Amer Sports, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Overall Performance: Amer Sports Group saw 17% sales growth in Q3, with adjusted operating margin at 14.4%. Arc’teryx led growth, and market-leading ball and racquets and winter sports equipment franchises grew faster than expected.
• China Market: Generated 56% growth in Q3, outperforming the market. Outdoor trend in China is strong, attracting various consumers, and the team in China has a competitive advantage.
• Arc’teryx Highlights: Delivered strong growth across regions, channels, and categories. Opened 9 net new brand stores in Q3. MO/GO motorized hiking pants recognized by Time Magazine. Footwear and women’s categories grew strongly.
• Salomon Highlights: Salomon soft goods represent two-thirds of the outdoor performance segment. Expanded shops in China, launched new formats. Guillaume Meyzenq appointed President and CEO of Salomon.
• Ball and Racquet Highlights: Growth trends improved in Q3, driven by racquet sports. Tennis 360 strategy proving effective, and new Roger Federer racquet line successful.

Segment Performance

• Technical Apparel: Revenue increased 34% to $520 million, led by Arc’teryx. DTC expanded by 40%, with wholesale growing 26%. Adjusted operating margin expanded 370 basis points to 20%.
• Outdoor Performance: Revenues increased 8% to $534 million, driven by Salomon footwear and apparel growth. Partially offset by decline in Salomon winter sports equipment. Adjusted operating margin contracted 40 basis points to 17.5%.
• Ball and Racquet: Revenue increased 11%, driven by strong trends in racquet sports. Adjusted operating profit margin increased 600 basis points to 6.9%.

Guidance

• Full Year 2024: Raised revenue guidance to 16%-17% growth. Adjusted gross margin guidance increased to 55.5%. Adjusted diluted EPS expected in range of $0.43 to $0.45 per share.
• 2025 Outlook: Expect low double-digit to mid-teens annual revenue growth and 30 to 70-plus basis points of annual adjusted operating margin expansion, driven by gross margin expansion. Net finance cost expected in range of $180 million to $190 million, effective tax rate approximately 37%.

Risks

• Sourcing Exposures: Greater China represents less than 30% of global sourcing. Sourcing from China to the U.S. market represents 10%-12% of total Group revenues. Ball and racquet segment most impacted by potential U.S. import tariffs, primarily tennis racquets, baseball bats, and basketballs; price increases to be used as primary tool if tariffs occur.

Question and Answer

• Q: Lorraine Hutchinson asked about the Chinese consumer and Amer’s biggest opportunity in the region.

A: James Zheng stated the Chinese sports market is booming, outdoor segment growth exceeds industry average, and consumers are treating outdoor activities as part of lifestyle.

• Q: Jay Sole inquired about Arc’teryx’s recent highlights and capital allocation.

A: Stuart Haselden mentioned Broadway store opening and strong footwear/women’s growth; Andrew Page discussed capital allocation focus on store build-out and debt management.

• Q: Matthew Boss asked about Arc’teryx’s regional performance and Q4 demand.

A: Stuart Haselden said strong momentum across regions; Andrew Page talked about gross margin expansion and SG&A investments.

• Q: Laurent Vasilescu asked about Salomon’s Guillaume and tax rate.

A: James Zheng introduced Guillaume’s experience and vision; Andrew Page explained tax rate improvement plans.

• Q: Michael Binetti inquired about SG&A and growth opportunities.

A: Andrew Page said SG&A expected flat leverage, and expected growth from demand materializing