[Click eStock] "Fila Holdings, Exchange Rate Rise Offsets Earnings Decline"

10% Sales Increase Expected This Year
Meaningful Growth in Tennis Apparel

Golf Apparel Subsidiary Anticipated to Deliver Solid Performance

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 28th that although FILA Holdings is expected to experience slow performance recovery due to the global economic recession and supply chain bottlenecks, the risk of further downward revision in earnings is low due to the rising exchange rate, maintaining a buy rating and a target price of 47,000 KRW.

Yoo Jung-hyun, a researcher at Daishin Securities, stated, "The risk of stock price decline is considerably limited due to efforts to enhance shareholder value, such as the company's first-ever special dividend since its establishment," adding, "While it will take some time for a full-scale earnings rebound, a long-term buy approach is a valid strategy."

The company is expected to record sales of 1.0192 trillion KRW in the third quarter of this year, a 10% increase. Operating profit is expected to remain the same as last year at 110.1 billion KRW.

Researcher Yoo said, "Due to the impact of clearing low-priced channels, sales in both domestic and U.S. markets have continued to decline, especially in the U.S., where discount sales surged due to inventory clearance by famous sports brands, leading to higher discount rates for FILA," adding, "As sales slumped, cost burdens increased, resulting in profitability worsening compared to the previous quarter."

While the inventory situation in the domestic market is better compared to the U.S. subsidiary, sales continue to decline due to the reorganization of low-priced channels. However, it is expected that sales could increase significantly with a meaningful share due to the recent surge in popularity of tennis apparel in the market.

Additionally, the improved performance of golf apparel subsidiary Acushnet and the effect of a high exchange rate are expected to help the overall operating profit in the third quarter meet market expectations. Researcher Yoo said, "Although the proportion of sales generated in U.S. dollars accounted for 86% of total sales last year due to the rising exchange rate, it is expected to rise to the high 80% range this year," adding, "The operating profit ratio is expected to increase from 88% in 2021 to 92% this year."