ASICS’ Strengths
From the earliest days of the Company, we have consistently innovated across a wide range of fields, leading to the creation of numerous standout technologies. Starting with the launch of basketball shoes in 1950, ASICS has grown to become a sporting goods manufacturer favored by athletes around the world. That success has been built on our commitment to athlete performance. By scientifically analyzing human movement and the specific characteristics of each sport – from elite athletes to casual runners and in sports ranging from tennis and volleyball to baseball, football, rugby and leather walking shoes – we have developed products with innovative materials and structural designs that have won the support and trust of athletes worldwide. We are harnessing that expertise and technology to continue creating innovative technologies, products and services for all areas of life, not just sport, driven by an unwavering desire to make the world a better place.
Revising AGP2020 to target sustainable growth
Two years have passed since we created our FiveYear Strategic Plan, ASICS Growth Plan (AGP) 2020. However, progress towards the plan’s 2020 targets has been extremely challenging.
The main causes have been a shift in consumer preferences that started in the U.S. and rapid changes in channels. In consumer preferences, we have seen a shift from people passionate about running, which was one of our strengths, to greater interest in sport as a fashion statement, with more people, especially younger consumers, selecting sports shoes and apparel as casual wear. In high-performance running shoes, our brand presence has weakened due to a slowdown in the market itself and a blurring of the boundaries between sports and fashion. In retail channels, there has been a dramatic change in consumer purchasing behavior from physical retail stores to eCommerce, leading to a growing number of bankruptcies in brick-and-mortar stores. In the U.S., we implemented several measures to address those developments, such as restructuring our sales organization to strengthen links with major retailers and improving our distribution network for highperformance products, but these efforts are yet to yield results. As a result, net sales over the past three years have stalled at around ¥400 billion. Furthermore, we have not been able to hold down rising selling, general and administrative expenses while failing to reach our sales targets, leading to lower profitability.
To break this negative cycle, we have revised our sales targets as an initial step, and we aim to increase earnings by allocating marketing investment, personnel and other management resources in the growth fields. We will also reinforce the importance of profitability in each business division, reviewing products, sales methods and processes to build the foundations for further growth.
After revising the AGP2020 targets, we are now aiming for ¥500 billion or more in net sales, average annual sales growth of 7% from 2017 to 2020, an operating margin of 7% or more, and ROE of 10% or more. We are also targeting average annual sales growth in East Asia of 13% and 16% in China, a priority area.
Our Five-Year Strategic Plan lists seven core strategies. We will maintain the basic direction of those strategies while building a foundation for future growth by focusing resources on growth fields and improving profitability.
Priority allocation of resources to growth areas
Our top priorities are running shoes and the U.S. market. The second priority is China. Our most important initiative is to develop the digital field.
Running shoes in the U.S. market
We have positioned the U.S. as our most important region because it has a vast running market and it tends to lead consumer trends in other regions. Although changing consumer preferences have led to slightly sluggish sales in the performance running market, we need to expand market share and reinforce our brand in the U.S. Otherwise, we will not be able to build a competitive advantage in the casual running
category. We will relentlessly develop new technologies
and pursue innovation in our highest-performance
products, while also emphasizing the advantages of
our high-performance products and strengthening
sales to specialty stores aimed at serious runners. In
the athleisure category – casual clothing and shoes
designed to be worn both for exercising and everyday
use – we plan to convert technologies developed for
high-performance products, an ASICS strength, into a
form that is visible to consumers and incorporate them
in other products.
In marketing, our goal is to not only create a
performance image through our sports assets, but also
to communicate a unified brand message and provide
product information via celebrities with high profiles in
athleisure and digital communication.
China
Our second priority is China. We see significant
potential in the Chinese market, as the country’s
economy is expanding and our current market share is
relatively low compared with other regions.
Sales in China are strong and we expect to see
further growth going forward. Moreover, the Chinese
government encourages participation in sport
as a national policy. We will continue to focus on
performance running shoes to tap into continued
growth in the number of runners in China amid rising
interest in healthy lifestyles. We will also promote our
brands by actively supporting marathons and other
events, while also using local celebrities to improve our
brand image via digital media.
Onitsuka Tiger, which we are working to build up in
China, has become very popular as a brand originating
in Japan. We will continue to promote and enhance the
value of the brand by opening flagship stores in major
cities with a focus on high-end products.
In the Chinese market, eCommerce is more advanced
than in the U.S., so we need to have a strong presence
in China’s online space. Specifically, we will enhance
consumer touch points and expand sales through
partnerships with competitive online portals. In our
own eCommerce channels, we will provide information about product features and product background
stories and utilize data gleaned from purchases and
browsing history in product planning
Digital commerce and marketing
The last key field is Digital commerce and marketing.
We aim to invest actively in digital content to expand
and cultivate contacts with our consumers. As
explained in our measures for the U.S. market, we will
offer products tailored to individual user foot shapes
and training frequency, while making use of data
and insights from more than 43 million Runkeeper
members, our proprietary online foot shape-measuring
app Mobile Foot ID, and other services such as the
ASICS Studio, training menu. We will continue research
and development in services, with a focus on our core
running category, to further improve the customer
running experience. We will also track online browsing
history, using it to provide information personalized to
each individual when they visit brick-and-mortar stores,
enhancing their shopping experience. Meanwhile, in
fields other than running, we will maximize customer
benefits and convenience through collaboration with
external partners. We will also utilize venture capital to
promote the use of digital technologies in our products
and services. There are limits to the connections
we can cultivate with customers through our own
digital commerce and marketing strategies, so we will
establish partnerships with competitive online retailers,
aiming to expand sales based on win-win relationships.
Improvement of profitability
We aim to improve profitability in Apparel, Core
Performance Sport shoes, Retail and Business operation.
Apparel
We have consolidated global functions to improve
efficiency in global projects and strengthen brand and
design direction. Our next step is to radically overhaul
product planning, development and production
systems. Over the last few years we have focused on
new design proposals and we plan to transfer success
in that area to sports fashion products to expand sales
in the athleisure market..
This category will play a vital role in maintaining our
position as a True Sport Performance brand. Keeping
a close eye on return on investment, we will channel
investment into strategic product categories to
improve profitability, while enhancing the contribution
to the ASICS brand as a whole.
Retail
We are tightening our focus on profit management in
our own retail channels. Specifically, we will carefully
monitor and control the performance of small and
medium-sized stores and factory outlets on a store-bystore
basis. We will also promptly scrap unprofitable
stores, create highly profitable products and improve
operations at each store and head office division.
Brand presentation will also be strengthened using our
flagship stores opened last year in New York, London
and Harajuku, Tokyo.
Our aim is to achieve speed, accuracy and productivity in internal business operations such as product development, sales and business analysis by taking maximum advantages of digital technologies and robotics. We also plan to reduce costs by reviewing procurement processes across our organizations in Japan, the U.S. and Europe, which are particularly large. We will also improve work practices and continue to maximize corporate value.
Progress in 2017 and outlook for 2018
In fiscal 2017, consolidated net sales increased 0.3%
year on year to ¥400,158 million (using last year’s
exchange rates, sales decreased 2.0% year on year).
The retail sector faces challenging times as more
brick-and-mortar stores close down. To counter that
trend, we decided to open flagship stores in major
cities such as London, Tokyo and New York, coupled
with efforts to expand our own eCommerce channels.These efforts are helping us rebuild touch points with
customers.
To create deeper connections with customers, we also
launched a new brand message in August 2017 –
I MOVE ME™. We are promoting the message
worldwide using popular brand influencers in the U.S.,
Japan, China and other markets.
In the U.S., where we face our greatest challenges,
we reorganized our sales network, creating a system
that allows us to ramp up sales to major retailers. To
address changing customer tastes, we established a
new running shoe development facility in Boston to
rapidly gather the latest information about trends in
the sports market. The new facility is part of a wider
overhaul of our local product development framework,
giving us the tools to analyze local demand and reflect
trends in product planning. Product development
using the new framework is already under way and we
plan to launch a steady stream of new products that
combine design and function so that they integrate
effortlessly into various lifestyle situations. In another
development in the U.S., we opened a flagship store on
New York’s Fifth Avenue in December 2017 – the first
store in the U.S. to sell both our ASICS and ASICSTIGER
brands. The store employs a new retailing concept that
demonstrates how our shoes and apparel can create
high-quality lifestyle ideas spanning fashion and other
everyday situations, not just sport. In 2017, we rebuilt
customer touch points and reinforced our business
base, including our sales network. We plan to continue
channeling management resources into those areas in
2018 as a key part of AGP2020.
We are also restructuring our operations in Europe,
where changes in customer trends mirror those in
the U.S. Our aim is to rapidly and accurately address
changes in the operating environment.
Sales are rising in emerging markets. In China,
where sales continue to grow at a double-digit pace,
there has been a sharp increase in the popularity
of running as a pastime, reflected by growth in the
number of marathon events. We will continue to
step up marketing in China while also upgrading our
own eCommerce channels and building closer ties
with leading local online retailers. In other emerging
markets with promising growth prospects, such as Russia and countries in Asia, the Middle East and
Africa, we will work to grow sales further and improve
profitability.
Working to create healthier societies
Over the past few years, we have seen a number of developments that have fundamentally changed the way the sporting goods industry operates regarding sustainability. In particular, social media has played a role in increasing customer awareness about the risks around unsafe and unethical working conditions, and environmental damage in complex, global supply chains. Consumers expect more transparency about the origin of products, materials used and ethical supply chains. We take this responsibility very seriously and recognize that we have an influential role to play.
Financial strategy
Along with the revisions to our Five-Year Strategic Plan, we also reviewed our shareholder return policy, taking into account the balance between growth and profits. Our basic policy had been to pay out roughly 20% of consolidated net income as dividends. We have now decided to boost returns to our shareholders based on the total return ratio. We will flexibly repurchase and cancel shares in line with stock price levels and market conditions, in addition to paying stable dividends, aiming to achieve a total return ratio of about 50% in each year from 2017 through 2020. In 2017, the total return ratio was 49.8%. Moreover, to increase opportunities for returning profits to shareholders, we introduced an interim dividend system. In addition to working to improve profitability and efficiency, we aim to maintain the capital ratio and net cash at current levels as part of our commitment to financial discipline. We will also work to generate cash by continuously improving working capital.
Strengthening our management structure to support sustained growth
Yasuhito Hirota was appointed President and COO on
March 29, 2018. Motoi Oyama continues to supervise
and guide the entire ASICS Group as Chairman and
CEO.
ASICS has taken steps to make its business more
global, including actively recruiting non-Japanese
executives and employees and promoting workforce
diversity. To achieve the targets in AGP2020 and take
ASICS into a new stage of growth, we realized that we
had to create a new management structure to bring the
whole Group together more effectively to drive forward
and expand the business. Drawing on his experience
as a senior manager at Mitsubishi Corporation,
Yasuhito Hirota will strive to deliver sustained growth
in corporate value. He will also lead efforts to create a
new organization that allows our diverse personnel to
maximize their specialist skills in dynamic, motivating
workplaces and that strengthens and expands our
business on a global level.
We appreciate and look forward to your continued
understanding and support.
May 2018