Amer Sports, Inc. (AS) Q1 2025 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Amer Sports First Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Omar Saad, SVP Capital Markets and Investor Relations. You may begin.

Welcome, everyone. Thanks for joining Amer Sports earnings call for the first quarter of fiscal year 2025. Earlier this morning, we announced our financial results for the quarter ended March 31, 2025, and the release can be found on our IR website, investors.amersports.com. A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures. We'll begin with prepared remarks from our CEO, James Zheng; and CFO, Andrew Page, followed by a Q&A session until approximately 9:00 a.m. Eastern. James will cover key operational and brand highlights, and Andrew will provide a financial review at both the group and segment level and also walk through our guidance for the second quarter and full year '25. Arc'teryx CEO, Stuart Haselden, will also join for the Q&A session. With that, I'll turn the call over to James.

Thanks, Omar. Amer Sports began 2025 with a great performance in the first quarter, delivering sales adjusted margin and EPS well above expectations. We generated 23% sales growth or 26% ex currency, and we also expanded our adjusted operating margin by nearly 500 basis points. Our performance was led by strong growth and profitability in both Technical Apparel and Outdoor Performance, as well as solid sales and margin results in Ball & Racquet. In addition to the continued broad-based strength from our flagship brand, Arc'teryx, I'd like to highlight the growing momentum behind the Salomon sneakers. We are really starting to see consumers all around the world respond to their unique performance and style's attributes. Furthermore, our market-leading hard goods equipment franchises delivered better-than-expected results for both Winter Sports Equipment and the Wilson Ball & Racquet. Although we are off to a great start in 2025, given macro uncertainty related to U.S. tariffs, we are operating our business with discipline and flexibility. Andrew will provide a more detailed discussion of our tariff exposure, mitigation strategies and the financial impacts. But I'd like to emphasize that I believe we are very well positioned to manage through a wide range of tariff scenarios given our premium brands with pricing power, secular growth trends and the relatively low U.S. revenue exposure. Looking near and long term, we believe Amer Sports is a uniquely positioned company within the global sports and outdoor space. Several factors give me confidence for the rest of this year and well beyond. First, we own and operate a unique portfolio of premium outdoor and sports brands. Each one is empowered by our technical innovation and is positioned at the pinnacle of its segment. Our brands have high conversion and satisfaction but are still small players with room to grow. Second, Arc'teryx is a breakout growth story with great growth and profitability for the outdoor industry, driven by its disruptive direct-to-consumer models and a unique competitive position. It's still very underpenetrated globally and still has a tremendous long-term growth opportunity. Third, we believe Salomon sneakers have unique performance and design attributes. And the brand is experiencing accelerating momentum globally, but still has a small market share of the global sneaker market. Fourth, Wilson and our Winter Sports Equipment brands have authentic heritage, premium positioning, higher performance products and the leading market positions. These high market share brands will deliver slower long-term growth in their core equipment businesses, but they still have large soft goods potential, especially Wilson Tennis 360. And the fifth, we believe we have a very strong differentiated platform in Great China, where we continue to deliver best-in-class performance with great momentum across all three big brands. Before I turn it over to Andrew, allow me to briefly recap key brand highlights from our three segments. Starting with Technical Apparel, which is led by our fastest-growing and largest brand, Arc'teryx. Arc'teryx delivered another great quarter with strong growth across all regions, channels and categories, especially footwear and women's, which continue to grow faster than the brand overall. We are encouraged to see the Technical Apparel momentum continue in the direct-to-consumer channel where we generate a plus 19% omni-comp in quarter one. Importantly, our direct-to-consumer growth was driven by strong performance in both stores and online. We believe Arc'teryx stores are very differentiated from both our product and experience perspective, and they continue to be critical to the whole strategy, especially how we engage with local consumers and the community. Arc'teryx net new store openings were flat in quarter one as four openings were offset by the closure of four legacy locations as part of our ongoing strategy to optimize the quality and the productivity of our store fleet. Key new store locations this quarter include two stores in China, one in Georgetown, Washington, D.C. as well as our new Chamonix location, which is our first mountain town store in Europe, and has attracted great consumer interest since day one. Arc'teryx store expansion strategy includes of a mix of different formats ranging from multilevel large-scale alpha flagship stores to small format, very distinct mountain town shops. For 2025, we plan to open approximately 25 net new Arc'teryx stores globally, which incorporates a similar level of gross openings as in 2024, partially offset by the closure of certain outlets and other suboptimal locations. We are focused on positioning Arc'teryx for sustainable long duration growth, and developing a high-quality store network is critical to our success, and much more important, chasing fast-paced new store expansion. For example, in Great China, we will continue to focus on optimizing Arc'teryx retail footprint rather than pushing new store expansion. This year, we will have net store closure in China, including closing some legacy partner stores, but will grow our own store count, continue to open larger format, high-quality locations. We expect to grow revenue strong double-digits, driven by comp store growth and replacing small, less productive stores with large-format, high-quality locations. In Beijing, we will still open a brand store within the Peninsula Hotels and we have plans to open two more shops at other Peninsula locations later this year. We are very excited that Arc'teryx will be the first sports brand to sit alongside traditional luxury brands inside of this iconic hotel chain. We also recently opened another mountain town store in [Banff] (ph), a popular mountain destination in Canada, and it's a great addition to our small but growing portfolio of authentic mountain town locations, including Chamonix, and Whistler. Community engagement continues to be a key part of our strategy to raise brand awareness. In March, we host our first ever Arc'teryx Academy in California at Mammoth Mountain. The event drew thousands of participants, achieved a record-breaking ReBIRD sales, created 6 million media impressions and saw a direct lift in sales in Arc'teryx stores in the Los Angeles areas as well as e-commerce. Shifting to products. Footwear continued to be Arc'teryx fastest-growing category in quarter one as consumers continue to respond positively to what we believe is the best line of technical performance footwear designed for mountains. This spring, we launched the Norvan LD 4, an elevation of the popular silhouette made for long-distance mountain running. We also launched the Vertex Speed, which is a mountain running shoe designed to climb through technical vertical terrain. Looking forward, Arc'teryx has an exciting pipeline for shoe launch in the second half of 2025. We believe footwear will become a sizable and profitable growth avenue for Arc'teryx, both in own retail, e-commerce and in certain wholesale accounts over time. We have now structured footwear as a separate business unit with a dedicated P&L and the team focused on the category. Women's also continued its great momentum in quarter one with double-digit growth across all regions and channels, outperforming the rest of the brand in every region. We see a big opportunity to serve women in the outdoor differently through pinnacle design and the performance. A great example of our design focus on women's is the Clarkia pants, which has been explosive growth in quarter one, stocking out quickly. We are seeing rising brand awareness and affinity with women in the U.S. and Europe as we have improved fit, style and function. ReBIRD also continues to be one of our priority strategies, which we believe will truly separate us from the marketplace. Our products are long-lived and beautifully paired. We experienced especially strong consumer engagement in all of our locations with the ReBIRD center. At the end of quarter one, we had 25 ReBIRD service centers globally. Lastly, on to Veilance, which we view as the city expression of Arc'teryx. Like footwear, Veilance also now has its own P&L and management team. Our new Veilance leadership is sharply focused on developing the best products, merchandising, marketing and go-to-market strategies to drive Veilance's long-term growth opportunity. For the first time, Veilance will present at Fashion Week in Paris, where the brand was positioned alongside the luxury players and received a very positive feedback from buyers, industry and media. Moving to the Outdoor Performance segment, which delivered an excellent quarter, led by Salomon footwear and apparel. Winter Sports Equipment results were also better than expected. Global brand momentum behind Salomon sneakers is accelerating. Not only is the Salomon footwear franchise continue to grow very well in China and APAC, it's now also starting to impact in both the U.S. and Europe. Our brand awareness has doubled the past couple of years, and we are now seeing very strong momentum in both sport style and our performance lines. Salomon sneakers surplus US$1 billion of sales in 2024, but it's still tiny relative to the US$180 billion global sneaker market. We believe Salomon sneakers have an authentic and unique market position with technical features designed for athletes on a variety of terrains, but also great for everyday use. Our unique style and technical attributes are resonating with consumers at a time when they are more receptive than ever to wearing new sneaker brands. Long term, we expect Salomon soft goods to grow strong double digits annually. In Q1, Salomon footwear and apparel continued its very strong growth in Great China and APAC, while America accelerated and the EMEA continued its solid growth. Direct-to-consumer remains the fastest-growing channel for the brand, and the sport style offering continues to lead footwear growth. In addition to shoes, Salomon apparel, bags and socks are also experiencing great momentum. Our key brand highlights in quarter one was our first ever global footwear launch with XT-WHISPER, a new addition to our sports style offering. This global synchronized launch has been a massive success, and was welcomed with excitement by customers around the globe. We did XT-WHISPER collaborations with Kith and Sandy Liang in the U.S., and have been great results from our WhisperGo campaign in China. On the performance side, we have been very pleased with the launch of the low running shoe, Aero Glide 3, one of the best footwear launched in Salomon history. Aero Glide 3 uses a foam called optiFOAM EVO, which we believe represent a disruptive new generation material, offering the runner a new level of rebound and comfort for running on road or trail. We are also very excited by the GRVL launch this month, a new line that offers consumers a more versatile than ever running shoe that performed great on various types of terrain from pavement to parks and trails. Regionally, Salomon soft goods is continuing to experience great sell-through and solid order books in Europe, both for sports style and the performance. Sell-through for retailers continues to be strong which is translating to healthy growth in our order books. In Asia, direct-to-consumer continued to be the critical growth channel for Salomon. Our Salomon compact shop format, developed in China, works very well, and we believe these stores generate significantly higher sales per square foot versus industry average and continues to improve. We are continuing to expand our compact shop in Great China, opening 22 net new Salomon shops in quarter one, including both owned stores and partner stores, bringing our total count to 218. We are on track to reach near 300 Salomon shops in Great China this year. We believe Salomon has the opportunity to grow to several hundred locations over time in just Tier 1 and 2 cities from only eight stores four years ago. Our new Salomon flagship in Shanghai has continued to perform very well in the first few months. We will open a second Shanghai flagship in August, which will be located in the former French Concession district known for its boutique shopping. In the U.S., we continue to lay the groundwork to support significant future growth, and we are seeing more and more signals that the brand is gaining momentum in the world's largest sneaker market. Our first U.S. store in New York City continues to show incredible traction with our consumers, and the brand is seeing strong buzz with key sneaker retailers across the city. We plan to open three to four more Salomon shops in the great New York area this year as well as continue to expand our presence in key wholesale accounts. Beyond New York, we also focused on San Francisco and Los Angeles as the epicenter market for Salomon sneakers. In addition to the success of Salomon sneakers, our Winter Sports Equipment brand delivered a better-than-expected end of the ski season with strong sell-through at retail, leading to at-once reorders. Moving to Ball & Racquet highlights. We are pleased that the Ball & Racquet growth trends continue to be solid in quarter one, with 12% growth driven by strength in sportswear, racquet sports and golf. Our Tennis 360 continues to resonate very well with consumers from performance racquet to soft goods, especially in Great China. Wilson's performance racquets business continues to shine, including the January launch of the Clash V3, which is off to a solid start. And in pickleball, we are experiencing strong response to our Vesper paddle launch. Wilson Tennis 360 soft goods also continues its excellent growth, nearly doubling in Q1 2025. We have seen very strong response to the Intrigue women's tennis shoe. We also continue to excel in China and will open approximately 50 more Wilson Tennis 360 shops in China this year, including both owned and partner stores, bring the total to almost 100. In North America, the new Tennis 360 concept store in the Dallas NorthPark Mall is off to a very good start. This is also true of our tennis footwear and apparel test in 50 DICK'S Sporting Goods locations where we are selling through better than our competitors. Lastly, we were pleased to see Wilson Golf have a solid improvement in sales and margins in quarter one, led by the DYNAPWR launch this spring, which has received positive reviews in the golf influencer community. With that, I will turn over to Andrew.

Thanks, James. Before I start, I want to take the time to thank our more than 13,000 Amer employees around the world. Our passionate teammates are critical to developing innovative products, engaging with consumers and building our brands for the long term. And they've done an amazing job navigating the ever-changing macro environment with discipline and flexibility. I will discuss tariffs in detail when I provide guidance, but I want to start by saying that we are very confident that our fundamental business momentum, diverse global footprint, clean balance sheet and strong brand portfolio with pricing power will give us significant flexibility and firepower to manage through a variety of tariff scenarios. Let's go through Q1 results first. Amer Sports grew 23% in Q1 on a reported basis and 26% in constant currency. The strong group sales performance was led by both Technical Apparel and Outdoor Performance, while Ball & Racquet also delivered very solid growth in the quarter. By channel, the group continues to be led by DTC, which grew 39%, led by Salomon footwear in Greater China and APAC. We also saw solid wholesale growth of 12% led by Arc'teryx. Regional growth was led by Asia Pacific, which increased 49%, followed by China, which grew 43%, EMEA accelerated to 12% and the Americas also grew 12% in Q1. We continue to achieve very strong growth in Greater China, and there are several reasons why we are doing so well there and are also confident in our future growth in this important consumer market. Number one, our brands compete in one of the high-quality and fastest-growing consumer segments in China, the premium sports and outdoor market. The outdoor trend in China continues to be very robust, attracting younger consumers, female consumers and luxury shoppers. Additionally, our still small specialized brands are known for their expertise, high quality and technical innovation, which resonates with Chinese shoppers. Third and most important, we have a great team in China. Our deep expertise and unique scalable operating platform gives us a significant competitive advantage across the portfolio. Turning to profitability. Adjusted gross margin increased 330 basis points to 58% in Q1, primarily driven by favorable channel, geographic and product mix as well as lower discounts compared to prior year. Going forward, we expect our highest gross margin franchise, Arc'teryx, to continue to be the biggest underlying driver of our ongoing gross margin expansion. Adjusted SG&A expense as a percentage of revenues leveraged by 160 basis points and represented 42.6% of revenues in Q1. Both the Technical Apparel and Outdoor Performance segments achieved SG&A leverage on very strong growth. This was partially offset by slight deleverage at Ball & Racquet due to the ongoing investment in Tennis 360 and DTC growth. Driven by both gross margin expansion and SG&A leverage, we generated 490 basis points increase in our adjusted operating margin from 10.9% last year to 15.8% in Q1 of the current year. Adjusted corporate expenses were $19 million, up from $17 million in Q1 of last year. Depreciation and amortization was $78 million, which includes $36 million of ROU depreciation. Adjusted net finance cost in the quarter was $17 million, which comprised of $22 million of interest expense, partially offset by $5 million of FX gains and other items related to the weakening U.S. dollar. In the quarter, our adjusted income tax expense was $64 million, which equates to an adjusted effective tax rate of 30%, better than expected, primarily due to our over delivery of operating income. Adjusted net income in Q1 was $148 million compared to $50 million in the prior year period. Adjusted diluted earnings per share was $0.27 compared to adjusted diluted earnings per share of $0.11 last year. Turning to segment results. Technical Apparel revenues increased 28% to $664 million, led by Arc'teryx. Growth was fueled by the 31% DTC expansion, including a 19% omni-comp, a very good result comparing against a 36% omni-comp in the first quarter of last year. Arc'teryx DTC momentum continues to be fueled by both new and existing consumers across all regions, channels and product categories. Technical Apparel wholesale revenues grew 22%, driven by Arc'teryx. Although it is a small part of the Technical Apparel segment, it is worth noting that we are making good progress with Peak Performance brand and cleaning up the marketplace in EMEA and the Nordics, shifting to a more full-priced DTC-oriented brand. Peak's healthier core franchise is a solid base for the new President, Stefano Saccone, to lead the brand through the next phase of its journey. Regionally, Technical Apparel growth was led by Asia Pacific, followed by Greater China, the Americas and EMEA. All regions grew strong double digits, fueled by Arc'teryx. Technical Apparel adjusted operating margin expanded 110 basis points to 23.8%, driven by SG&A leverage, thanks to strong growth. Moving to our Outdoor Performance segment, we saw revenues increased 25% to $502 million, driven by strong performance in Salomon soft goods and good results in Winter Sports Equipment. The DTC channel grew very healthy double digits, driven by new storage openings in Asia Pacific and Greater China as well as solid comps from existing Salomon stores. Outdoor Performance growth also benefited from a solid performance in Winter Sports Equipment in Q1, following a slow start to the winter season. By channel, Outdoor Performance DTC grew 68%, led by Greater China and APAC, and wholesale grew 9% from the prior year period. The wholesale results were driven by both Salomon Winter Sports Equipment and Salomon soft goods. Regionally, Outdoor Performance growth was led by Greater China and APAC, followed by accelerating growth in EMEA. The Americas was roughly flat, but only because of the ENVE divestiture in 2024. Salomon soft goods saw very good growth in the Americas. As James alluded to, the popularity of Salomon footwear is inflecting globally, and we are well positioned to appropriately and fully develop this unique opportunity over time. We believe we have very significant growth in all three major consumer regions and have the right talent and team structures in place to take a more meaningful share of the global sneaker market over time. Our Winter Sports Equipment business finished on a high note as a good end-of-season snow helped boost retailer sell-through and reorders. The Nordic or cross country market remains more challenged, but we were able to move a significant amount of inventory at reasonable discounts, leaving us in a very clean position at the end of the winter. Our assumption is that the Winter Sports Equipment market will grow low single digits in 2025 and over the long term. The ski and snowboard industry is healthy and given advanced snowmaking capabilities industry-wide as well as the growing attraction of winter mountain vacations, demand for on-piste skiing is strong. Winter Sports Equipment now represents one-third of the Outdoor Performance Segment and the share is shrinking as Salomon soft goods grows faster. Outdoor Performance adjusted operating profit margin expanded 990 basis points from last year to 14.7% in Q1, driven by strong gross margin expansion, thanks to channel, region and product mix, as well as favorable product costs. This margin expansion was also driven by SG&A leverage on high growth. Moving to Ball & Racquet. Revenue increased 12% to $306 million, driven by soft goods, racquet sports and golf. The strong growth was also helped by easier comparisons from Q1 last year when Wilson was still going through some liquidations to normalized inventory levels. We are pleased with the continued rebound but we would caution that double-digit growth is not sustainable long term, and we continue to expect Ball & Racquet to grow low to mid-single digits long term. By category, the growth was led by soft goods, which now represents 10% of Ball & Racquet sales in our marquee racquet sports franchises. We continue to see very strong momentum in Tennis 360, especially in North America, Greater China and APAC. Golf achieved positive growth, thanks to a successful DYNAPWR product launch as well as improving sales in pro golf clubs. Inflatables and baseball were both roughly flat as baseball bats returned to growth, offset by softer ball glove sales. All-in racquet segment adjusted operating profit margin increased 270 basis points to 6.6%, primarily driven by higher gross margin, thanks to favorable product mix, channel and region mix. We had slight SG&A deleverage due to the continued investment in Tennis 360 and DTC. Turning to the balance sheet. We ended the quarter with $515 million of net debt, down from $591 million at the end of Q4. Using the midpoint of our 2025 adjusted operating profit guidance, our net debt to adjusted EBITDA ratio was approximately 0.5 times at the end of Q1. Following our $1 billion equity raise and debt paydown last December, our balance sheet is in a healthy position to support our company as we navigate tariffs and other external uncertainties. Looking forward, using excess cash to pay down debt, which carries non-deductible interest remains a high return usage of excess cash. We also exited the quarter in a solid inventory position, up 15% year-over-year, well below our 23% sales growth. Driven by strong profit growth and disciplined working capital management, we generated $164 million of operating cash flow in the first quarter of 2025. And for the full year of 2025, we expect to generate solid operating cash flow growth from the 2024 levels. Now, moving to tariffs and guidance. There are several factors that give me confidence that we are well positioned to manage through a variety of tariff scenarios, both near and long term. First, we have low exposure to the U.S., only 26% of revenues, and we enjoy a meaningful exposure to high-end consumers. Also, the high functional nature of our products creates personal engagement and a strong value equation for consumers. Thirdly, we believe the brands in our portfolio have significant untapped pricing power. The vast majority of our growth the last several years has come from more units and not higher prices. Lastly, our clean balance sheet and strong cash flow dynamics give us the financial flexibility to weather macro challenges as they arise. Given the upside in the first quarter and our continued operating and financial momentum and despite higher tariffs, we are raising our full year revenue and EPS expectations. This updated guidance assumes the current 30% tariff on goods arriving to the U.S. from China and 10% tariffs on goods coming in from Rest of World will stay in place for the remainder of 2025. Given the mitigation strategies we already have underway, we expect the impact to our P&L from higher tariffs to be negligible this year. Our updated guidance implies slower growth in the second half than in the first half. However, as we've said before, should strong trends continue and better-than-anticipated demand materialize, we believe we will be well positioned to deliver financial performance ahead of these expectations. Looking beyond 2025, we are confident in our ability to offset the vast majority of higher import tariffs under a wide range of scenarios through pricing, vendor renegotiations and supply chain maneuvers. Since the ultimate tariff outcome is still unknown, we thought it would be helpful to frame our U.S. sourcing exposure. In 2024, U.S. revenues represented 26% of group revenues. Sourcing from China to the U.S. was approximately 8 points of the 26%. Vietnam was also 8 points, rest of Asia was 6 points, Europe 3 points, and the Rest of World, 1 point. By brand, slightly more than half of the tariff exposure is in the Ball & Racquet segment, around 30% in Technical Apparel and the remainder in Outdoor Performance. All three segments, including Ball & Racquet are already implementing and executing measures to offset higher tariffs. In addition to partnering with vendors, retailers also understand the landscape and price increases are being accepted and implemented in the second half for those product categories most affected. One last perspective I want to share on tariffs. Even if the higher tariffs had remained in effect for the rest of the year or if they do return, i.e., China at 145% and Rest of World at the higher rates from before the 90-day pause, we were only anticipating a $0.05 impact from tariffs for the full year 2025 EPS after mitigation or approximately 100 basis points annualized. And over time, we believe we will be able to mitigate the majority of even the higher tariff rates. For the full year of 2025, we are raising our expectations for reported group revenue growth from 13% to 15% to 15% to 17%. We are now assuming a 150 basis point drag from unfavorable FX impact at current exchange rates compared to the 250-point drag incorporated in our prior guidance. We are raising our Technical Apparel revenue growth guidance from approximately 20% to 20% to 22%, Outdoor Performance from low double digits to now mid-teens, and Ball & Racquet from low to mid-single digits previously to mid-single digits currently. We are keeping our adjusted gross margin expectations at 56.5% to 57% for the full year. We are maintaining our adjusted operating margin guidance of 11.5% to 12%. For the segments, we continue to expect an adjusted operating margin of approximately 21% for Technical Apparel, approximately 9.5% for Outdoor Performance and 3% to 4% for Ball & Racquet Sports. You should assume full year net finance cost of approximately $120 million and an effective tax rate of 30% to 32%. Other operating income and non-controlling interest will be approximately $10 million each. We now expect adjusted diluted EPS of $0.67 to $0.72 versus our prior guidance of $0.64 to $0.69, which is based on approximately 560 million fully diluted shares. Also, we are assuming D&A of approximately $350 million, including approximately $180 million of ROU depreciation. CapEx is expected to be approximately $300 million, primarily to support new store expansion, ERP optimization and distribution and logistics investments. Turning to the second quarter. We expect reported revenue growth for the group in the range of 16% to 18%. We expect adjusted gross margin to be approximately 57% to 58% in Q2 and adjusted operating profit between 3% and 4%. Our net finance cost for the quarter should fall between $25 million and $30 million, and the effective tax rate should be 30% to 32%. We expect adjusted diluted EPS of $0.00 to $0.02 per share. As we've said in the past, should strong trends continue and higher-than-expected demand materialize, we will be well positioned to deliver financial performance ahead of these expectations. With that, I'll turn it back to the operator for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Matthew Boss from JPMorgan. Your line is open.

Thanks, and congrats on another great quarter. So James, on your broad-based strength, as we think about the competitive advantages, could you walk through operating from a portfolio approach in this backdrop and just what that provides? And then, brand specific, could you elaborate on momentum at Salomon and white space you see to scale this brand? And Stuart, on Arc'teryx, any change as we think about the omni-comp strength into the second quarter relative to high teens you saw in the first quarter?

Okay. Thanks, Matt. Okay. First of all, I will say Amer Sports is really a unique portfolio company, sporting goods company from a very unique portfolio of brands in the market. So, we are different from other sporting goods companies. So, all the brands we own, they all got a distinguished proposition in the markets and with a very strong high technical product pipeline offered to the market to adjust the different level of the sports participants needs. So, I think this kind of a unique proposition gives us a very strong competitive edge in the market. And also, especially on the premium segment, outdoor categories, we really see a strong demand in cross-border in the world, especially in Asia and China and more and more consumers participating in outdoor activities. And our products, Arc'teryx and Salomon really address the strong demand from the market. So, we feel very good on our overall proposition today in the markets. On the other side, really look at the Salomon in Q1 results. And we are also really happy to see our soft goods business growing from Salomon brands and especially on footwear, okay? So, we created a new category we call the modern outdoor sneakers, which really address very special needs in the market. This kind of a unique position help us to attract kind of new groups of outdoor levers, I mean, especially for female -- younger female consumers group. So, we create the right base and very unique on our sneaker markets. And we received tremendous positive feedback, not only from Asia Pacific, but also in Europe and the U.S. at the starting base and the people are looking for the kind of attractive offers to the market, and they really enjoy the products we offer to them. We call it real technical products with very nice designs to address the kind of the needs for our consumers for both on the sports activities and also the lifestyle environment. So, I think it's a quite unique position. And we see a very -- we also see a very strong runway for that. Stuart, you also can comment on the Arc'teryx side.

Yeah. Thanks, James. Yes, Matt, the comp in the quarter was really solid, plus 19% omni-comp. That's comparing against a 36% last year. That is the highest comparison that we'll have in '25. The comp comparisons moderate for the balance of the year. And I would just add, it was a traffic-driven comp, we had really strong solid conversion, but the upside is really driven from traffic increases, which we think reflects the momentum of the brand and just the investments we've made in community and brand marketing and the expansion of our store fleet. And the brand stores continue to perform well. We're seeing expansion in productivity across every region. We're really pleased with how our stores are performing. Also pleased with the traction that we're seeing in e-commerce. So, the -- every signal from the market is positive. And yeah, we're excited for what the balance of the year looks like. The only thing I would say is in the first quarter, there was a drag on the omni-comp as it relates to our outlet sales. Our outlet sales were lower in both China and North America as we had a stronger full price business, and we chose to pull back on how much inventory we're pushing through our outlets. So, we view that as a very positive factor. It speaks to the high-quality full-price nature of our business that we want to continue to increase.

It's a great color. Best of luck.

Your next question comes from the line of Brooke Roach from Goldman Sachs. Your line is open.

Good morning, and thank you for taking our question. It sounds like your confidence in broad-based growth for Salomon is growing. Are there any technical reasons that attributed to the outsized growth in 1Q, or do you believe that the momentum observed in the quarter is sustainable? As you look on a multiyear horizon, what margin profile do you think that this business can achieve? Thank you.

Hey. Thanks, Brooke. It's Andrew. Yeah, I, mean we are on track and doing what we had always set ourselves up to do. I mean to your question around, do we believe it's sustainable? I mean we've raised our guidance for the full year as it relates to Salomon Outdoor Performance. So, we're pretty excited about it. We always understood that we had great product. We obviously had to operationalize our commercial go-to-market strategy, get our teams in place. You saw the brand really driving momentum in Asia Pac and Greater China, and it's continuing with both of those regions up over 60%. In Europe, you continue to see the brand picking up momentum there as well. And it's outside of not only our performance, but as well as our sports style and we're doing more with our key strategic partners. We talked about this kind of in May of last year, signing up some key strategic partners that we're able to do more with. And then, as you move regionally to North America, that continues to be our less mature market, but we definitely have the leadership team in place and we are starting to penetrate key accounts that we'd like to continue to see the brand -- see the brand continue to grow it. But as we talked about, I mean, our DTC is a leading indicator for what we think that brand can do and the conversion there and the attachment to the consumers is pretty strong. So we're excited about what we see for Salomon footwear.

Great.

Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.

Oh, good morning. Thank you very much for taking my question. I'm going to be the third person to ask about Salomon. You've raised out our performance category to grow mid-teens for FY '25. With winter goods, I think, Andrew, I think you said you guided to grow low single digits for this year. Is it fair to assume that it implies that soft goods can grow 20% this year? And longer term, James, you called out that sneakers -- Salomon sneakers reached $1 billion in sales last year. You mentioned it's still tiny relative to the market. Can Salomon sneakers double over the next five years?

Yeah. So great question. I appreciate it. We've not necessarily given specific long-term growth targets. But what I will say is that we have a great product. You can see the margin profile of Salomon footwear, Salomon soft goods, really starting to inflect. We talked about the fact that as soft goods within the Outdoor Performance grows, you're going to see margin accretion, which you saw strong margin accretion, the gross margin in the first quarter and even operating margin. And operating margin, up almost 1,000 points in Outdoor Performance, two-thirds of that was in gross margin, about a third of that in SG&A, which continues to speak to the fact that as we over deliver top line, you have a really strong effect coming down to the bottom line. The $1 billion that Salomon is, that's $1 billion on a $180 billion sneaker market. And we believe that we have the product, we have the same and that can disrupt and take meaningful share within this business -- I mean within this market. So we're excited about it. Again, you'll continue to -- you saw the margin inflection as we grow that soft goods business. And we believe that, that margin inflection reflects the longer-term profile that we will continue to benefit from.

Very helpful. And maybe just a follow-up question on housekeeping for the model. Andrew, you're maintaining your gross margin for the year. But underlying, I think you talked about 100 basis points on an annualized basis, the impact from tariffs. Maybe just unpacking a little bit like under the hood, what are the moving pieces versus 90 days ago? Is it like 50 bps from tariffs and then 50 bps just better performance in the overall business?

Yeah. Thanks for the question. Just -- let me just kind of reiterate some of my prepared remarks on tariffs. Our assumptions in -- for 2025 guidance is that the 30% tariff on China and 10% Rest of the World remain in place. The burden on our 2025 P&L is negligible. We have -- after our mitigation initiatives, I thought it would be prudent to kind of contextualize had the higher tariffs stayed in place or if things go backwards, i.e., China at 145%, Rest of World at 30% and 40%, that's where the 100 basis point annualized drag would come from. So over time, we believe that we -- the levers that I talked about, whether it be pricing, re-resourcing, vendor management that over time, we could neutralize the 100 basis point drag. So, when you look at our gross margin for the remainder of the year, we -- obviously, we had a strong first quarter. There is a meaningful amount of uncertainty still left in the market. And we believe that the guidance for the rest of the year is prudent, it's responsible, given the uncertainty that's out there. But like I said, I mean, we felt convicted and confident in our mitigation initiatives. And from a bottom line perspective, the impact on tariffs based upon where tariffs stand today is negligible.

Your next question comes from the line of Alex Straton from Morgan Stanley. Your line is open.

Hi. Thanks for taking the question. This is Chad Britnell on for Alex. I'd like to touch on Ball & Racquet. My first question is on store growth of 189% in the quarter. What portion of those store openings were in China? And how do you think about the sustainability of Wilson store openings beyond 2025 in the region? And then, my second question is on Ball & Racquet profitability. You saw a nice improvement in margin in 1Q. What pushes margin back to the mid-single-digit levels or beyond that you've seen in previous years? Thank you.

Yeah. So, the store growth related to Ball & Racquet is primarily -- all of that has been -- mostly all of that is in Asia and Greater China. So that's where you see the store growth. Remember, that's an environment that is very receptive to the mono-brand retail format. It works very well. Our team is very astute at running that, and that's what your -- that's the store growth that you see. From a profitability perspective, I think what gets us back is continuing to scale our investment. We are investing in our Tennis 360 concept. We believe that we have the authority to play there, and we will continue to drive that business. And so, what's happening is once you see that reach scale, then you'll start to see the profitability and Ball & Racquet return. So, yes, so we're excited about the direction that we're going in.

Your next question comes from the line of Michael Binetti from Evercore. Your line is open.

Thanks for taking our question here. I'll add my congrats on a nice quarter. Maybe, Stuart, just another way to ask you about the omni-comp, the 19% in Technical Apparel. I know it slowed a little bit from last quarter, but you mentioned the big comparison from a year ago. You mentioned the outlet pullback. I'm wondering if you could speak to whether there was any pull forward or change in the cadence of important product launches for the winter and maybe the progression of how you see that comp evolving through the year, including like impactful launch -- cadence of impactful launches for the brand for the rest of the year. And then, I'm just curious on the comment that we're going to close some Arc'teryx partner stores in China to open larger format. Can you just talk about the strategy there from an ROI standpoint? Obviously, partner doors are probably capital-light to run. Maybe just walk us through the opportunity or what the financial prize is for investors as you shift to a larger format. Thanks.

Yeah. Thanks, Michael. So yes, I think it's a good call out on the product and how it influences just revenue broadly, and that's obviously reflected in the omni-comp. We're very confident in the outlook that we've shared for the year that Andrew described. We've made improvements in our in-stock positions across a number of categories, footwear in particular. We've seen a stronger position as we entered the year. We learned a lot from last year. We were really excited to see strong footwear trends in the first quarter. Our footwear was up 41% on top of the launch of the three new models last Q1 with the success that we're seeing now in the Norvan LD 4, which was up 163% to plan as part of the launch. That's easily our largest footwear model. Vertex Speed was also very successful in the first quarter. So that will continue to be an important part of the growth story, still leading our product category growth. We'll have a couple of new model launches later in the year, the Konseal approach shoe and the [indiscernible] trail shoe, and the Kragg also continues to be a hot model as well. So, much better positioned from a footwear standpoint. Where we've seen continued exciting demand, the Gamma franchise, in particular, we really haven't found the edge of demand yet for the Gamma. It actually moved up. It's the second largest franchise behind the Beta now for us. And so, it's exciting to see the momentum in the Gamma. It's a great product. It's versatile. It works in many different climates. We think this has a lot of room to continue to expand and importance in our overall assortment. As I said, we're fighting out of stocks in the Gamma. We see that as potential into the future. And our women's business was up 38% in the first quarter, second behind footwear. We're seeing great momentum there. You heard James mention the success that we saw in the women's pants, the Clarkia pants in particular was up more than double in the first quarter. We're chasing demand there as well. So, success in our women's strategy. And overall, we did see some out of stocks also in the first quarter in certain hard shell jackets that we just didn't buy enough into. So, overall, I think our in-stock is better this year than last year, but opportunities in the areas I just mentioned. Shifting to your other question around partner doors in China, that continues to be an opportunity for us to elevate the execution in China, to move to better locations that better represent the premium nature of the brand, expanding the square footage when we do that. So, we see this as a theme of higher quality execution and upside as we convert those from essentially a wholesale to an owned location. You get multiple layers of benefit in terms of larger store, more productive, better execution and then just the accounting of going from wholesale to own. So, that's a theme that we'll have for the next few years actually in China.

Okay. Really helpful. Thanks, Stuart.

Thanks, Michael.

Your next question comes from the line of Jonathan Komp from Baird. Your line is open.

Yeah. Good morning. Thank you. Andrew, I want to follow up on the full year outlook. When you look to the second half of the implied performance, it looks like limited profit growth and a margin decline that's embedded. So, I just want to ask how you're embedding after a pretty strong start to the year here versus a prudent approach to forecasting and some of the assumptions you've made?

Yeah. Thanks for the question, Jonathan. First quarter was strong. And as I look through -- as we look through how we're trending out, we can -- the trends continue to be strong. That being said, like I talked about, there is a meaningful amount of uncertainty out there. We believe that focusing on the things that we can control are -- is really important. As you know, the macro uncertainties with not only the tariffs, but what could go on in the environment. We're focused on the things that we can control. We believe that we put a guide out there that's really responsible, that puts more things that are controlled than the macro. And if the macro should turn sour or some things that we are not anticipating out there, we believe that we'll be able to navigate multiple scenarios out there. So, our guide infers a slowdown, our guidance for the slowdown in the back half, and we believe that, that is responsible, given the amount of uncertainty that we cannot control.

Okay. Understood. Thank you. And just one follow-up on Salomon. The wholesale business there, I know had been negative for some time and just recently turned positive. So, just any further color on the visibility you see in wholesale given the accelerating overall momentum? Thank you.

Yeah. Jonathan, the Salomon wholesale business is mainly driven by our core region, which is Europe, okay? So, it's the last region for our Salomon footwear business. And we saw a great momentum also at the beginning of the year in terms of our sell-through in the various channels in Europe, okay, and which give us very strong confidence for our retail partners. So -- and the reorder also accelerated in the first quarter. So -- and also our future order booking also see a very positive movement for the second half of this year. So, it's very encouraging. And also that kind of a trend we believe will carry on because based on our new product offers to the market for both sports style and sports performance products, it's really resonating the market trends and also give us a good level of confidence for our partners.

Yeah. I will just double down in on that. If you think about sports style as an example, our XT-WHISPER, sports style is always a strong franchise. Our XT-WHISPER was the most successful sports style launch within that franchise. Similarly, our Aero Glide 3, just a very, very successful launch in our performance category. So, not only are the strategic relationships and the wholesale relationship getting stronger with the brand in Europe, but also the franchises are resonating extremely well with consumers and giving us momentum and confidence to go forward.

Operator, we have time -- since we went over on the tariff commentary, maybe time for a couple more questions. Thanks.

Certainly. Your next question comes from the line of Jay Sole from UBS. Your line is open.

Great. Thank you so much. Stuart, maybe can you elaborate a little bit on the opportunity in the women's business? James made some comments that, that business was really growing nicely. Can you just maybe talk about what you've learned in the last 90 days and what kind of potential you see long term for the women's business in Arc'teryx?

Yeah, it's -- we really see this as a strong growth driver for our business. We're underpenetrated in women's as we have focused on improving our color, our fit and our choice for our female guests. We're really seeing traction. And the colored investment in the first quarter really paid off. We saw a much stronger color presentation and higher sell-through as a result. I mentioned the Clarkia pants, which has been a runaway hit for us with our women's assortment and excited to chase that. It really could be exponential growth for us as we crack into a part of the assortment that's really a new add for us. The Gamma was really successful in women's as well as men's and that's sort of right in our wheelhouse in outerwear and something that we've been able to find a fit and a model design that really appeals to our female guests. And something I would add is, we had -- you heard James mentioned our Mammoth academy in California. This was a huge success, and we saw 49% of the participants in that were women. And over 70% of the content that we generated coming out of that was aimed at our female guests. So there's just -- there's a lot of momentum, not only from a product category standpoint, but also just as we're building community and engaging with our female guests. We see this as a huge potential to have a more balanced business. Ultimately, we see the potential to see our guests 50-50 between men's and women's. So, it's something that we feel we have good momentum, as I said, 38% growth in women's in the quarter, second only to footwear, and we expect that to continue.

Got it. Thank you so much.

And that concludes our question-and-answer session -- I'm sorry, we'll have our last question from the line of Paul Lejuez from Citi. Your line is open.

Hey. Thanks, guys. Curious if you could talk about your AURs in the Salomon footwear business and just where within that assortment, you're seeing the greatest strength and growth? And then, second, curious if you saw on the air pockets over the last several months in any of the businesses just tied to all the tariff news? And if so, which segments, which regions? Thanks.

Paul, you're a little -- coming through a little bit muffled. Can you repeat? The first question was about Salomon AUR. And the second half of the question?

Yeah, Salomon AUR, just where within the assortment you're seeing the greatest strength and growth?

Yeah. With regard to the greatest strength and growth, I mean, we believe that both our performance category and our sport styles category are very strong. From a growth perspective, we continue to see sports style as the biggest growth driver. Performance is more mature, but sports style is the biggest growth driver. Now, what I will say is that the -- even within the performance category, our GRVL franchise, which both has a running and a GRVL platform were very, very, very successful launches. So, we're super excited about sports style as a category. We're super excited about GRVL and running as a performance within our performance section. You talked about our average units at retail. I mean we haven't given that information. But what I will say is that our -- both our AOV and our ASPs are picking up with both of these franchises and going in the right direction.

And Paul, there was a second part to your question related to tariffs. Did I hear that right?

Yeah. Just curious if you saw any air pockets over the last several months in any of your businesses just tied to the whole tariff news?

No. We -- as we said, we're -- we continue -- broad-based strength across the portfolio that you saw in the recent quarters and especially this most recent quarter continued so far. So, I don't know that we're going to be the leading indicator on the macro, but we haven't seen any air pockets yet.

Thank you, guys. Good luck.

Thank you.

And that concludes our question-and-answer session. I will now turn the call back over to management for closing remarks.

Thanks, everyone, for joining. Look forward to reconnecting in 90 days for our second quarter results. Have a great week.

This concludes today's conference call. Thank you for your participation. You may now disconnect.