On February 1, the sports apparel company Amer Sports officially debuted on the New York Stock Exchange, marking a significant event for the Anta Group, its parent company. This initial public offering (IPO) saw the issuance of 105 million shares at a price of $13 each, raising approximately $1.365 billion. Despite a 3% increase in share price on its first trading day, bringing the total market capitalization to around $6.3 billion, the performance was seen as relatively modest by market standards.
For Anta Group and Amer Sports, however, this was somewhat of a letdown considering the lead-up to the IPO, which had projected a share price range of $16 to $18. This high valuation would have potentially pushed Amer Sports' market worth beyond $10 billion, with $1.8 billion in expected fundraising.
In recent years, there has been a noticeable shift in fashion towards outdoor apparel, further eclipsing conventional streetwear trends. Retail brands like Lululemon have achieved record revenues, while niche companies such as On and Hoka One One have experienced rapid growth. Amer Sports, with its premium brands Arc'teryx and Salomon, has also benefitted from this trend. Arc'teryx is often seen as a benchmark for high-end sports goods, while Salomon has successfully penetrated the fashion market via a series of collaborations.
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According to the company's prospectus, Amer Sports showed steady revenue growth from 2020 to 2022, with figures of $2.446 billion, $3.067 billion, and $3.549 billion respectively. During the first nine months of 2023, revenues reached $3.053 billion. Notably, the combined sales of Arc'teryx, Salomon, and Wilson Sports Equipment accounted for 90.3% of total revenues in that same period, up from 84.6% in 2020.
The U.S. remains Amer Sports' largest market, contributing $1.226 billion in revenue during the first three-quarters of 2023. Following closely are the regions of Europe, the Middle East, and Africa, which saw revenues of $999 million, with Greater China lagging behind at $593 million but showing an impressive 67.6% year-on-year growth, outpacing the U.S. and Europe/Middle East/Africa growth rates of 19.3% and 22.6%, respectively.
This positive performance in the Chinese market can largely be attributed to Anta Group's reformation of Amer Sports' business strategy in that region. This includes the opening of more direct-sale stores and flagship outlets in high-end shopping areas such as the Wangfujing shopping center in Beijing. Moreover, Amer Sports is shifting its marketing focus from purely professional sports to more fashionable, lifestyle-oriented promotions, allocating more resources to footwear and apparel rather than solely sporting equipment.
Amer Sports’ growth has positioned it as a leading example of premium market operation within the sportswear industry, heralding Anta Group as a success story in the transformation of a Chinese company into a global player. With various strategic changes and personnel adjustments underway, the experiences and strategies of Amer Sports are expected to be integrated into the broader development of other brands under Anta Group’s banner.
On the flip side, there are concerns regarding Amer Sports' heavy reliance on the Chinese market, which could pose a potential risk. While China isn’t currently the largest market for Amer Sports, its rapid growth in recent years has been vital for the company's success. For instance, in the first nine months of 2023, Arc'teryx generated $452 million in revenue in Greater China, a staggering 61.8% increase compared to previous years, with nearly half of its global sales being absorbed by the Chinese consumer base.
However, discrepancies in brand image and pricing between China and international markets present an impending challenge. In China, Arc'teryx has thrived in a fast-paced market that benefits from a gap in information and availability. Yet, as that gap narrows, the brand could face dilemmas regarding its positioning. The debates around price hikes and perceived "overluxury" have already sparked controversies surrounding Arc'teryx in the Chinese market.
Moreover, uncertainty in the retail environment and geopolitical tensions are affecting investor confidence. Amer Sports acknowledged in its prospectus that U.S.-China tariff disputes might impact its ability to sell products in the States. The company operates production facilities in China, with approximately 33% of its goods manufactured by third-party suppliers located there.
Debt has also raised red flags. Amer Sports has been in the red since its acquisition by Anta Group, consistently showing negative cash flow and accumulating debts of up to $2.1 billion. Even though these debts could be alleviated through IPO funds, investors are questioning the overall profitability of Amer Sports.
In response to these uncertainties, Amer Sports' CEO Zheng Jie expressed in an interview with Bloomberg that the disappointing IPO pricing should be viewed as a short-term concern. He maintained confidence in future prospects, citing tangible successes in product development, distribution channels, and marketing strategies. However, whether these achievements can sustain over time remains to be seen, as the market waits for clearer indicators of Amer Sports' long-term viability.