Yamafen Sports' third quarter performance continues to exceed market expectations and has raised its full year performance guidance.
Prior to the stock market on November 19th, Amer Sports, a sports and outdoor brand group, released its financial results for the third quarter of 2024. The third quarter revenue reached $1.354 billion, a year-on-year increase of 17.4%, exceeding the original expectation of 12% to 13%; Net profit reached 56.2 million US dollars, compared to -35.9 million US dollars in the same period last year, achieving a turnaround from losses to profits.
The revenue for the first three quarters reached 3.548 billion US dollars, a year-on-year increase of 15.45%; Net profit reached 61 million US dollars, compared to 114 million US dollars in the same period last year, achieving a turnaround from losses to profits.
During the evening conference call, the management of Yamafen Group stated that the group's performance in every region, channel, and product category exceeded expectations, and the group is also very satisfied with the momentum of accelerating full price sales, especially in North America.
Yamafen Sports is a globally iconic sports and outdoor brand group, which has been acquired by an investment consortium led by ANTA Group since 2019. It went public in the United States in early February this year with a revenue of $4.4 billion in 2023. It is reported that Yamafen Sports has over 11400 employees worldwide, with operations in more than 40 countries/regions. Its products are sold in over 100 countries/regions, mainly divided into three sub businesses: technical apparel, outdoor performance, and ball sports. High end outdoor equipment brand Arc'teryx, French mountain outdoor off-road brand Salomon, and American tennis equipment brand Wilson are the core brands in the three segmented markets mentioned above.
According to the financial report, the gross profit margin of Amalfin in the third quarter increased by 420 basis points year-on-year to 55.2%; The adjusted operating profit margin increased by 280 basis points to 14.4%. Among them, the operating profit margin of outdoor functional clothing increased by 370 basis points after adjustment, reaching 20.0%; Mountain outdoor clothing and equipment decreased by 40 basis points to 17.5%; Ball and racket equipment increased by 600 basis points, reaching 6.9%.
As of the end of November 19th, the US stock market closed at $20.67 per share, up 5.78%, and up 0.44% after hours.
Archaeopteryx's revenue increased by over 30%, management: strong growth in footwear and women's clothing categories
Looking at channels separately, the brand direct operation channel (DTC) maintained a 41% year-on-year growth in the third quarter. According to the financial report, as of September 30, 2024, the number of self owned stores in the outdoor functional clothing sector led by the Archaeopteryx brand was 212, a year-on-year increase of 18%; 196 mountain outdoor clothing and equipment stores, a year-on-year increase of 69%; There are 45 stores for ball and racket equipment business, a four fold increase compared to the same period last year.
In terms of business segments, the revenue of the outdoor functional apparel segment led by the Archaeopteryx brand increased by 34% year-on-year in the third quarter, reaching 520 million US dollars; The revenue from mountain outdoor clothing and equipment increased by 8% year-on-year, reaching 534 million US dollars; The revenue of ball and racket equipment business achieved double-digit accelerated growth, reaching 300 million US dollars, a year-on-year increase of 11%.
The Archaeopteryx brand has always been known as the "top outdoor brand", with an average clothing price of 4000 to 6000 yuan, which is jokingly referred to as the "standard for the middle class" by domestic netizens. The management also pointed out during the conference call that in the third quarter, Archaeopteryx achieved significant double-digit growth in all regions and sales channels worldwide, and it is expected that the Archaeopteryx brand with the highest gross profit margin will continue to be the driving force for the group's sustained profit growth.
In the third quarter, Archaeopteryx added 9 brand stores globally, located in the United States (4), Canada (2), Australia (2), China (2), and Germany (1), bringing the total number of its own brand stores to 134. During the conference call, the management stated that they plan to add a net of 30 Archaeopteryx stores by 2024, which will be the year with the highest store growth in the brand's history.
Currently, footwear and women's outdoor clothing are the focus of Yamafen's efforts, with plans to continuously expand its product categories.
Specifically, the management stated during the conference call that the group has seen sustained success in the development of its footwear business, which is very exciting. The group is also constantly launching new shoe models. In the third quarter, the category of women's clothing (including shoes and clothing) increased by over 50%, accounting for nearly a quarter of the overall sales for the quarter, and there is still greater potential for development in the future.
Zheng Jie, the global CEO of Amalfin Sports, mentioned in the financial report that the group is making every effort to seize the growth opportunities of Archaeopteryx and Salomon footwear products. During the conference call, the management pointed out that since launching its first self-designed shoe series, Archaeopteryx's footwear products have shown strong growth momentum, with the Kragg series hiking shoes and the newly launched Kopec hiking shoes performing well in the third quarter. Salomon footwear has also shown impressive development momentum in Greater China and the Asia Pacific region, with the new product category "off-road running shoes" pioneered in China being popular among young consumers.
The management also pointed out that in the European, Middle Eastern, and African regions, as well as the North American market, Salomon has further optimized its marketing structure by clearly dividing the winter sports equipment sales team from the Salomon footwear sales team. Due to the fact that these two teams are each targeting different end markets, this strategic adjustment will enable them to more effectively tap into the potential of these two product categories.
Overall, in the third quarter, Salomon's footwear and apparel business accounted for about two-thirds of the revenue of the mountain outdoor apparel and equipment department, showing significant growth compared to 54% in 2022. The management predicts that in the long run, Salomon's footwear and apparel business is expected to achieve double-digit growth annually. Worldwide, Salomon plans to open 404 stores, including both direct and franchise stores, by the end of the year, doubling the number compared to the same period last year. In the third quarter, the ball and racket equipment business maintained a growth trend, achieving double-digit growth. This is mainly due to the Roger Federer series of rackets and the tennis craze sparked in China after Zheng Qinwen won the Olympics.
However, the management also emphasized during the conference call that the sales growth of skiing equipment in North America has slowed down after the epidemic, and 2024 will be a slightly weak year for sports equipment. Driven by the brand and scale advantages of the group, the group continues to seize market share, and the decline in business is smaller than the market. In the long run, although sports equipment is expected to become a slower growing business, the industry will still maintain healthy development and grow at a low single digit rate each year.
Greater China's revenue increased by over 50% in the third quarter, and the annual performance guidance has been raised
Divided by regional revenue, Greater China had the highest revenue growth rate in the third quarter, reaching 313 million US dollars, a year-on-year increase of 56%; The Asia Pacific region reached $125 million, a year-on-year increase of 47%; $488 million in the Americas region, a year-on-year increase of 4%; Europe, Middle East and Africa (EMEA) region reached $429 million, a year-on-year increase of 4%.
It is reported that Salomon officially opened its flagship store in Xintiandi, Shanghai, on October 30, which is Salomon's largest full-service store in Asia. The management pointed out during the conference call that in China, Salomon's "standard store" model has achieved great success, with a floor area efficiency of about four times the industry average and a profit on the first day.
The management further pointed out during the conference call that Salomon will continue to expand its store network in Greater China, with a net increase of 29 stores in the third quarter, including its own and partner stores, bringing the total number of stores in Greater China to 165. It is expected that by the end of 2024, the number of Salomon stores in China will reach about 200. In the future, the number of stores in first and second tier cities in China is expected to reach hundreds. Salomon has also started promoting its "standard store" model outside of China and opening new stores in the Asia Pacific region, Europe, Middle East, and Africa.
When other consumer goods companies faced challenges in the Greater China region, we achieved 56% growth in the third quarter, continuing to outperform the market. When it comes to the elements of success in the Chinese market, Zheng Jie, CEO of Yamafon Sports, said in a conference call that the Yamafon brand is positioned in the fastest-growing consumer markets in China, namely the high-end sports and outdoor markets. The strong trend of outdoor sports in China has attracted young consumers, female consumers, and even luxury consumers. The domestic consumer market is undergoing a process of survival of the fittest. Although the Yamafen brand is relatively niche, it has gained recognition in the Chinese market through professionalism, quality, and technological innovation. In addition, the professional knowledge and scalable unique operational platform of the Chinese team provide a competitive advantage for the brand.
We are confident in raising our full year sales and profit expectations. Looking ahead, we are confident in our initial expectations for 2025 and expect to achieve performance consistent with our long-term financial goals: low to mid double-digit growth in annual revenue; and a 30 to 70 basis point increase in adjusted operating profit margin driven by improved gross profit margin
According to the financial report, Yamafen has raised its full year performance guidance, expecting revenue growth of 16% to 17%, gross profit margin of 55.3% to 55.5%, and operating profit margin of approximately 10.5% to 11.0% for the 2024 fiscal year. The revenue of outdoor functional clothing increased by about 34%, and the operating profit margin of the business segment was slightly higher than 20%; The revenue from mountain outdoor clothing and equipment increased by about 8%, with a high single digit operating profit margin; The revenue from ball games and racket equipment increased by about 4%, and the operating profit margin was as low as mid single digits.