[Click eStock] "Fila Holdings, Deficit Widens Due to US Inventory Reduction"

Daishin Securities stated on the 22nd that although FILA Holdings is expected to see a larger deficit due to the U.S. subsidiary's inventory reduction plan, it will maintain its investment opinion of 'Buy' and target price of '44,000 KRW' reflecting performance improvement next year.

FILA Holdings' sales in the fourth quarter of last year recorded 896.7 billion KRW, down 7% compared to the same period the previous year, and operating profit turned to a loss of 7.9 billion KRW. Sales of the U.S. subsidiary, as well as domestic sales, continuously declined, and especially due to inventory clearance by top U.S. sports brands, discount sales surged, leading to an increase in FILA Holdings' discount rate, which negatively impacted performance. Additionally, costs related to workforce restructuring further increased losses.

However, FILA Holdings' royalty income increased by 20%, and commission income from China recorded a slight decrease of only 3% despite the impact of lockdowns, showing solid performance. The subsidiary Acushnet posted an operating profit of 11.6 billion KRW in the fourth quarter, turning profitable compared to the same period last year, continuing a favorable performance trend.

FILA Holdings plans to reduce inventory of its U.S. subsidiary this year. Accordingly, the operating loss of the U.S. subsidiary is expected to expand to around 80 to 90 billion KRW this year due to discounted sales aimed at reducing inventory assets.

Yoo Jeong-hyun, a researcher at Daishin Securities, said, "Reducing inventory is very important at this time, so the increasing losses are regrettable," but added, "Considering the strong royalty income mainly from Europe, the good performance outlook for Acushnet, and above all, the expectation that domestic operating profit will increase by 33% despite a decline in domestic sales, the expectation for a turnaround remains valid."