Significant risks and uncertainties
Amer Sports’ business is balanced by its broad portfolio of sports and brands as well as its presence in all major markets.
Short-term risks for Amer Sports are particularly associated with consumer demand development in North America, Europe and Japan, with labor and raw material price inflation, especially in China, and with Amer Sports' ability to manufacture, source and deliver products on a timely basis.
For example, the following risks could potentially have an impact on the company’s development:
- The sporting goods industry is subject to risks related to consumer demand in various parts of the world. Amer Sports is particularly dependent on general economic conditions and consumer demand in North America, Europe and Japan.
- The sporting goods industry is highly competitive and includes many regional, national and global companies. Although Amer Sports has no competitors that challenge it across of all of its product categories, the company faces competition from a number of companies in most of the product categories. There cannot be any assurances that additional competitors will not enter Amer Sports’ existing markets or that Amer Sports will be able to compete successfully against existing or new competitors.
- Sales of winter sports equipment are affected by snow conditions. Winter sports equipment represents 1/4 of Amer Sports’ sales.
- A large part of Amer Sports’ production is outsourced. Amer Sports is constantly reviewing the global production and sourcing footprint to gain operational efficiencies and cost savings. Although the business areas audit their subcontractors regularly, possible delivery problems or breaches of contract by subcontractors may have an impact on Amer Sports’ operations.
- Labor costs are expected to increase in Asia, where Amer Sports sources a significant portion of its products. Amer Sports uses steel, rubber, and oil-based raw materials and components in its products and must obtain adequate supplies of these raw materials from the markets in competition with the other users of such materials. Increases in labor and raw material costs can have a negative impact on product costs.
- Amer Sports’ most important production facilities are the Winter Sports Equipment’s factories in Austria and Bulgaria, Precor’s factory in the United States, and the Suunto’s factory in Finland. In addition, Amer Sports has major factories in Eastern Europe, which are owned by subcontractors. Amer Sports’ most important distribution centers are located in Germany, Austria, the United States and France. Any unexpected production or delivery breaks in these units would have a negative impact on the company’s business.
- Amer Sports success is dependent on its ability to identify and respond to constantly shifting trends in consumer demand, its ability to leverage advancements in technologies and to develop new and appealing products. Sales of Amer Sports’ products may be negatively affected if it is not successful in introducing innovative products in response to changes in consumer preferences, technology and industry trends.
- Growing the number of Amer Sports’ own retail stores requires up-front investment. In addition, the maintenance of the stores and the personnel employed in own retail create more fixed costs than distribution to trade customers. A failure to execute Amer Sports retail growth plan as part of Amer Sports multi-channel sales strategy could have a negative impact on Amer Sports’ results.
- Losing a significant client would affect Amer Sports’ sales. However, this risk is limited because Amer Sports’ client base is diversified.
- Despite extensive testing of its products before market launch, the company cannot completely rule out the risk of product recalls and legal actions related to product liability. Amer Sports has standard insurance cover against the financial consequences of product recalls and product liability cases. Product quality issues could harm Amer Sports’ reputation and, as a result, could have an adverse effect on its sales.
- A characteristic feature of the sporting goods industry is the need to protect intellectual property rights (IPR) and disputes connected with them. Amer Sports’ success depends in part on its ability to protect its innovations, trademarks and other IPR from unauthorized use by others through obtaining relevant protection in the countries in which it operates and to enforce its IPRs. Any litigation to defend against claims or infringement could result in substantial costs and diversion of resources and could negatively affect results of operations or competitive position of Amer Sports. The material impacts on Amer Sports’ financial position and operational result arising from pending litigation affecting the business areas and decisions of the authorities are assessed regularly, and current estimates are presented publicly when necessary.
- Amer Sports sources a significant proportion of its products from subcontractors located throughout Asia, which exposes it to the political, economic, and regulatory conditions in that area, and to a variety of local business and labor practice issues. Although Amer Sports has third party audit programs in Asia, Amer Sports cannot fully control its’ subcontractors actions. The violation of labor laws, regulations or standards by Amer Sports’ subcontractors, or the divergence of those subcontractors’ labor practices from those generally accepted as ethical in the European Union or the international community, could have a material adverse effect on Amer Sports’ public image and the reputation of its brands.
- Amer Sports relies on data communications to operate its business, and it is in the process of integrating its IT platform globally and implementing further applications to better control its supply chain. System failures and service interruptions may occur as the result of a number of factors. Any of these factors could have a material adverse affect on Amer Sports’ business.