ANTA is playing a big game in the next move.
Less than half a month into 2024, outdoor brand ANTA’s ancestor, Amer Sports, has already trended twice.
On January 11, it was reported that the limited edition Amer Sports Rooster Year assault jacket, originally priced at 8200 yuan, has been speculated to 12,000 yuan, and even at such a high price, it is still hard to find.
Earlier, Amer Sports’ parent company, Amer Sports, submitted an F-1 filing (a prospectus for foreign companies not based in the U.S.) to the U.S. Securities and Exchange Commission, planning to list on the New York Stock Exchange.
Behind Amer Sports, there are “luxurious” shareholders such as ANTA, Tencent, and the founder of lululemon. Among them, ANTA is the largest shareholder of Amer Sports, with a stake of 52.70% according to its 2023 mid-year report.
ANTA’s connection with Amer Sports began with the highly attention-grabbing “snake swallows elephant” acquisition in 2019. At that time, a consortium led by ANTA and FountainVest Partners spent about 4.6 billion euros to acquire Amer Sports. ANTA’s Chairman Ding Shizhong bluntly stated that acquiring Amer Sports was the heaviest decision he had made since starting his business.
The risky acquisition of Amer Sports is closely related to Ding Shizhong’s ambition to layout globally. Ten years ago, he boldly claimed to want to make ANTA a global brand. Acquiring international brands and companies such as FILA, Descente, Amer Sports, etc., are crucial components of ANTA’s internationalization strategy.
An analyst who has been tracking ANTA for a long time told Tiger Sniff that ANTA Group is adept at using brand, operations, and channel capabilities to make the acquired international brands grow stronger in the domestic market. From FILA to Descente, KOLON, and Amer Sports, ANTA almost “acquires one, ignites one.”
Behind the popularity on the consumer end, how has Amer Sports, under ANTA’s acquisition in recent years, performed, and how far is the company from becoming a global ANTA?
ANTA’s Achievements
Looking at the operating results disclosed in the prospectus, ANTA’s acquisition in recent years has indeed brought many positive impacts to Amer Sports.
Firstly, Amer Sports’ revenue growth has accelerated. From 2020 to 2022, under the operation of ANTA Group, Amer Sports’ revenue increased from 2.45 billion yuan to 3.55 billion yuan, with a compound annual growth rate of 20.4%. Although this revenue growth rate is not as high as Li-Ning and ANTA (with compound annual growth rates of about 34% and 23% respectively during the same period), it is significantly higher than Amer Sports before ANTA’s acquisition and major players in the European and American markets such as Nike and Adidas.
In terms of brands, Amer Sports has been dubbed the “LVMH of outdoor sports brands,” with many sub-brands. After ANTA’s acquisition of Amer Sports, some relatively “peripheral” brands were divested, focusing the brand structure on outdoor sports footwear, apparel, and equipment.
After a series of brand adjustments, Amer Sports is now divided into three major series: Professional Apparel, Outdoor Performance, and Ball and Racquet Sports. From 2020 to the present, Outdoor Performance has consistently been the largest series for Amer Sports, and the second-ranking Professional Apparel has the fastest growth.
Looking at individual brands, Salomon and Amer Sports’ biggest two sub-brands, Salomon and Amer Sports, have the fastest growth, earning the title of Amer Sports’ biggest contributor.
From 2020 to 2022, Amer Sports’ Amer Sports brand revenue increased from $550 million to $950 million, with a compound annual growth rate exceeding 31%. During the same period, Salomon’s revenue increased from $850 million to $1.07 billion, with a compound annual growth rate of about 12%.
At the current development rate, Amer Sports’ Amer Sports brand becoming the top brand within Amer Sports is imminent. For example, in the first three quarters of 2023, Amer Sports’ Amer Sports brand revenue had already reached $940 million, with the gap to Salomon being less than $10 million.
Supporting the performance of the Amer Sports brand, in addition to the traditional outdoor enthusiasts, is also the middle class.
As a professional outdoor brand, when Amer Sports’ Amer Sports brand first entered the Chinese market, it mainly targeted outdoor enthusiasts and channels. However, under ANTA’s operation, Amer Sports’ Amer Sports brand has gradually become more fashionable and luxurious, attracting a large number of affluent mainstream users. In 2018, Amer Sports’ Amer Sports brand had 14,000 members in China, and by September 2023, this number had skyrocketed to 1.7 million.
In addition to the sudden success of Amer Sports’ Amer Sports brand, the channel changes brought by ANTA are also noteworthy.
In recent years, channel reform has been a significant event in the entire sportswear industry. In the previous development stage, almost all companies focused on rapidly expanding wholesale channels. However, as the entire industry began to emphasize refined operations, direct-to-consumer (DTC) channels facing consumers directly became the direction embraced by various companies.
After ANTA’s acquisition of Amer Sports, a significant change was a focus on DTC channels. Among them, Amer Sports’ Amer Sports brand has been the most “thorough” on this road.
A senior industry insider told Tiger Sniff that before being acquired by ANTA, Amer Sports’ Amer Sports brand’s performance in the Chinese market was mainly contributed by distributors, “such as brand ordering conferences, most of which were supported by distributors in various cities.” After ANTA’s acquisition of Amer Sports, using its own resources, it obtained many core locations in city centers and began to focus on rebuilding its sales channels, reducing reliance on distributors.
The above-mentioned person revealed that currently, Amer Sports’ Amer Sports brand’s shopping mall stores and outlet stores are all self-operated by the brand, and other channels like outdoor involve distributors. As of September last year, Amer Sports’ Amer Sports brand had 138 self-operated retail stores worldwide, including 63 in Greater China.
At the group level, from 2020 to 2022, the proportion of DTC channels in Amer Sports’ revenue increased from 21.7% to 29.5%.
Whether it is the “take-off” of the high-end brand Amer Sports’ Amer Sports brand or the increase in the proportion of DTC channels, both contribute to improving Amer Sports’ gross profit margin. In 2022, Amer Sports’ gross profit margin reached 49.7%, an increase of 2.7 percentage points compared to 2020.
Challenges and Pressures from Amer Sports
Although Amer Sports has undergone a series of positive changes under ANTA’s leadership, its financial situation is relatively tight.
Since 2020, Amer Sports has been in a state of continuous losses. From 2020 to September 2023, the total accumulated loss over three years was approximately $730 million. The reason for Amer Sports’ losses is not that its main business is not profitable, but the earnings are not enough to cover the interest payments.
Since ANTA’s acquisition, Amer Sports’ daily operations have been basically maintained by two large-scale loans. One is a related party loan, about $4 billion, from shareholders, and the other is nearly $1.8 billion in loans from financial institutions.
Because of these loans, Amer Sports needs to repay a certain amount of interest every year. For example, in the first three quarters of 2023, Amer Sports’ financial expenses (mainly interest payments) were close to $300 million, while the operating profit during the same period was about $240 million.
However, with Amer Sports going public, the financial pressure on the company itself and its controlling shareholder ANTA will be greatly relieved.
According to the information disclosed in Amer Sports’ prospectus, the company will use the funds raised from the IPO to repay $1.4 billion in loans. After the loans are repaid, Amer Sports will be able to save a significant amount in interest expenses, improve its profit situation, and the money raised from the IPO will also help Amer Sports further develop. As a shareholder, ANTA will also profit from this.
In addition to the immediate relief of pressure, the long-term challenge Amer Sports brings to ANTA is the operation in the international market. Of course, for ANTA, this challenge is also an opportunity to take a bold step.
For the brands previously acquired, such as FILA, ANTA’s approach was to acquire the operating rights of these brands in Greater China. Essentially, it was still operating international brands in the domestic market. However, Amer Sports is different, with its main market still in Europe and America. How to manage the foreign market well has become a new challenge for ANTA.
The management team is a crucial part of international operations. In order to succeed in the international market, after acquiring Amer Sports, ANTA has completed a major change in its management team and formed an experienced international executive team.
Currently, Amer Sports’ CEO is ANTA’s “veteran” Zheng Jie; CFO Andrew E. Page, who joined in 2023, was previously the CFO of sportswear brand Under Armour; Michael Hauge Sørensen became Amer Sports’ CMO in 2020, and earlier, he served as Vice President and CMO of ECCO (shoes, leather goods brand).
The head of the brand line has also undergone a major adjustment. The current head of the core brand Amer Sports’ Amer Sports brand previously served as an executive for brands such as lululemon and J.Crew (a mid-to-high-end American clothing brand), and the General Manager of Amer Sports’ Amer Sports brand in Greater China has changed twice. When ANTA first acquired Amer Sports, the General Manager of Amer Sports’ Amer Sports brand in Greater China was ANTA’s “veteran” Xu Yang. Last year, after Xu Yang took over as CEO of ANTA’s main brand, Yao Jian, who had worked for Nike in Greater China for many years, took over this position.
The head of Salomon previously served as the global executive vice president of outdoor brand Columbia; the number one position at Wilson brand is the only “veteran” of Amer Sports, who has worked for Wilson for over 28 years.
The configuration of such an executive team indicates ANTA’s emphasis on international strategy. However, returning to the operational level, ANTA’s journey in the international market has just begun.
An example is that since ANTA’s acquisition of Amer Sports, Greater China has been its fastest-growing market. From 2020 to 2022, the compound annual growth rate of revenue was close to 61%, and the proportion of revenue in the group also increased from 8.3% to 14.8%. In comparison, the European and American markets are somewhat inferior.
In the first half of the international layout, ANTA has already explored a mature path: leveraging the acquisition of international brands to do business in the Chinese market. After acquiring Amer Sports, ANTA has entered the second half of the game, facing the challenge of expanding to foreign markets and doing business internationally. Although this path is more challenging, it is the only way to become a global ANTA.