Looking Back on Operational Results for the Second Quarter (cumulative) of Fiscal year Ending March 2014
For the second quarter of the 101st period, net sales was 88,263 million Yen (8.5% increase from the same term last year), with ordinary income 2,227 million Yen (14.2% decrease from same term last year, resulting in a net income of 1,325 million Yen (22.1% decrease from same term last year).
This term, due to the consolidation with Senoh Corporation as well as the steady performance in the Americas, net sales saw revenue growth. However for profits, due to increases in production costs mainly with overseas production, the gross margin percentage decreased, which led to a fall in profit.
By product category, with our footwear, our running shoes sales continued to show strong global performance. Furthermore, walking shoes in Japan, and indoor shoes in Europe both increased their sales for an overall sales increase.
Apparel in Japan showed its strength in sales performance with baseball apparel as well as our compression underwear "BIOGEAR." However, our highly versatile multi-training wear showed sluggish sales which led to a marginal change overall.
For equipment, although golf club sales declined on one hand, baseball products showed steady performance. In our services/others category, in addition to the consolidation with Senoh Corporation, new contracts were signed for designated facility management, leading to a large growth in sales.
Operating Results in Japan
With the increase in revenue due to the acquisition of Senoh Corporation, sales in Japan were 61,683 million Yen up 1.7 % compared to the previous year.
With the shrinking baseball market, baseball products showed marginal growth. However, with the running boom remaining strong, our new running shoes "Wave Rider 17," positioned as our most strategically important product, was accepted by runners for its product performance and assisted in increasing our sales.
Additionally, for walking shoes, their comfortable fit gained support from a wide range of users centered on the active senior demographics, leading to successful sales.
For golf products, our new fitted golf shoes "GENEM," (a size-recommendation system where the user's feet width is measured) showed solid performance. However, golf club demands remained sluggish, straining our sales efforts.
Our designated management business, which receives outsourcing of management and operational services by the government for public sports facilities obtained contracts for new facilities increasing our sales.
International Operating Results
Sales revenues in Europe increased 3.5% from the previous year on a local currency basis.
In the European market, the golf market remained stagnant, which in turn led to sales struggles for golf products. However, the continued excellent condition of running shoes as well as indoor sports shoes including volleyball and handball contributed in boosting sales.
In the Americas, sales rose 8.3% on a local currency basis from the previous year.
With the existing healthy running market, we promoted strengthening our sales and marketing tactics not only with specialty stores but also with major sports retailers.
As a result, running shoes sales in both North and South America were in excellent condition, contributing to the increase in revenue as a whole.
In Asia and the Oceania regions, sales revenues increased 14.4% on a local currency basis from the previous year.
In Taiwan and Australia, sales have increased centered on running shoes leading to increased revenue. However, in the Chinese market, the unresolved excessive supply of products by competitive companies and the intensifying competition from fashion brands led to continued difficulties.
Running Shoes "Wave Rider 17"
Our Efforts for Future Growth
In an effort to further enhance our global expansion, we established not only Mizuno Italy in January 2013, but also successfully started Mizuno Korea in July 2013.
Taking full advantage of these locations, we will develop products and marketing strategies that match each country's regional characteristics.
Also, during the 22nd Winter Olympic Games (2013/Sochi) scheduled in February 2014, our products will be provided to the Japan National Team as well as to each competition to further increase saturation and value of the Mizuno brand globally.
Chosen to host the Tokyo 2020 Olympics/Paralympics, we forecast a future with increased interest in sports, even in the significantly matured Japanese sports market.
With this background in mind, we as an integrated sports manufacturing company hope to contribute in stimulating the sports market by providing a total package of product, place, and service. Furthermore, in response to the dwindling birth rate and aging population that will further progress in the years to come, we will apply the technology acquired over the years developing sporting goods to expand our product line specifically for the general public.
Mizuno Shop in Korea
22nd Winter Olympic Games (2014/Sochi)
official clothing and bags for the Japan National Team
Forecasts of full-year results for the financial year ending March 2014
Based on our performance up to the second quarter as well as our current business condition, revisions have been made to our full-year operating results for financial year ending March 2014 as follows:
The main factor for this forecast revision is due to increase in production costs, the stagnant golf market, and excessive supply in the Chinese market. We are currently advancing our efforts for a swift resolution of these challenges.
In the golf business, the European golf market remains and continues to shrink, and though the Japanese market is showing signs of recovery, it has not reached a point where conservative purchasing can be resolved. Hereafter, we will flexibly respond to the directions of the market and proceed to review our profit structure.
In regards to business in China, we estimate lengthy turbulent market conditions such as excessive distribution inventory, and are also taking action for fundamental business reforms.
For the rise in production costs, we are making cost reduction efforts by consolidating our raw materials and re-examining our designs.
Though we remain in a difficult business environment, we aim to further expand our future business and will continue to push forward to resolve our business challenges and reinforce our business infrastructure.
As mentioned above, our operating results for the second quarter of fiscal year ending March 2014 were regrettable. However, the spirit of this year's slogan, "Make it Simple!" will be reconfirmed as we take quick and thorough measures that give us direct results. It is our duty to achieve our corporate philosophy which is "Contributing to society through the advancement of sporting goods and the promotion of sports," and we believe this is a way to contribute to not only our shareholders, but to all of our stakeholders as well. Therefore, Mizuno will be exerting further efforts and would greatly appreciate your continued understanding and cooperation.