Arthur'S Performance Continues To Be Sluggish And Revitalizes Overseas Markets China Should Not Be Underestimated

This year is the 70th anniversary of the brand, but the financial report of Japanese sports product group Asics is not satisfactory. A few days ago, Arthur's data for the first quarter of 2019 fiscal year showed that comprehensive net sales and net profit attributable to the parent company had declined to varying degrees.

However, in recent years, Arthur's performance continued to be low. In 2018, the increase in direct store costs in the US and Japan markets led to a decline in operating profits in these two markets. In this regard, Arthur said that he would do his best to promote the recovery of sales growth in the U.S. market in the future, and adjusted Arthur's 2020 mission goals.

However, Arthur was surprised by the performance of the Chinese market. In 2018, the sales of Arthur's China increased by more than 20% year on year, and the sales of OnitsukaTiger brand increased by 25% year on year. The Group is optimistic about the Chinese market, and said that it will build China into the fourth pillar market of the Group after North America, Europe and Japan as soon as possible.

Industry insiders believe that if Arthur's 2020 goal is to be achieved quickly, it will not only need to revitalize the U.S. market, but also the strength of the Chinese market with the upgrading of consumption.

Target shrink by 1/3

On April 24, Arthur's released its financial report for the first quarter of 2019. The group's comprehensive net sales fell 7.4% year-on-year to 104.6 billion yen, 9.4% year-on-year at the constant exchange rate; Operating profit fell by 35.4% to 8.5 billion yen, mainly due to the 7.9% year-on-year increase in sales costs, general expenses and administrative expenses (SG&A), and the opening of new retail stores; The profit attributable to the parent company fell 43.2% year on year to 5.3 billion yen.

It is worth noting that previously, in order to seek new growth points, Arthur introduced a medium-term reform strategy - the goal is to achieve sales of 750 billion yen, or about 43.5 billion yuan, by the time of the 2020 Tokyo Olympic Games.

However, with the continued downturn in performance in recent years. Arthur has also had to lower the medium-term business plan sales target to 500 billion yen, with an operating profit margin of more than 7% and a return on equity of more than 10%. This means that Arthur has reduced his previous goal by one third.

Looking back at the performance of Arthur's in recent years, it can also be found that since 2012, Arthur's sales have declined for the first time in 2016, and Arthur's performance has been in a downturn. From January to September 2017, Arthur's net profit was about 920 million yuan, a decrease of 15% over the same period last year.

In 2018, Arthur's overall sales fell 3.4% year on year to 386.6 billion yen, equivalent to 23.7 billion yuan. Operating profit fell 46.3% year on year to 10.5 billion yen, resulting in a loss of 20.3 billion yen, which is the largest loss Arthur has suffered in the past 20 years.

Industry insiders believe that the continuous downturn of Arthur's performance is related to factors such as its slow pace of development and difficulty in winning a wide range of young consumers. At the same time, Arthur is also conservative in promoting new and signing new spokespersons. All of these make it difficult for Arthur to respond to the market quickly and effectively. At the same time, the brand loyalty of consumers is declining, which ultimately leads to only a few audiences remaining loyal to it.

"Mute fire" in the main battlefield

In fact, the continuous downturn of Arthur's performance is closely related to its core market America. Among them, America contributed nearly 25% of sales to Arthur. In the first quarter of 2019, sales in the US market fell 26.8% year on year due to sluggish sales in wholesale channels.

In 2018, Arthur's sales in Japan, Europe and the Americas declined to varying degrees, including sportswear and running shoes. In addition, there were problems such as increased costs of direct stores. Among them, in November 2018, Arthur's performance in the first nine months of fiscal 2018 has declined.

Among them, Arthur's net sales fell 4.7% year on year to 295.68 billion yen, operating profit fell 37.1% year on year to 15.36 billion yen, and net profit fell 47.55% year on year to 8.288 billion yen. The sales volume of the core market America fell again 17.8% year on year to 67.67 billion yen. In addition, affected by the low sales volume and higher cost of sales ratio, the US department lost 958 million yen.

As for the 2018 annual performance, Arthur pointed out that, especially in the American market, Arthur was facing increasingly fierce competition, and the sales of running shoes fell 14.2% year on year, which directly led to a significant decline in the group's performance. In addition, together with the internal business reform activities such as business restructuring, reevaluation and allocation of Japanese and overseas assets that have been implemented before, it also caused some losses, totaling 24.3 billion yen, or about 1.5 billion yuan.

Yasuhiro Hiroda, president and COO of Arthur, also pointed out in an interview: "Due to the huge losses, the bonuses of all directors and executives in charge of performance matters will be zero. But I believe that 2020, when the Tokyo Olympic Games and Paralympic Games will be held, should be a year of Arthur's leap, and we will also start the offensive in 2019."

However, Arthur's decline in the core market is also closely related to his genes. As early as before the establishment of ASICS, its predecessor, Onitsuka, had begun to produce marathon running shoes for middle and long distance runners in Japan. However, Onitsuka lacks skilled shoe making experience. Later, in order to expand production and market, in 1977, Onitsuka merged with the then Japanese fishing sporting goods brand GTO and sportswear manufacturer JELENK, and established a new company with the concept of "Animal Sana in Corporate Sano (sound spirit in healthy body)". This company is now Arthur.

They are all "synthetic" Arthur's products of Japanese companies, and the products are not completely suitable for Americans. Until the introduction of TARTHER in 1983, the design of this pyramid sole opened up a new way for it in front of a large number of heavy American running shoes.

Guo Bin, secretary-general of the National Sports Industry Research Base of Peking University, said that in the past, Arthur could win dividends in the American market by virtue of the lightweight attribute, but now Nike, Adidas, Under Armou, etc. are increasingly focusing on the quality, weight and technological content of products. It is not easy for Arthur to continue to share in the American market.

Hiroda Kangren also said recently: "The US market is changing frequently, and the market of easy running category is growing rapidly, but we have not planned this area in advance. For Arthur, the US market is the key and must not lose. "

New pillars not erected

In sharp contrast to the American market, the Chinese market is increasingly expanding, and Arthur has also received dividends from it. The data shows that in 2018, the sales of Arthur's China market increased by more than 20% year on year, and the sales of OnitsukaTiger brand increased by 25% year on year. The Group is optimistic about the Chinese market. In addition, Arthur will help the Chinese market achieve faster growth through brand image upgrading, store design and other ways.

"Actively promote the growth of the growing market and build China into the fourth pillar market of the Group as soon as possible after North America, Europe and Japan." Hirota Kangren also realized the importance of the Chinese market.

However, the insiders said frankly that the Chinese market has not yet become Arthur's pillar market, and policies and products closer to Chinese consumers are needed in the future.

In addition to pinning its hopes on the Chinese market, Arthur also hopes to break through performance bottlenecks with the Tokyo Olympic Games and Paralympic Games to be held in 2020. But in Guo Bin's opinion, if Arthur wants to break through the performance bottleneck, the first thing he should do is to break through his own bottleneck.

In this regard, the reporter interviewed Arthur by email. As of press release, the other side did not reply.

However, in order to achieve the 2020 goal, Arthur has developed a new marketing strategy: gradually returning the strategic focus from pursuing the lifestyle of millennial consumers to the sports foundation of professional running.

At the same time, Arthur has also begun to transform into a young and diversified society in recent years. In the past, the main colors of Arthur's products were blue, white and silver. In August 2017, Arthur renewed the brand image, adding bright pink, bright purple, emerald green and lemon yellow to the main colors in the brand logo, and also put forward a new slogan of "I move me".