrease of 64.4 percent in the ratio of operating income to sales for the category, year-over-year.
Overall, Asics lost 1.4 billion yen ($12.7 million) in operating income in the region in Q1, down 5.8 percent from the 1.1 billion yen ($9.8 million) lost in the comparable period last year.
Sales: Net sales in North America totaled 19.8 billion yen ($179.7 million) in the first quarter for Asics, up from the 19 billion yen ($172.4 million) it earned in the comparable period last year. Performance running, by far its largest category, earned 43.2 billion yen ($392.08 million) worldwide compared to the 46.8 billion yen ($424.7 million) earned last year. Thirty-three percent of that came from U.S. sales in the first quarter, up 3 percent year-over-year at 14.3 billion yen ($129.8 million).
In contrast, worldwide sales for Asics stood at 98.7 billion yen ($895.8 million) a loss of 5.7 percent over the first quarter in 2018.
In the U.S., Asics said its sales had been buoyed by a 14.7 percent growth in e-commerce revenue during the quarter, which it owes to the release of its popular Asics “Legends” products. Sports Style, its sports leisure category, grew by 9.8 percent in the quarter. The fastest growing category for Asics America, the brand said, was actually its Tennis footwear lineup, which grew by 28.6 percent year-over-year.
Asics America’s retail sales grew 3.3 percent, as well, which the company said was led by successful product launches throughout the quarter.
Sales in both Europe and Greater China declined during the first quarter. In Europe, sales of 24.7 billion yen ($224.2 million) decrease by 14 percent over the comparable period. Sales in China were even worse, falling 26.1 percent to 8.3 billion yen ($75.3 million). In its home country of Japan, Asics’ revenue was stagnant at 33 billion yen ($299.7 million), an increase of just 0.4 percent.
Earnings: Asics kept to its forecast of a 24 yen (22 cents) annual dividend to be provided to shareholders at year-end. An interim dividend of 12 yen (11 cents) per share will be paid out at the half-year mark.
CEO’s Take: Koichiro Kodama, ASICS new North America CEO, was pleased with the brand’s progress in the U.S. and pledged to continue growing the performance running category.
“We are excited to open 2019 with strong momentum in our footwear categories, especially within Performance Running as we continue to invest in our quality product and innovations for the betterment of runners,” Kodama said. “This year, we have recommitted ourselves to performance running, with key investments such as our renewed partnership as title sponsor of the Los Angeles Marathon. We will continue to push ourselves to meet the needs of our core consumer with the highest quality products, which they expect and demand from ASICS.”