WHAT IS ASICS?
Since its founding in 1949, the ASICS Group has been committed to nurturing the world’s youth through sports in order to contribute to society. Starting with the launch of basketball shoes in 1950, we have developed products with innovative materials and structural designs by scientifically analyzing human movement and the specific characteristics of each sport, from tennis and volleyball to baseball and rugby. As a result, our products have won the support and trust of elite athletes and citizen runners worldwide and have enhanced our brand value.
Over the past 70 years, we have continuously harnessed our expertise and technology to continue creating innovative technologies, products and services for all areas of life.
In the fourth quarter of FY2018, the Company adjusted and reassessed its domestic and overseas assets as part of a business restructuring program, recording extraordinary income of ¥1.3 billion and extraordinary losses of ¥24 billion. As a result, the Company reported net losses of ¥20.3 billion for FY2018. Excluding extraordinary losses booked as a result of adjusting overseas staffing to appropriate levels, extraordinary losses for business restructuring did not lead to an outflow of cash, resulting in no impact on the financial position of the Company.
The Company expects the booking of these extraordinary losses to lead to an improvement in operating income of ¥4.3 billion in FY2019. As a result of the consolidated net loss, no bonuses were paid to the Company’s Directors and Executive Officers. We view these results seriously and intend to rapidly step up the pace of business reform.
OUR STRATEGY ACTION PLAN
We released Action Plan in August 2018 and announced new organizations and personnel changes the following October to rapidly put Action Plan in motion. We have created a new business structure based on product categories, which brings the current functional units under an organization aligned with the new categories. The headquarters have even more profit/loss accountability than before and are tasked with promoting profitable growth as an entire Group, together with subsidiaries. Due to the challenges of making the shift immediately in all categories, we began by making the strong-performing Onitsuka Tiger Division an independent business division, which serves as a kind of in-house company. This is our first move toward category-based management and organizational administration that integrates production and sales. Leading categories will be given considerable discretion to advance their businesses, providing a model for other categories to follow.
When we formulated our business plan for 2019, we conducted discussions with each executive responsible for categories, subsidiaries, management sections, major related companies and other units. During the meetings, we reviewed our performance in 2018 and carried out detailed discussions about our 2019 plans. To ensure the product-based management structure functions well, we conducted the meetings with the aim of encouraging each product category and subsidiary to accurately align their targets. We believe the meetings succeeded in having all attending parties hold close mutual discussions.
Leading categories have been given targets to work towards. Our role as management will be to continually monitor progress towards those targets, take necessary measures as needed, and establish a system to promptly respond to situational changes.
Also, in line with the objectives of Action Plan, we will step up efforts in each of the following priority areas by targeting resources on growth fields and improving profitability.
1) Focus on the Performance Running market in the U.S.
The U.S. is a world leader in sports, including running, and a country that has important impacts on the rest of the world, with new lifestyles emerging there. Recognizing that the U.S. market is our largest and most important market, we will devote even more resources of the headquarters function to attract serious runners to our products. The category division of the headquarters will establish partnerships with key U.S. retailers with strong market positions and work to further increase market share. Starting in 2019, we are renewing our focus on grassroots activities on a global scale. In addition to making and selling products, we will share the pleasure and joy of sports with many people by organizing running and sporting events in various regions. Our hope is to increase the number of ASICS fans through such activities.
2) Accelerate growth in the Chinese market
ASICS sales in China continue to grow at a double-digit pace, supported by a growing number of new marathon events amid rising interest in healthy lifestyles. While China is still a promising growth market, the market is drastically changing and experiencing unique trends. The transfer of additional headquarters functions to Shanghai will support rapid decision-making and ensure we capture growth in the expanding Chinese market. Our goal is to increase market share at a pace that exceeds market growth. Also, we will accelerate growth by strengthening relationships with major online retailers in China and by utilizing China’s unique digital environment such as local SNS.
3) Develop the digital business as a new growth driver
To take aggressive action in this promising field under an integrated system, we have decided to concentrate our digital strategy-related functions at ASICS Digital in Boston, which has been tasked with accelerating the digital business. We will promote our new membership program OneASICS™, which launched in Europe and Japan in 2018, by utilizing all consumer touch-points such as our own retail, websites, e-commerce, apps and other channels. By using purchase history and activity data from the OneASICS™ program, we will develop personalized marketing and omnichannel marketing systems and roll them out in each region. Moreover, we aim to increase e-commerce sales.
4) Convert the apparel business into a profitably growing business
In the apparel business, which continues to struggle, we need to rigorously manage profits to ensure we achieve our goal of making the business profitable by 2020. We will establish frameworks for planning, designing and selling our products in line with customer preferences and trends, as well as the characteristics of sales channels in each region.
In addition to stepping up efforts to improve profitability in the above priority areas, we will introduce exit rules for each country, region, store and category. We will also pursue profitability thorough retail profit/loss management and convey the ASICS culture from retail. In addition, we will improve business operations and implement cost structure reforms.
METARIDE™, launched at the end of February 2019, are the most innovative ASICS running shoes to date and come packed with ASICS-developed technologies. METARIDE™ illustrate how ASICS consistently works to offer cutting-edge, premium products and services. ASICS needs to release new products equipped with new technologies. Going forward, we will continue to research and develop innovative new products and services and work toward our goals in each priority area.
To support the Group’s sustained growth, we will also focus on training and developing human resources. Our hope is that ASICS will become a leading company in environmental and social initiatives, in diversity and inclusion – where we currently devote significant energy – as well as in work styles. We want to see work styles with productivity high enough for us to beat the competition in the global market and to make ASICS a company where the best talent from around the world want to work.
2020 is set to be a very important year for ASICS, so we plan to move onto the offensive in 2019. We therefore need to strike the right balance in business management.
Firstly, we plan to accelerate strategic marketing investment to drive growth in 2020. In 2019, we plan to increase spending on advertising by ¥5 billion compared with 2018. Spending will be targeted on the performance running category, mainly through digital marketing. We will increase brand value by raising brand profiles and giving consumers more opportunities to experience our products, while also increasing the visibility of our brands online. In frontline sales areas, we will invest in e-commerce to link with our OneASICS™ program and work closely with leading business partners to promote our products.
Meanwhile, to increase profitability, we will continue to improve business operations and control the SG&A expenses ratio.
In addition, we will continue to build constructive relationships with all stakeholders to increase corporate value and ensure we secure and retain the trust of shareholders and all other stakeholders.
Sustainability has always been fundamental to the way we do business at ASICS. We aim to include sustainability considerations in every aspect of our business. That includes the wellbeing of our customers, reducing the environmental footprint of our value chain, promoting fair and safe working conditions at our supplier partners, and supporting our employees and the community.
At the 65th Ordinary General Meeting of Shareholders in March 2019, we obtained shareholders’ approval to introduce a compensation plan by which we grant our shares with transfer restrictions to Directors (excluding outside Directors), in lieu of the current stock compensation-type stock options. This new compensation plan is designed to create further common interests with shareholders and provide Directors with incentives. We continually aim to raise corporate value and realize expeditious and highly transparent management conducive to a company like ASICS. As part of this, while working on the development of business management systems, we will strive to further enhance the supervisory and audit functions of corporate management and internal control, ensure rigorous compliance, improve management transparency and take other steps. To further reflect the viewpoint of shareholders into the management.
We appreciate and look forward to your continued understanding and support.
Chairman and CEO, Representative Director
President and COO, Representative Director