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DATE
Tuesday, May 20, 2025 at 8 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — James Zheng
Chief Financial Officer — Andrew Page
Teric CEO — Stuart Haselden
Vice President, Investor Relations — Omar Saad
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TAKEAWAYS
Revenue Growth: Reported sales increased by 23% in Q1 FY2025, or 26% in constant currency, led by technical apparel and outdoor performance segments.
Adjusted Operating Margin: Adjusted operating margin expanded by 490 basis points to 15.8% from 10.9% versus the prior year period, driven by both gross margin expansion and SG&A leverage.
Direct-to-Consumer (D2C) Channel: D2C sales grew 39% in Q1, led by Salomon Footwear in Greater China and APAC, while Arc'teryx registered a 19% omni-channel comparable growth.
Regional Performance: Asia Pacific increased 49% in Q1 FY2025, China rose 43%, EMEA accelerated 12%, and the Americas grew 12%.
Adjusted Gross Margin: Adjusted gross margin increased 330 basis points to 58%, primarily due to favorable channel, geographic, and product mix, as well as lower discounts.
Segment Results — Technical Apparel: Revenues rose 28% to $664 million for Q1 FY2025 with a 23.8% adjusted operating margin, led by Arc'teryx and fueled by 31% D2C expansion.
Segment Results — Outdoor Performance: Revenues increased 25% to $502 million for Q1 FY2025, with D2C channel up 68% and adjusted operating profit margin up 990 basis points to 14.7%.
Segment Results — Ball and Racket: Revenues grew 12% to $306 million for Q1 FY2025; adjusted operating margin (non-GAAP) climbed 270 basis points to 6.6%.
Adjusted Net Income: Adjusted net income in Q1 was $148 million, up from $50 million in the comparable period (adjusted, Q1 FY2024).
Adjusted Diluted EPS: Adjusted diluted earnings per share was $0.27 in Q1, compared to $0.11 in the prior year period.
Balance Sheet Position: Ended Q1 FY2025 with $515 million in net debt, down from $591 million at the end of Q4; net debt to adjusted EBITDA was approximately 0.5x at quarter-end.
Operating Cash Flow: Generated $164 million of operating cash flow in Q1 FY2025, with inventory up 15% year over year, well below 23% sales growth.
Tariff Mitigation: CFO Page said, "The burden on our FY2025 P&L is negligible." with current tariff levels and mitigation strategies implemented.
Full-Year Guidance Raised: Revenue growth outlook increased to 15%-17% (from 13%-15%) for FY2025, adjusted diluted EPS to $0.67-$0.72, and technical apparel revenue growth guidance to 20%-22%.
Segment Guidance: Adjusted operating margin targets for FY2025 remain at 21% (technical apparel), 9.5% adjusted operating margin (outdoor performance), and 3%-4% (ball and racket).
Q2 2025 Guidance: Expects reported revenue growth of 16%-18% for Q2 FY2025, adjusted gross margin of 57%-58%, adjusted operating profit between 3% and 4%, and adjusted diluted EPS of $0.00-$0.02.
Store Expansion: Plans to open approximately 25 net new Arc'teryx stores worldwide in FY2025; Salomon aiming for nearly 300 shops in Greater China, up from 218 at quarter-end.
Women’s Segment Growth: Arc'teryx women's business grew 38% in Q1 FY2025, outperforming the rest of the brand in every region.
SUMMARY
With strong sales momentum in both technical apparel and outdoor performance segments and healthy regional performance led by Asia Pacific and China, management increased full-year revenue and earnings expectations for FY2025, stating existing tariff mitigation initiatives are expected to keep margin pressure minimal. Store expansion continues, particularly in Greater China and across key brands, while the women’s and footwear categories are emphasized as core pillars of the company’s ongoing strategy.
Management highlighted the Arc'teryx brand's increasing traction, particularly in the direct-to-consumer channel and women's category, emphasizing product and retail innovation.
Salomon’s sports style and performance footwear franchises were cited as high-growth drivers in Q1, with the company viewing its $1 billion in sneaker sales in 2024 as a small fraction of overall global opportunity.
Tariff risk was addressed directly, with CFO Page stating, "impact on tariffs based upon where tariffs stand today is negligible." and describing multiple mitigation levers in place.
Ball and racket segment store growth was concentrated in Greater China in Q1, and profitability improvement is expected as the retail strategy matures and scales.
Management maintained a cautious outlook for the balance of the year, embedding potential macroeconomic uncertainty into second-half guidance.
Ongoing rebalancing in Greater China involves closing lower-performing Arc'teryx partner doors and consolidating retail in higher-quality, larger-format owned stores for sustained growth and increased productivity.
Wholesale momentum at Salomon in Europe is supported by successful strategic launches, with robust order books and retailer confidence heading into the second half.
INDUSTRY GLOSSARY
Omni comp: Comparable sales growth across both physical retail and e-commerce direct-to-consumer channels.
SG&A leverage: Operating expense control resulting in selling, general, and administrative costs growing at a slower rate than revenue, improving profitability.
ARPUs: Average Revenue Per User/store, an indicator of sales productivity at retail locations.
AOV: Average Order Value, the mean sales value per customer transaction.
ASPs: Average Selling Price, the mean price at which a product is sold.
ROU depreciation: Depreciation expense associated with Right-Of-Use assets under lease accounting standards.
Full Conference Call Transcript
Omar Saad: Thanks for joining Amer Sports, Inc.'s 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 AM Eastern. James will cover key operational and brand highlights, then 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 2025. Our Teric CEO, Stuart Haselden, will also join for the Q&A session. With that, I'll turn the call over to James.
James Zheng: Thanks, Omar. Amer Sports, Inc. 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 and racket. In addition to the continued broad-based trends 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 attributes.
Furthermore, our market-leading hybrid equipment franchises delivered better-than-expected results for both winter sports equipment and the Wilson tennis racket. Although we are off to a great start in 2025, given macro uncertainty related to the US 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 US revenue exposure.
Looking year and the long term, we believe Amer Sports, Inc. 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 spire with great growth and profitability for the outdoor industry driven by its disruptive direct-to-consumer models and 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 brand have authentic heritage, premium positioning, higher performance products, and leading market positions. These high market share brands will deliver slower long-term growth in their core equipment business, but they still have large soft goods potential, especially Wilson Tennis 360. And fifth, we believe we have a very strong differentiated platform in Greater China where we continue to deliver best-in-class performance with great momentum across all three big brands.
Before I turn 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 generated plus 19% omni-channel in quarter one. Importantly, our direct-to-consumer growth was driven by strong performance in both stores and online.
We believe our current stores are very differentiated from both our product and experience perspective, and they continue to be critical to our strategy, especially how we engage with local consumers and the community. Our Arc'teryx net new store openings were flat in quarter one, and four openings were offset by the closure of four legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet. Ten new store locations this quarter include two stores in China, one in Georgetown, Washington DC, as well as our new Chamonix location, which is our first mountain pass store in Europe and has attracted great consumer interest since day one.
Our Arc'teryx store expansion strategy includes 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 our brands for sustainable long-duration growth, and developing a high-quality store network is critical to our success and much more important than chasing fast-paced new store expansion. For example, in Greater China, we will continue to focus on optimizing our current retail footprint rather than pushing new store expansion.
This year, we will have net store closures in China, including closing some legacy partner stores, but we are growing our own store count, continuing 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 soon open a brand store within the Peninsula Hotel, 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 Bend, 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, Shangri-La, and Whistler. Community engagement continues to be a key part of our strategy to raise brand awareness. In March, we hosted our first-ever academy in California at Mammoth Mountain. The event drew thousands of participants, achieved record-breaking ReBird sales, created six million media impressions, and saw a direct lift in sales and traffic in stores in the Los Angeles area, as well as e-commerce.
Shifting gears to products, footwear continued to be Arc'teryx's 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 launches 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 the footwear as a separate business unit with a dedicated P&L and a 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 performance. A great example of our design focus on women's is the Clarkia pant, which has seen explosive growth in quarter one, stocking out quickly. We are seeing rising brand awareness and affinity with women in the US 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 repairable. 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, onto 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 product, merchandising, marketing, and go-to-market strategy to drive Veilance's long-term growth opportunity.
For the first time, Veilance was present at Fashion Week in Paris, where the brand was positioned alongside luxury players and received very positive feedback from buyers, industry, and media. Moving to the outdoor performance segment, which delivered an excellent quarter led by Salomon Footwear and Arc'teryx. Winter sports equipment results were also better than expected. Global brand momentum behind Salomon sneakers is accelerating. Not only is the Salomon footwear franchise continuing to grow very well in China and APAC, it's now also starting to impact both the US and Europe. Our brand awareness has doubled over the past couple of years, and we are now seeing very strong momentum in both lifestyle and performance lines.
Salomon sneakers surpassed $1 billion of sales in 2024, but it's still tiny relative to the $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 Greater China and APAC, while the Americas accelerated and EMEA continued its solid growth.
Direct-to-consumer remained the fastest-growing channel for the brand, and the sports style offering continues to lead footwear growth. In addition to shoes, Salomon apparel, bags, and socks are also experiencing great momentum. A key brand highlight in quarter one was our first-ever global footwear launch with the 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 US and have seen great results from our WhisperGo campaign in China.
On the performance side, we have been very pleased with the launch of the long-running shoe AeroGlide 3, one of the best footwear launches in Salomon's history. AeroGlide 3 uses a foam called Optivibe EVO, which we believe represents 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 global launch this month of a new line that offers consumers a more versatile than ever running shoe that performs great on various types of terrain from pavement to parks and trails. Regionally, Salomon footwear is continuing to experience great sell-through and solid order books in Europe, both for sports style and performance.
Sales growth for retailers continues to be strong, which is translating to healthy growth in our ARPUs. In Asia, direct-to-consumer continues to be the critical growth channel for Salomon. Our Salomon concept shop format developed in China works very well, and we believe these stores generate significantly higher sales per square foot versus the industry average, and it continues to improve. We are continuing to expand our concept shop in Greater 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 nearly 300 Salomon shops in Greater China this year.
We believe Salomon has the opportunity to grow to several hundred locations over time in just tier one and two 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, and 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 US, 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 domestic market.
Our first US 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 Greater New York area this year, as well as continue to expand our presence in key wholesale accounts. Beyond New York, we also focus on San Francisco and Los Angeles as epicenter markets 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 sales through at retail, leading to better-than-expected reorders.
Moving to ball and racket highlights, we are pleased that the ball and racket's growth trends continue to be solid in quarter one, with 12% growth driven by strength in sportswear, racket sports, and golf. Our Tennis 360 continues to resonate very well with consumers from performance rackets to soft goods, especially in Greater China. Wilson's performance rackets franchise continues to shine, including the January launch of the Clash V3, which is off to a solid start. In pickleball, we are experiencing strong response to our Vespula launch. Wilson Tennis 360 soft goods also continues its excellent growth, nearly doubling in Q1 2025. We have seen very strong response to the entry women's tennis shoe.
We also continue to excel in China and will open approximately 50 more shops in China this year, including both owned and partner stores, bringing the total to almost 100. In North America, the new Tennis 360 concept store in the Dallas North Park 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 DynaPOWER launch this spring, which has received positive reviews in the golf influencer community.
With that, I will turn it over to Andrew.
Andrew Page: Thanks, James. Before I start, I want to take the time to thank our more than 13,000 Amer Sports, Inc. 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 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, Inc. 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 and racket also delivered very solid growth in the quarter. By channel, the group continues to be led by D2C, 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, 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 give 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 the 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, representing 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 and racket due to the ongoing investment in Tennis 360 and D2C growth. Driven by both gross margin expansion and SG&A leverage, we generated a 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 $7 million, which comprised of $22 million of interest expense partially offset by $5 million of FX gains and other items related to the weakening US 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 31% D2C 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 D2C 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 we are making good progress with Peak Performance brand and cleaning up the marketplace in EMEA and the Nordics, shifting to a more full-price D2C-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, which saw revenues increase 25% to $502 million driven by strong performance in Salomon soft goods and good results in winter sports equipment. The D2C channel grew very healthy double digits driven by new store 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 D2C 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 Softgoods. 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 NV divestiture in 2024. Salomon soft goods saw very good growth in the Americas. As James alluded to, the popularity of Salomon's Footwear is inflecting globally, and we are well positioned to appropriately and fully develop the unique opportunity over time.
We believe we have very significant growth in all three major 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 retailers' 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-peak 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 and racket, revenue increased 12% to $306 million driven by soft goods, racket sports, and golf.
The strong growth was also helped by easier comparisons from Q1 last year when Wilson was still going through some liquidation to normalize 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 and racket to grow low to mid-single digits long term. By category, the growth was led by soft goods, which now represents 10% of ball and racket sales, and our marquee racket 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 DynaPOWER 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. Ball and racket 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 continued investment in Tennis 360 and D2C. 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 pay down 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 nondeductible 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 US, only 26% of revenues, and we enjoy 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 US from China and 10% tariffs on goods coming in from the rest of the 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 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 US sourcing exposure.
In 2024, US revenues represented 26% of group revenues. Sourcing from China to the US was approximately 8% of the 26%. Vietnam was also 8%, the rest of Asia was 6%, Europe 3%, and the rest of the world 1%. By brand, slightly more than half of the tariff exposure is in the ball and racket segment, around 30% in technical apparel, and the remainder in outdoor performance. All three segments, including ball and racket, 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 the rest of the 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 and racket 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 and racket. You should assume full-year net finance costs 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 57% to 58% in Q2, and adjusted operating profit between 3% and 4%. Our net finance costs for the quarter should fall between $25 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 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.
Operator: Thank you. We will now begin the question and answer session. Your first question comes from the line of Matthew Boss from JPMorgan. Your line is open.
Matthew Boss: Thanks, and congrats on another great quarter. So, James, on your broad base, 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 we think about the omni comp strength into the second quarter, relative to high teens you saw in the first quarter?
James Zheng: Okay. Thanks, Matt. Okay. First of all, I will say, Amer Sports, Inc. is really a unique portfolio company, sporting goods company, from a very unique portfolio of brands in the markets. So we are different from other sporting goods companies. So all the brands we own, they all got the distinguished positioning in the markets. And with a very strong high technical product pipeline offer to the market to address the different levels of the sports participants. Yes. So I think this kind of unique proposition gives us a very strong market. And also, especially in the premium segment, in outer categories. We really see a strong demand across the border in the world, especially in Asia and China.
And more and more consumers are participating in outdoor activities. And our products, Arc'teryx, and Salomon really address the strong demand from the market. So, we feel very good about our overall proposition today in the market. On the other side, really look at the Salomon in Q1 result, and we are also really happy to see our soft goods business is growing from Salomon brands and especially on our footwear. Okay? So we created a new category we call them modern outdoor sneakers, which really address very special needs in the market. This kind of unique position helps us to attract a new group of lovers. I mean, especially for younger female consumers groups.
So we created the right buzz and very unique on our sneaker market. And we receive tremendous positive feedback, not only from Asia Pacific but also in Europe and the US at the starting base. And people are looking for the kind of attractive offers into the markets. And they really enjoy the product we offer to them, we call it real technical products with very nice designs to address 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 strong runway for that. Do you also want to comment on some website?
Andrew Page: Yeah. Thanks, James. Yeah. Matthew, the comp in the quarter was really solid, you know, plus 19 on the comp. That's comparing against a 36% last year. That is the highest comparison we'll have in 2025. 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 productivity across every region, we're really pleased with how our stores are performing. Also pleased with the track that we're seeing in e-commerce. So every single signal from the market is positive. And, yeah, we're excited for, you know, 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 outlet.
So we view that as a very positive factor, you know, as it speaks to the high-quality full-price nature of our business that we want to continue to increase.
Matthew Boss: 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.
Brooke Roach: 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.
Andrew Page: 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, you know, 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 operation-wise 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. Yeah, 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, you know, 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, you know, that continues to be our less mature market, but we definitely have the leadership team in place and we are starting to penetrate, you know, key accounts that we'd like to continue to see the brand continue to grow at.
But as we talked about, I mean, our D2C is a leading indicator for what we think that brand can do, and the conversion there and the attachment to the consumer is pretty strong. So we're excited about what we see to Salomon, but we're...
Laurent Vasilescu: Great. Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.
Laurent Vasilescu: Oh, good morning. Thank you very much for taking my question. I'm gonna be the third person to ask about Salomon. You've raised the outdoor performance category to grow mid-teens for us by 2025. 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 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?
Andrew Page: Yeah. So great question. I appreciate it. You know, we're not necessarily giving 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 Softgoods is really starting to inflect. And we talked about the fact that as soft goods within the outdoor performance grows, you're going to see margin accretion, which you saw a strong margin accretion, gross margin in the first quarter and even operating margin. And operating margin up almost a thousand points in outdoor performance. Two-thirds of that was in gross margin, about a third of that SG&A.
It continues to speak to the fact that as we over-deliver top line, you have this, you know, a really strong effect coming down to the bottom line. You know, the billion dollars that Salomon is, that's a billion dollars 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 know, you saw the margin inflection as we grow that soft goods business and we believe that margin inflection reflects a longer-term profile that we can and will continue to benefit from.
Laurent Vasilescu: 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 a hundred basis points on an annualized basis on the impact from tariffs. Maybe just unpacking a little bit, like, under the hood, like, what are the moving pieces versus ninety days ago? Is it, like, fifty bps from tariffs and then fifty bps just better performance in the overall business?
Andrew Page: Yeah. Thanks for the question. Yeah. 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 it had the higher tariff stayed in place or things go backwards, i.e., China at 145%, rest of the world at, you know, the 30 or 40%, that was that's where the hundred basis point annualized drag would come from.
So and over time, we believe that we, you know, the leverage that I talked about whether it be pricing, resourcing, vendor management that over time, we could neutralize the hundred basis point drag. So you look at our gross margin for the remainder of the year, you know, 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.
Alex Straton: Thanks a lot. Your next question comes from the line of Alex Straton from Morgan Stanley. Your line is open.
Chad Berntell: Hi. Thanks for taking the question. This is Chad Berntell on for Alex. I'd like to touch on ball and racket. 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 and racket profitability. You saw a nice improvement in margin in Q1. What pushes margin back to the mid-single-digit levels or beyond that you've seen in previous years? Thank you.
Andrew Page: Yeah. So the store growth related to ball and racket is primarily, you know, all of that is in mostly all of that is in Asia and Greater China. So that's where you see the store growth. Remember, that is 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 the store growth that you see. From a profitability perspective, I think what gets us back is, you know, continuing to scale this 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 and racket return. So yeah. So we're, you know, we're excited about the direction we're going in.
Michael Binetti: Great. Your next question comes from the line of Michael Binetti from Evercore. Your line is open.
Michael Binetti: 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 comps and 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 to the brand. For the rest of the year.
And then I'm just curious on the comment that we're gonna 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 financial prize is for investors as you shift to larger format. Thanks.
Stuart Haselden: Yeah. Thanks, Michael. So yeah. 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. It's that Andrew described, you know, we've made improvements in our in-stock positions across a number of categories, but where in particular, we've seen, you know, 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 at 41% on top of the launch of the three new models last Q1.
With the success that we're seeing now and 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. Have a couple of new models, launches later in the year that conceal approach shoe and the ballast. Trail shoe and the crack also continues to be a hot model as well. So much better position from a footwear standpoint. Where we've seen continued exciting demand, 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 that it's exciting to see the momentum and 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. You know? And our women's business was up 38% in the first quarter, second behind footwear, seeing great momentum there.
You heard James mention that 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, you know, overall, that 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's better this year than last year, but you know, opportunities in the areas I just mentioned.
Shifting to your other question around partner doors in China, that continues to be, you know, 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 and upside, you know, as we convert those from essentially a wholesale to an owned location. You get multiple layers of benefit in terms of larger stores, 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.
Michael Binetti: Okay. Really helpful. Thanks, Stuart.
Jonathan Komp: Thanks, sir. Next, your next question comes from the line of Jonathan Komp from Baird. Your line is open.
Jonathan Komp: 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, you know, after a pretty strong start to the year here versus, you know, a prudent approach to forecasting and some of the assumptions you've made.
Andrew Page: Yeah. Thanks for the question. You know, Jonathan, the first quarter was strong. And as we look through how we're trending now, yeah, the trends continue to be strong. That being said, like I talked about, there's a meaningful amount of uncertainty out there. We believe that focusing on the things that we can control is really important. As you know, the macro uncertainties with not the tariffs, but, you know, what could go on in the environment. We're focusing on the things that we can control. We believe that we put a guide on here that's really responsible that puts more things in our control 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 guide infers a slowdown in the back half, and we believe that is responsible given the amount of uncertainty that we've cannot control.
Jonathan Komp: Okay. Understood. Thank you. And just one follow-up on Salomon, that wholesale business there, I know, had been negative for some time and just recently turned positive. So any further color on the visibility you see in wholesale, you know, given the accelerating overall momentum? Thank you.
James Zheng: Yeah. Jonathan, the Salomon wholesale business managed 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 sales through in the various channels in Europe. Okay? And which gives very strong confidence for our retail partners. So and the reorder also accelerates in the first quarter. So and also our future order booking also sees a very positive movement for the second half of this year.
So it's very encouraging, and also that kind of 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.
Andrew Page: Yeah. I would just double down on that. If you think about sports style as an example, our XT Whisper Sport style was always a strong franchise. Our XT Whisper was the most successful sports style launch within that franchise. Similarly, our AeroGlide 3, just a very, very successful launch in our performance category. So not only are the strategic relationships and the wholesale relationships 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.
Stuart Haselden: Yeah. Operator, we have time since we went over on the tariff commentary, maybe time for a couple more questions. Thanks.
Operator: Certainly. Your next question comes from the line of Jay Sole from UBS. Your line is open.
Jay Sole: 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 business was really growing nicely. Can you just maybe talk about what, you know, what you've learned in the last ninety days and what kind of potential you see long term for the women's business in Arc'teryx?
Stuart Haselden: Yeah. It's, you know, 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 attraction. And the color investment in the first quarter really paid off. You know, we saw a much stronger color presentation and higher sell-throughs as a result. I mentioned the Clarkia pant, which has been a runaway hit for us with our women's assortment. And excited to chase that. It's really could be exponential growth for us as we crack into a part of the assortment that's really a new ad 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 in a model, a design that really appeals to our female guests. And something I would add is, you know, we had you heard James mention 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 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 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.
Jay Sole: Got it. Thank you so much.
Operator: 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.
Paul Lejuez: 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 any 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.
Andrew Page: Oh, you're coming through a little bit muffled. Can you repeat? The first question was about Salomon AUR. And the second half, the question...
Paul Lejuez: Yeah. It's Omni AUR. Just wherever in the assortment, you're seeing the greatest strength and growth.
Andrew Page: Yeah. With regard to the greatest strength and growth, I mean, we believe that both our performance category and our sports styles category are very strong. From a growth perspective, we continue to see sports style as the biggest growth driver. Now what I will say is that even within the performance category, our gravel franchise, which both has a running and a gravel platform, were very, very, very successful launches. So we're super excited about sports style as a category. We're super excited about gravel and running as a performance within our performance section. You talked about our AUR at retail. And, I mean, we haven't given that information.
But what I will say is that both our AOV and our ASPs are picking up with both of these franchises and going in the right direction.
Paul Lejuez: And, Paul, there was a second part to your question related to tariffs. Did I hear that right?
Paul Lejuez: 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.
Andrew Page: No. No. We, as we said, we continue broad-based strength across the portfolio that you saw, you know, in the recent quarters, especially this past recent quarter continues so far. So I don't know that we're gonna be the leading indicator on the macro, but we haven't seen any air pockets yet.
Paul Lejuez: Thank you, guys. Good luck.
Operator: Thank you. And that concludes our question and answer session. I will now turn the call back over to management for closing remarks.
Omar Saad: Thanks, everyone, for joining. Look forward to reconnecting in ninety days for our second quarter results. Have a great week.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.