Japan’s Asics on Wednesday said it will spin off its high-end Onitsuka Tiger business, a key driver behind four straight years of record profit thanks to a tourism boom and a surge in demand for its retro-inspired sports shoes.
Under the plan, the nearly 80-year-old Onitsuka Tiger business will be transferred to OT Group, a wholly owned subsidiary, via a company split that will be effective on January 1, Asics said. The move is aimed at speeding up decision-making and boosting competitiveness, it added.
“As organisations grow too large, decision-making often slows as approvals become more layered and time-consuming,” said Tatsunori Kawai, chief strategist at Mitsubishi UFJ ESmart Securities. “So a spin-off is an ideal move for such fast-growing companies.
“Onitsuka Tiger has already established a solid and independent brand position and there’s not much domestic competition. The spin-off is unlikely to erode Asics’ core business.”
Shares of Asics, which competes with the likes of Nike NKE.N, Adidas ADSGn.DE and Puma PUMG.DE, rose nearly 2% in Tokyo, compared with a 0.7% fall for the broader TOPIX index .TOPX. The stock has jumped roughly sevenfold over the past five years, giving it a market value of about $20 billion.
Onitsuka Tiger has been a key growth driver for Asics in recent years. Sales of the brand jumped 43% from a year earlier to 136.5 billion yen ($851.32 million) in the year that ended in December, buoyed by strong demand in Europe, inbound tourism to Japan and a weaker yen.
Brazilian Ana Lebl, 18, was among scores of duty-free shoppers who bought a pair of Mexico 66 SD trainers last week at an Onitsuka Tiger store in Tokyo.
“I’ve always seen them online and they’re so fun,” she said, adding that shopping at Onitsuka Tiger was high on her bucket list for her Japan visit. “Even before my trip, some of my friends asked me if I was going to the store and told me about the shoes they got.”
The Onitsuka Tiger business posted a profit margin of nearly 38%, the highest among Asics’ five core categories.
In February, the Japanese maker of athletic footwear and apparel forecast another year of record profit this year.
Known for its minimalistic designs, Onitsuka Tiger traces its roots to Asics’ predecessor, founded in 1949 by Kihachiro Onitsuka, who sought to make sports shoes out of a belief that nurturing healthy young people was essential to rebuilding Japan after World War Two.
Onitsuka developed his first pair of basketball shoes and named the brand “Tiger,” inspired by the strength and agility of what he saw as Asia’s most powerful animal.
($1 = 160.3400 yen)
Reuters
