Amer Sports Inc (AS) Q4 2024 Earnings Call Highlights: Record Revenue Growth and Margin Expansion

GuruFocus.com
26 Feb
  • Revenue Growth: 23% sales growth in Q4; 18% revenue growth for 2024 to $5.2 billion.
  • Adjusted Operating Margin: Expanded by more than 300 basis points in Q4; 130 basis points expansion for the year to 11.1%.
  • Adjusted Gross Margin: Increased 370 basis points to 56.4% in Q4.
  • Adjusted Net Income: $90 million in Q4, compared to an adjusted net loss of $31 million in the prior year period.
  • Adjusted Diluted EPS: $0.17 in Q4, compared to an adjusted diluted loss per share of $0.08 last year.
  • Technical Apparel Revenue: Increased 33% to $745 million in Q4.
  • Outdoor Performance Revenue: Increased 13% to $594 million in Q4.
  • Ball & Racquet Revenue: Increased 22% to $296 million in Q4.
  • Free Cash Flow: Approximately $150 million for 2024.
  • Net Debt: Reduced to $600 million at the end of Q4 from $2.0 billion at the end of Q3.
  • Store Openings: Arc'teryx opened net eight new retail stores in Q4; Salomon opened 31 net new shops in Greater China in Q4.
  • Warning! GuruFocus has detected 4 Warning Sign with AS.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Amer Sports Inc (NYSE:AS) reported a strong fourth quarter with sales, adjusted margins, and EPS exceeding expectations.
  • The company achieved 23% sales growth and over 300 basis points of adjusted operating margin expansion in Q4.
  • Arc'teryx, Salomon, and Wilson brands showed accelerating momentum, contributing to the company's overall growth.
  • Greater China and APAC regions delivered strong growth, with EMEA and North America also accelerating.
  • The company reduced its leverage significantly, ending the quarter with $600 million of net debt, down from $2.0 billion at the end of Q3.

Negative Points

  • Expected FX headwinds are anticipated to slightly weigh on the 2025 reported financial results.
  • Winter sports equipment segment faced challenges due to soft reorders in Europe and poor snow conditions.
  • The ball & racquet segment, despite strong growth, is expected to grow only low-to-mid single digits long term.
  • The company faces potential impacts from new tariffs on imports from China, Canada, Mexico, and Vietnam.
  • Adjusted SG&A expenses as a percentage of revenues deleveraged by 20 basis points, indicating increased investments to support growth.

Q & A Highlights

Q: Can you update us on the longer-term store targets for Arc'teryx? A: Stuart Haselden, CEO of Arc'teryx, stated that they plan to continue opening a similar number of stores each year, with 33 net new stores in 2024 and a target of 25-30 for 2025. They see potential for around 200 stores in North America, 75-100 in Europe, 75-100 in APAC outside of China, and 150-200 in Mainland China, with a more bullish outlook for China.

Q: Could you elaborate on drivers of the comp acceleration to nearly 30% at Arc'teryx in the fourth quarter? A: Stuart Haselden explained that the biggest factor was increased traffic, both in-store and online, with healthy conversions and increases in average order value and selling prices. Post-holiday demand has remained strong, and they have improved inventory planning for 2025, particularly in footwear.

Q: Can you elaborate on the investments in SG&A throughout the year? A: Andrew Page, CFO, mentioned that investments are focused on new store build-outs, increasing consumer connection online and in-store, and infrastructure improvements like ERP systems and logistics. They expect SG&A to be relatively flat in 2025 as previous investments start to scale.

Q: How are you thinking about growth in footwear and women's segments within Arc'teryx? A: Stuart Haselden noted that footwear grew over 60% in 2024, reaching nearly 10% of sales, with potential to exceed 20% in the coming years. The women's segment grew faster than men's, approaching 40% of sales in Q4, with a goal to achieve a balanced gender mix in apparel.

Q: Can you unpack the gross margin expansion and its drivers? A: Andrew Page highlighted that Arc'teryx, as the highest-margin and fastest-growing business, is the main driver of gross margin expansion. Other factors include mix shift within segments, such as higher-margin footwear in outdoor performance and Tennis 360 in ball & racquet. Stuart Haselden added that lower transportation costs, markdowns, and higher product margins also contributed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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