The Kobe-based group has turned things around—spectacularly. Central to its turnaround strategy are small but regular price increases, combined with a formidable culture of cost control and astute partnerships with distributors positioned in the premium segments of the market.
This skillful management owes much to CEO Yasuhito Hirota, who was appointed in 2018 to succeed former athlete Motoi Oyama, who took the helm at Asics during the subprime crisis and subsequently modernized its brand image. The result is operating margins that are firmly in double digits and now even above those of Nike. This shows just how far the company has come.
This success is even more evident when comparing the equipment manufacturer's revenue and operating profit trends. Over the last decade, in US dollars, the former has grown at an annualized rate of just 2.1%, while the latter has grown at an annualized rate of 12.1%. In yen, the performance is even more impressive.
The expansion of free cash flow is also revealing, having increased fivefold over the ten-year cycle, from $103m in 2015 to $517m in 2024. This momentum has enabled Asics to launch a $222m share buyback program last year, in addition to a $92m dividend payout and $128m in debt repayment.
This development has undoubtedly been hailed by investors—particularly international investors keen to see improvements in the governance of Japanese listed companies, such as the Caisse des Dépôts et Consignations du Québec, which recently acquired a 0.43% stake in Asics.
That said, while the group's recovery is admirable, its margin expansion potential is likely to soon hit a glass ceiling in an extremely competitive market contested by Nike, Adidas, On, and Hoka, amongst others. It is therefore reasonable to assume that its current valuation levels—33x free cash flow and 20x EBITDA—will not be sustainable if growth slows.
The misfortunes of peers such as Nike, Puma, Under Armour, and Lululemon are a reminder that in the sportswear sector, fortunes can sometimes be made and lost in the blink of an eye. However, while this risk must be taken into account, it should be noted that it is not yet a concern for Asics. On the contrary, in Q1 2025, sales grew by 19.7%, with operating profit up 31.2%.
The Japanese equipment manufacturer generates a quarter of its consolidated revenue in Europe, a fifth in the United States, and another fifth in its domestic market. China accounts for less than a sixth of sales, which reduces another source of potential risk.
