Earnings Call Transcript - AS Q1 2025

Operator, Operator

Thank you for your patience, and welcome to the Amer Sports First Quarter Fiscal 2025 Earnings Conference Call. I will now hand the call over to Omar Saad, Senior Vice President of Capital Markets and Investor Relations. You may begin.

Omar Saad, SVP Capital Markets and Investor Relations

Welcome, everyone. Thanks for joining Amer Sports 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 9:00 a.m. Eastern. James will cover key operational and brand highlights, and 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 '25. Arc'teryx CEO, Stuart Haselden, will also join for the Q&A session. With that, I'll turn the call over to James.

James Zheng, CEO

Thanks, Omar. Amer Sports 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% excluding currency adjustments, 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 & Racquet. In addition to the continued broad-based strength 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 hard goods equipment franchises delivered better-than-expected results for both Winter Sports Equipment and the Wilson Ball & Racquet. Although we are off to a great start in 2025, given macro uncertainty related to U.S. 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 U.S. revenue exposure. Looking near and long term, we believe Amer Sports 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 story with great growth and profitability for the outdoor industry, driven by its disruptive direct-to-consumer models and a unique competitive position. It's still very underpenetrated globally and 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 brands 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 businesses, 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 it 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 a plus 19% omni-comp in quarter one. Importantly, our direct-to-consumer growth was driven by strong performance in both stores and online. We believe Arc'teryx stores are very differentiated from both our product and experience perspective, and they continue to be critical to the whole strategy, especially how we engage with local consumers and the community. Arc'teryx net new store openings were flat in quarter one as 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. Key new store locations this quarter include two stores in China, one in Georgetown, Washington, D.C., as well as our new Chamonix location, which is our first mountain town store in Europe, and has attracted great consumer interest since day one. 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 Arc'teryx for sustainable long-durable growth, and developing a high-quality store network is critical to our success, and much more important, chasing fast-paced new store expansion. For example, in Greater China, we will continue to focus on optimizing Arc'teryx 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 will grow 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 still open a brand store within the Peninsula Hotels, 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 Banff, 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 and Whistler. Community engagement continues to be a key part of our strategy to raise brand awareness. In March, we hosted our first ever Arc'teryx Academy in California at Mammoth Mountain. The event drew thousands of participants, achieved a record-breaking ReBIRD sales, created 6 million media impressions, and saw a direct lift in sales in Arc'teryx stores in the Los Angeles areas as well as e-commerce. Shifting 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 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 market differently through pinnacle design and performance. A great example of our design focus on women's is the Clarkia pants, which saw explosive growth in quarter one, stocking out quickly. We are seeing rising brand awareness and affinity with women in the U.S. 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 beautifully paired. 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, on to 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 products, merchandising, marketing, and go-to-market strategies to drive Veilance's long-term growth opportunity. For the first time, Veilance will present at Fashion Week in Paris, where the brand was positioned alongside the 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 apparel. 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, but it's now also starting to gain traction in both the U.S. and Europe. Our brand awareness has doubled in the past couple of years, and we are now seeing very strong momentum in both sport style and performance lines. Salomon sneakers exceeded $1 billion in 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 America accelerated and EMEA continued its solid growth. Direct-to-consumer remains the fastest-growing channel for the brand, and the sport style offering continues to lead footwear growth. In addition to shoes, Salomon apparel, bags, and socks are also experiencing great momentum. Our key brand highlights in quarter one were our first-ever global footwear launch with 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 U.S., and have had great results from our WhisperGo campaign in China. On the performance side, we have been very pleased with the launch of the low running shoe, Aero Glide 3, which is among the best footwear launches in Salomon history. Aero Glide 3 uses a foam called optiFOAM 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 GRVL launch this month, a new line that offers consumers a more versatile running shoe that performs well on various types of terrain from pavement to parks and trails. Regionally, Salomon soft goods are continuing to experience great sell-through and solid order books in Europe, both for sports style and performance. Sell-through for retailers continues to be strong, translating to healthy growth in our order books. In Asia, direct-to-consumer continued to be the critical growth channel for Salomon. Our Salomon compact shop format, developed in China, works very well, generating significantly higher sales per square foot versus industry average, and continues to improve. We are continuing to expand our compact shops 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 1 and 2 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. We will open a second Shanghai flagship in August, located in the former French Concession district known for its boutique shopping. In the U.S., we continue to lay the groundwork to support significant future growth, and we are seeing more signals that the brand is gaining momentum in the world's largest sneaker market. Our first U.S. store in New York City continues to show incredible traction with our consumers, and the brand is generating 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 are also focused on San Francisco and Los Angeles as the epicenter market 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 sell-through at retail, leading to immediate reorders. Moving to Ball & Racquet highlights. We are pleased that the Ball & Racquet growth trends continued to be solid in quarter one, with 12% growth driven by strength in sportswear, racquet sports, and golf. Our Tennis 360 continues to resonate very well with consumers, from performance racquet to soft goods, especially in Greater China. Wilson's performance racquets business has continued 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 Vesper paddle launch. Wilson Tennis 360 soft goods also continues with excellent growth, nearly doubling in Q1 2025. We have seen a very strong response to the Intrigue women's tennis shoe. We also continue to excel in China, and will open approximately 50 more Wilson Tennis 360 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 NorthPark 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 improve solidly in sales and margins in quarter one, led by the DYNAPWR launch this spring, which has received positive reviews in the golf influencer community. With that, I will turn it over to Andrew.

Andrew Page, CFO

Thanks, James. Before I start, I want to take the time to thank our more than 13,000 Amer 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 that 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 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 & Racquet also delivered solid growth in the quarter. By channel, the group continues to be led by DTC, 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 in Greater China, 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 importantly, we have a great team in China. Our deep expertise and unique scalable operating platform gives 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 and represented 42.6% of revenues in Q1. Both the Technical Apparel and Outdoor Performance segments achieved SG&A leverage with very strong growth. This was partially offset by slight deleverage at Ball & Racquet due to ongoing investment in Tennis 360 and DTC 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 $17 million, which comprised $22 million of interest expense, partially offset by $5 million of FX gains and other items related to the weakening U.S. 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 overdelivery 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 the 31% DTC 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 DTC 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 that we are making good progress with Peak Performance brand and cleaning up the marketplace in EMEA and the Nordics, shifting to a more full-priced DTC-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, we saw revenues increase 25% to $502 million, driven by strong performance in Salomon soft goods and solid results in Winter Sports Equipment. The DTC 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 DTC grew 68%, led by Greater China and APAC, while wholesale grew 9% from the prior year period. The wholesale results were driven by both Salomon Winter Sports Equipment and Salomon soft goods. 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 ENVE divestiture in 2024. Salomon soft goods saw very good growth in the Americas. As James alluded to, the popularity of Salomon footwear is inflecting globally, and we are well positioned to appropriately and fully develop this unique opportunity over time. We believe we have very significant growth in all three major consumer 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 retailer 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-piste skiing is strong. Winter Sports Equipment now represents one-third of the Outdoor Performance segment, and that 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 & Racquet. Revenue increased 12% to $306 million, driven by soft goods, racquet sports, and golf. The strong growth was also helped by easier comparisons from Q1 last year when Wilson was still going through some liquidations 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 & Racquet to grow low to mid-single digits long term. By category, the growth was led by soft goods, which now represents 10% of Ball & Racquet sales in our marquee racquet 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 DYNAPWR 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. All-in racquet 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 the continued investment in Tennis 360 and DTC. 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 paydown 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 non-deductible 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 U.S., 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 in 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 U.S. from China and 10% tariffs on goods coming in from the Rest of 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 in 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 U.S. sourcing exposure. In 2024, U.S. revenues represented 26% of group revenues. Sourcing from China to the U.S. was approximately 8 points of the 26%. Vietnam was also 8 points, rest of Asia was 6 points, Europe 3 points, and the Rest of World, 1 point. By brand, slightly more than half of the tariff exposure is in the Ball & Racquet segment, around 30% in Technical Apparel and the remainder in Outdoor Performance. All three segments, including Ball & Racquet, 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 Rest of 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. 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 & Racquet 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 & Racquet Sports. You should assume full year net finance cost 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 approximately 57% to 58% in Q2, and adjusted operating profit between 3% and 4%. Our net finance cost for the quarter should fall between $25 million 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've 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, Operator

Thank you. Your first question comes from the line of Matthew Boss from JPMorgan. Your line is open.

Matthew Boss, Analyst

Thanks, and congrats on another great quarter. So James, on your broad-based 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 as we think about the omni-comp strength into the second quarter relative to high teens you saw in the first quarter?

James Zheng, CEO

Okay. Thanks, Matt. First of all, I will say Amer Sports is really a unique portfolio company, a sporting goods company with a very unique portfolio of brands in the market. So, we are different from other sporting goods companies. So, all the brands we own have distinguished propositions in the markets and a very strong high technical product pipeline offered to meet the different levels of sports participants' needs. I think this unique proposition gives us a strong competitive edge in the market, especially within the premium segment, outdoor categories. We really see strong demand across borders in the world, especially in Asia and China, with more consumers participating in outdoor activities. 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 markets. On the other hand, looking at Salomon's Q1 results, we are happy to see our soft goods business growing from the Salomon brand, especially in footwear. We created a new category we call the modern outdoor sneakers, which address very specific needs in the market. This unique position helps us attract new groups of outdoor enthusiasts, especially younger female consumers. We have created a strong base and a unique presence in our sneaker markets. We received tremendous positive feedback, not just in Asia Pacific, but also in Europe and the U.S. The response has been fantastic, and people appreciate the attractive offerings we have in the market.

Stuart Haselden, CEO, Arc'teryx

Yeah. Thanks, James. Yes, Matt, the comp in the quarter was really solid, plus 19% omni-comp. That's comparing against a 36% last year. That is the highest comparison that we'll have in '25. The comp comparisons moderate for the balance of the year. It was a traffic-driven comp; we had really strong solid conversion, but the upside came from traffic increases, which we think reflects the momentum of the brand and just the investments we've made in community and brand marketing, as well as the expansion of our store fleet. The brand stores continue to perform well. We're seeing expansion in productivity across every region. We're really pleased with how our stores are performing. We're also pleased with the traction that we're seeing in e-commerce. Every signal from the market is positive. We're excited about what the balance of the year looks like. The only thing I would say is that 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 outlets. We view that as a very positive factor, speaking to the high-quality full-price nature of our business that we want to continue to increase.

Operator, Operator

Your next question comes from the line of Brooke Roach from Goldman Sachs. Your line is open.

Brooke Roach, Analyst

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 this business can achieve? Thank you.

Andrew Page, CFO

Hey. Thanks, Brooke. It's Andrew. Yes, we are on track and doing what we had always set ourselves up to do. I mean, 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 operationalize our commercial go-to-market strategy and get our teams in place. You saw the brand really driving momentum in Asia Pac and Greater China, and it's continuing, with both of those regions up over 60%. In Europe, you continue to see the brand gaining momentum there as well. It's reflected not only in our performance but also in 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. As for North America, we continue to penetrate key accounts that we would like to see the brand continue to grow in. Our DTC is a leading indicator for what we think that brand can do, and the conversions there are pretty strong. So we're excited about how we see Salomon footwear performing.

Operator, Operator

Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.

Laurent Vasilescu, Analyst

Oh, good morning. Thank you for taking my question. I'm the third person to ask about Salomon. You've mentioned that your performance category is expected to grow in the mid-teens for FY '25. Regarding winter goods, I believe you indicated that growth is expected in the low single digits for this year. Can we assume that this suggests soft goods could see a 20% increase this year? Also, longer term, you noted that Salomon sneakers achieved $1 billion in sales last year and that this figure is still minor compared to the overall market. Is it possible for Salomon sneakers to double in sales over the next five years?

Andrew Page, CFO

Yeah. So great question. I appreciate it. We've not necessarily given specific long-term growth targets. However, what I will say is that we have great product, and you can see the margin profile of Salomon footwear and soft goods really starting to inflect. We talked about the fact that as soft goods within the Outdoor Performance grow, you're going to see margin accretion. You saw strong margin accretion in gross margin in the first quarter and even operating margin. The $1 billion that Salomon is at, that pertains to a $180 billion sneaker market. We believe that we have the product and the brand to disrupt and take meaningful share within this market over time. So we're excited about it. You'll continue to see margin inflection as we grow the soft goods business. That reflects the longer-term profile that we will continue to benefit from.

Operator, Operator

Your next question comes from the line of Alex Straton from Morgan Stanley. Your line is open.

Chad Britnell, Analyst

Hi. Thanks for taking the question. This is Chad Britnell on for Alex. I'd like to touch on Ball & Racquet. 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 & Racquet profitability. You saw a nice improvement in margin in 1Q. What pushes margin back to the mid-single-digit levels or beyond that you've seen in previous years? Thank you.

Andrew Page, CFO

The store growth for Ball & Racquet is largely concentrated in Asia and Greater China. This region is very open to the mono-brand retail format, which is very effective for us. Our team excels in managing this format, and that's what is contributing to the growth in store numbers. To return to our previous profitability levels, we need to continue scaling our investments. We are investing in our Tennis 360 concept, and we are confident in our capabilities there. As this concept gains momentum, we expect to see profitability and Ball & Racquet recover. We are indeed optimistic about the positive direction we are moving in.

Operator, Operator

Your next question comes from the line of Michael Binetti from Evercore. Your line is open.

Michael Binetti, Analyst

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-comp, the 19% in Technical Apparel. I know it slowed a little bit from last quarter, but you mentioned the big comparisons 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 for the brand for the rest of the year. And then, I'm just curious on the comment that we're going to 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 the financial prize is for investors as you shift to a larger format. Thanks.

Stuart Haselden, CEO, Arc'teryx

Yeah. Thanks, Michael. So yes, I think it's a good observation on the product and how it influences overall revenue, and that's reflected in the omni-comp. We're confident in the outlook that we've shared for the year that Andrew described. We've made improvements in our in-stock positions across several categories, footwear in particular. We've seen a much stronger position as we entered the year. We learned a lot from last year. We were excited to see strong footwear trends in the first quarter. Our footwear was up 41% on top of the launch of three new models last Q1, and that includes the successful launch of the Norvan LD 4, which was up 163% to plan. That's easily our largest footwear model. The Vertex Speed was also very successful in the first quarter. That will continue to be an important part of the growth story, leading our product category growth. We'll have a couple of new model launches later in the year, including the Konseal approach shoe and the trail shoe. The Gamma franchise continues to show exciting demand, moving up to the second largest franchise behind the Beta now. We're optimistic for the growth potential of Gamma. It's versatile and works in many climates, and it has great continued demand. Our women's business grew 38% in the first quarter, showing momentum that we believe will continue. Regarding partner doors in China, moving to higher-quality execution by shifting to better locations that reflect the premium nature of the brand is a key strategy for us. Expanding square footage will elevate our execution. We see this shift from a wholesale to owned location as having multiple benefits, increasing productivity, and improving execution. It's a theme we will pursue for the next few years in China.

Operator, Operator

Your next question comes from the line of Jonathan Komp from Baird. Your line is open.

Jonathan Komp, Analyst

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 is embedded. So, I just want to ask how you're embedding this after a pretty strong start to the year here versus a prudent approach to forecasting and some of the assumptions you've made?

Andrew Page, CFO

Yeah. Thanks for the question, Jonathan. The first quarter was strong. We are looking through trends and can see that they continue to be solid. That being said, there is a meaningful amount of uncertainty out there. We believe that focusing on the elements we can control is crucial. The macro uncertainties around tariffs and market conditions are always present. It is important to have a responsible guide and expectations, which we feel we've maintained, considering uncertainties that may arise. That said, our guide does infer a slowdown in the back half, and we believe that approach is reasonable given the prevailing uncertainties.

Operator, Operator

Your next question comes from the line of Paul Lejuez from Citi. Your line is open.

Paul Lejuez, Analyst

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, CFO

Yeah. Regarding AURs, we believe that both the performance category and our sports styles are performing well. From a growth perspective, sports style continues to be the biggest growth driver, but performance is one of our more mature segments. Even within the performance category, the GRVL franchise, which encompasses both running and GRVL platforms, has had successful launches. We're excited about the growth here. In terms of our average units at retail, we haven't given that specific information. However, I will say that both AOV and ASPs are improving with both these franchises and trending positively overall. Regarding the second part of your question, we haven’t noticed significant air pockets across our businesses related to tariffs; rather, we maintain broad-based strength across our portfolio as observed in recent quarters.

Operator, Operator

And that concludes our question-and-answer session. I will now turn the call back over to management for closing remarks.

Omar Saad, SVP Capital Markets and Investor Relations

Thanks, everyone, for joining. Look forward to reconnecting in 90 days for our second quarter results. Have a great week.

Operator, Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.