Fila's Q3 hit by promotional US market
Sports and leisurewear operator Fila Holdings Corp saw its performance dented in Q3 as margins shrank. Overall sales and profits remain on an upward trajectory but the Fila brand is operating against the backdrop of an intensely promotional market, especially in the US.
Fila Holdings said the three months to September 30 saw sales up 16.4% to KRW1,079 billion ($815m), but they rose only 2.6% currency-neutral.
Fila brand sales rose 1.4% to KRW325 billion as it benefited from exchange rate effects, but it dropped 5.7% currency-neutral.
However, the Acushnet unit — in which the business has a 50.9% stake and that owns Titleist and Footjoy — was much more buoyant and saw sales rising 24.4% (+7% currency-neutral) to KRW753 billion.
Gross margins fell 80 basis points to 48.1% and while operating income rose 10.4% to KRW121.8 billion, it was down 6.2% currency-neutral.
Net income at the Fila Brand fell 54.6% to KRW 22.7billion, but overall Fila Holdings net income grew 23.6% to KRW 93.8 billion as Achushnet rose 64.4% to KRW99 billion.
This all came as Fila USA’s sales dropped 20.4% while Fila Korea sales rose 4.6%.
The company said that it benefited during the quarter from Fila’s well diversified business portfolio with resilient royalty income, but promotional sales and challenging circumstances in the US were an issue.
US headwinds were strong due to weaker pricing power caused by excess inventory in the market and bigger discounts from competitors.
The company has updated its outlook with sales expected to rise between 5% and 10% against a previous forecast between a fall of 2% and a rise of 2%.
Expectations are unchanged for the Fila brand but Global Royalty revenue should be higher and Acushnet should continue to outperform.
Yet the forecast for consolidated operating profit has been downgraded to a range of down 5%-10% from expectations that it could fall 2% or perhaps even rise by up to 2%.
The operating profit outlook will reflect one-off restructuring costs and that margin pressure due to promotional activities in the US.
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