With expected growth slowing down, should Amer Sports start looking for a new "Arcteryx"?

Amer Sports (AS.NYSE) has delivered a significantly growing financial report.

On February 25, Amer Sports released its 2024 financial report: achieving revenue of USD 5.183 billion, a year-on-year increase of 18%; adjusted net profit of USD 73 million, a year-on-year increase of 135%.

This is the first time Amer Sports has achieved annual profitability. From 2020 to 2023, Amer Sports incurred a total loss of over USD 700 million.

Amer Sports specifically pointed out that the global growth momentum of the Arc'teryx brand continues to expand, leading to a year-on-year growth of 33% in the outdoor functional apparel segment in the fourth quarter of 2024, reaching USD 745 million.

Operating profit in the fourth quarter increased by 224% year-on-year, reaching USD 194 million; adjusted operating profit grew by 63%, reaching USD 223 million.

Additionally, management characterized the fourth quarter of 2024 as "an important financial turning point in the development process."

In this quarter, the company repaid all USD 1.2 billion of its term loans after completing USD 1 billion in equity financing, significantly reducing the leverage ratio on its balance sheet.

As of the end of 2024, Amer Sports' total non-current liabilities decreased by RMB 1.144 billion compared to the end of the previous quarter, with the overall debt-to-asset ratio dropping to 40.64%.

The company expects adjusted net financial costs of approximately USD 120 million in 2025, a reduction from the previous guidance of USD 180-190 million. In contrast, the company's interest expenses for 2024 were USD 219 million.

With the gradual alleviation of debt pressure, where will Amer Sports place its bets for future growth?

China Market "Sustaining Alone"

The Greater China region remains the most significant area of growth for Amer Sports in 2024.

In 2024, revenue from the Greater China region reached USD 1.298 billion, a year-on-year increase of 53.7%. The proportion of the Chinese market in the overall revenue landscape further increased from 8% in 2020 to 23% in 2024.

In contrast, the performance growth rates in the higher revenue-generating markets of Europe and America are all in single digits.

The largest market, the Americas, achieved annual revenue of USD 1.859 billion, a year-on-year increase of 6.5%; the second-largest market, Europe, the Middle East, and Africa (EMEA), reached USD 1.513 billion, with a year-on-year increase of only 3.8%.

The positive business performance is clearly driven by the success of Arc'teryx and the Chinese market.

In 2024, Arc'teryx opened 33 new stores, including six stores in China at core locations.

The most notable is the global flagship store "Arc'teryx Museum" established in May of that year on Nanjing West Road in Shanghai. This store, claimed to be the world's largest "original ecological flagship store," covers an area of 2,400 square meters and employs a one-on-one shopping guide system.

Amer Sports CEO Zheng Jie stated that this flagship store represents the highest level of retail format for the Arc'teryx brand, with expected first-year revenue exceeding USD 20 million, approximately RMB 144 million.

In China, the audience for Arc'teryx has expanded from professional outdoor sports enthusiasts to middle-class ordinary consumers. Its rare "luxury sports" positioning allows it to stand out among outdoor brands.

The creation of scarcity further helps it break out of its niche.

At the beginning of 2025, Arc'teryx launched a limited edition jacket for the Year of the Snake with an official price of RMB 8,200, which saw its price soar to RMB 20,000 in the secondary market Even the hangtags have become hot commodities in the secondary market, with acquisition prices in the second-hand market ranging from 5 to 30 yuan, and some limited edition hangtags even selling for as much as 300 yuan.

However, when Arc'teryx attempted to reverse its "luxury sports" positioning to overseas markets by opening flagship stores, it seemed to encounter obstacles.

In 2024, Arc'teryx plans to open Alpha flagship stores in London, New York, Tokyo, and other locations, aiming to replicate its high-end operational approach in the global market.

In 2024, Amer Sports' DTC channel revenue share increased from 36.1% in the same period last year to 43.7%; the overall gross margin rose by 2.9 percentage points to 55.4%.

However, unlike the decisive move to cut off distributors in the domestic market, Arc'teryx has not reclaimed the distribution rights from the largest retailer, REI, in the U.S. market. Various discounted Arc'teryx products are still available on the REI website or in physical stores.

In the fiercely competitive overseas outdoor goods market, the power does not belong to the brand but to the channels.

Guohai Securities' research report cites Statista's 2023 statistics, showing that Arc'teryx's brand awareness in the U.S. is only 18%. In the same period, THE NORTH FACE, Columbia, and Patagonia had brand awareness rates of 83%, 78%, and 52%, respectively.

For Arc'teryx, which lacks price control, replicating the "luxury sports" positioning overseas is not easy.

The DTC model has always been a "double-edged sword," carrying risks of high investment and high inventory.

Tang Xiaotang, founder of Fashion Chinese Network, told Xinfeng that when migrating the Chinese store model overseas, higher rent and labor factors need to be considered, which may not achieve the same store opening effects.

"Amer Sports' 2025 operating profit guidance has not been significantly raised, indicating possible uncertainties in the development process," Tang Xiaotang said.

In the past year, brands under Amer Sports have been expanding stores on a large scale globally.

In 2024, the number of self-owned stores in the outdoor functional apparel department reached 223, a year-on-year increase of 19%; the mountain outdoor apparel and equipment department had 229 self-owned stores, a year-on-year increase of 82%; and the ball and racket equipment department had 53 stores, a year-on-year increase of 342%.

Sales, general, and administrative expenses related to store expansion reached $2.43 billion, a year-on-year increase of 23%, accounting for a slight increase of 1.1 percentage points to 46.9% of total revenue.

Zheng Jie revealed at the earnings conference that Arc'teryx plans to net open 25 to 30 new Arc'teryx stores in 2025, maintaining the same pace of store openings as in 2024.

Tang Xiaotang believes that according to the current store investment model of Amer Sports, if its brands fall behind in market competition or changes in the consumption environment lead to a decline in revenue, the overall profitability of the company will be challenged, and many costs cannot be quickly reduced.

Seeking Growth "Relay Baton"

In fact, although the pace of expansion has not slowed down, Amer Sports has already lowered its growth expectations for 2025.

According to the financial guidance provided by the company, Amer Sports' revenue is expected to grow by 13% to 15% year-on-year in 2025, a slowdown compared to this year's growth rate of 18% Among them, the outdoor functional apparel segment where Arc'teryx is located is expected to see revenue growth of about 20% and an operating profit margin of approximately 21%. The revenue growth rate and operating profit margin for this segment in 2024 are projected to be 36% and 21%, respectively.

One potential development direction is horizontal expansion of categories.

In recent years, both emerging outdoor brands and major sports brand giants have been increasing their efforts to tap into the female market.

In the fourth quarter of 2024, Arc'teryx's female product line achieved double-digit growth across all regions, significantly outpacing men's apparel and the brand average.

The footwear business has also become part of Arc'teryx's ambition to capture more lifestyle scenarios.

Officials revealed that in 2024, Arc'teryx's footwear business is expected to grow overall by more than 60%, with market penetration close to 10% for most of the year, and they see the potential for this business to exceed 20% penetration in the coming years.

Zheng Jie stated, "In 2025, Arc'teryx will launch more groundbreaking footwear products. Through synergy between its own retail network and specific strategic wholesale channels, the footwear business is expected to grow into a scalable profit channel."

At the same time, resources will be directed towards other brands with growth potential.

As a core brand under the mountain outdoor apparel and equipment department, Salomon has begun to replicate Arc'teryx's strategy in the Chinese market: aggressively opening stores, collaborating to break into new circles, and deeply binding brand culture with the middle-class lifestyle.

Currently, Salomon's channel expansion in the Chinese market is quite rapid.

Zheng Jie revealed that by 2024, the total number of Salomon stores in Greater China has reached 196. This means that in the past year, the brand added 119 new stores, with a year-on-year growth rate of 155%.

According to incomplete statistics, Salomon's store layout in China has entered central and western regions such as Chongqing, Kunming, Xi'an, and Taiyuan, and even covers many third- and fourth-tier cities.

In 2025, the brand plans to open another 100 new stores.

Tianfeng Securities analyst Sun Haiyang believes that Salomon is a typical people-oriented brand, starting from "meeting the needs of a specific group" and providing product solutions for core groups, continuously optimizing the sports experience, rather than fixating on a single product or category.

In October 2024, Salomon opened its second global flagship store in Shanghai Xintiandi, covering professional sports categories such as trail running, hiking, road running, and skiing.

Salomon clearly hopes to maintain a professional tone while reaching as many people as possible. However, it always faces the challenge of how to balance "professionalism" and "trendiness."

In Tang Xiaotang's view, if outdoor brands rely too heavily on trendy marketing, it may weaken the brand's professional image externally, which is not conducive to the loyalty of core users.

In 2024, the operating profit margin of the mountain outdoor apparel and equipment department where Salomon is located is less than 10%, far below the 21% of the outdoor apparel segment.

In addition, Salomon faces numerous domestic competitors, with international sports brands like ANTA and HOKA accelerating their embrace of the Chinese market, and the pricing range of lululemon's footwear products being similar to its own.

In today's rapidly changing "three treasures of the middle class," Amer Sports needs more achievements to prove its sustained growth potential