Asics Stock Catches Fire Along With Its Dad Sneakers
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Asics Stock Catches Fire Along With Its Dad Sneakers

Shares in the Japanese running-shoe maker have just about quadrupled

By JACKY WONG
Mon, Jun 3, 2024 9:00amGrey Clock 3 min

Asics , the 75-year-old Japanese sneaker brand, is having a moment. So are its shares.

The running-shoe maker’s stock price has quadrupled in total return terms over the past two years. Its financial performance is strong: Revenue in its last reported quarter grew 14% from a year earlier while its operating profit surged 53%.

Asics has long been a well-loved brand among the running community. Around a quarter of 54,000 runners who finished the Paris Marathon sported a pair of Asics, including both winners in the men’s and women’s races, according to the company.

In fact, even Nike can trace its roots back to the Japanese company. Nike began its business in the 1960s by importing and distributing shoes from Asics, then known as Onitsuka, in the U.S. Onitsuka Tiger remains a high-end fashion brand within Asics.

Asics has benefited from the Covid-19 pandemic: More people picked up running as a hobby when they had nothing else to do. At the same time, people working from home began giving priority to comfort in their footwear—discovering that lightweight shoes with cushioned soles designed for running are pretty comfortable for walking around in, too. Running-shoe upstarts such as Hoka and On Holding have also seen explosive growth in the past few years. Hoka’s sales in the quarter ended in March surged 34% from a year earlier, pushing shares of its owner , Deckers Outdoor , to record highs.

The performance running shoes segment is Asics’ largest by revenue, and it has tried to maintain a close-knit community of runners. Asics acquired Runkeeper, a popular fitness-tracking app among runners, in 2016. In recent years, it has been acquiring race-registration companies, including Njuko Sas in Europe and Register Now in Australia. Its loyalty program has nearly 15 million members globally.

But outside of runners and Onitsuka Tiger, Asics was perhaps best known for “dad sneakers” —a style of shoes that are picked more for practicality than aesthetics. Lately, however, some old Asics designs have become unlikely fashion symbols. Youngsters have apparently eschewed conventional beauty standards and embraced the uncool: Crocs and Hoka are some other examples of “ugly shoes” that have seen an explosion in popularity.

Asics has done its fair bit, too. Its collaboration with designers from Vivienne Westwood to Cecilie Bahnsen have generated lots of buzz on social media. For example, its redesign of its 2008 Gel-Kayano 14 sneaker with Canadian design studio JJJJound has been a smash hit . The shoe can sell for more than $1,000 on online marketplace StockX. Asics was the fifth most-traded brand on StockX last year, rising from No. 10 the year before. Revenue for the company’s more fashion-minded SportStyle division grew 52% year over year in the last reported quarter.

Even better news for investors is that the company has been more profitable, too. Operating margin in its quarter ended in March was 19.4%, compared with 9.5% two years earlier. Partly that is because the company has shifted its product mix to more premium products. It has also been selling more directly to customers than through wholesalers. Around 64% of its sales were through wholesale in the first quarter, down from 74% three years earlier. E-commerce sales have risen from 13% to 17% of sales.

Asics trades at 34 times forward earnings, according to S&P Global Market Intelligence. That is a similar multiple as Deckers Outdoor but higher than bigger peer Nike, which trades at 25 times. The premium could be justified if Asics could keep growing its sales with better margins.

Asics is sprinting ahead. It still has room to run.



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How the Middle East Became the Latest ‘Gold Rush’ in Marketing

The Middle East is set to be the fastest-growing marketing region in the world, driven by momentum in countries such as Saudi Arabia

By MEGAN GRAHAM
Tue, Jun 18, 2024 5 min

Saudi Arabia’s fledgling advertising industry and continued growth in the sector in the United Arab Emirates are helping to make the marketing business in the Middle East the fastest-growing in the world.

Ad spending in the Middle East is projected to increase 8.1% to $6.6 billion this year, up from 3.5% last year, according to advertising research firm WARC.

That expansion is building from a much smaller base than in many other ad markets. The Netherlands alone will generate $6 billion in ad spending in 2024, up about 2.3%, WARC said. But it is also enough to outpace every other region in 2024, the firm said.

“It reminds me almost of the gold rush,” said Reda Raad , chief executive of TBWA\Raad Group, an ad agency based in Dubai, in the United Arab Emirates, that is part of the U.S.-based ad holding company Omnicom Group . “I don’t think we’re going to see this type of growth again in our lifetime.” TBWA\Raad has won eight new clients over the past year, with an increase in head count of 17% to accommodate the new work, Raad said.

Some international brands have long maintained a presence in the region. PepsiCo has considered the area a strategic market for decades, said Karim Elfiqi , senior vice president and chief marketing officer at PepsiCo Africa, Middle East and South Asia. Sponsorship deals with local stars such as Mohamed Salah , a soccer player from Egypt, “are a testimony of how over time, we have been part of the cultural fabric of the region,” Elfiqi said.

Other major brands have formed a more recent focus on the Middle East. The Lego Group opened a Middle East and Africa headquarters in Dubai in 2019, citing the size of the region’s young population. That office has developed work such as a Ramadan-themed campaign that ran in the U.A.E. and Saudi Arabia, among other locations.

‘Massive growth’

The Middle East’s ad market has lagged behind regions such as North America and Europe partly because of stricter cultural norms and regulations that affected business, as did a more limited media landscape and economic instability, according to Raad.

But marketing growth in the region is now being driven in part by newfound marketing interest in Saudi Arabia, where ad spending this year is expected to reach $2.1 billion, nearly double its level in 2019, according to WARC. Growth is also coming from the U.A.E., whose ad market is expected to reach $1.7 billion in 2024. Smaller contributors include Qatar and Kuwait.

The landscape has changed now because of economic diversification, increased connectivity and a move into the digital world, leading international brands to enter and invest in campaigns tailored to the region, Raad said.

Four years ago, Saudi Arabia made up a small proportion of business at Lightblue, a creative experience and tech agency based in Dubai. These days, 40% of its business comes from the country, says co-founder David Balfour , who opened an office in Riyadh last month as a result.

“The conversation used to be, ‘We’re going to do this in Dubai.’ Now, it’s ‘We’re going to do this in Dubai—and in Saudi.’” Balfour said. “We’re seeing massive growth in that region.”

There have been speed bumps. As government spending reaches huge levels , Saudi Arabia experienced a rare economic contraction in 2023.

But the country’s efforts to expand its economic pursuits beyond oil have led to the creation of new brands, which are seeking the help of marketing agencies to get the word out.

Marketers in the region are seeking help to stay on-trend in areas such as generative artificial intelligence and social media, said Greg Paull , principal of R3, a consulting firm that helps match advertisers with agencies.

“U.A.E. has been a magnet for the region for 20 years as more investment has come in—but with the new leadership in Saudi since 2017 [when Mohammed bin Salman was named crown prince ], this market has gone through remarkable growth,” Paull said.

Saudi Arabia has faced criticism for its human-rights record under the crown prince, the day-to-day ruler of the kingdom, especially over the 2018 killing of dissident journalist Jamal Khashoggi and the more recent jailing of women’s rights activists.

Mohammed has outlasted the international isolation that followed Khashoggi’s killing, however, and continues to pursue an economic diversification plan dubbed Vision 2030. The country last year unveiled plans for a new international airline called Riyadh Air, is investing billions of dollars to build its tourism and videogame industries, and in March hosted a golf tournament in Jeddah under the auspices of LIV Golf, the Saudi-backed league that has both challenged the PGA Tour and struck a deal to unify with it.

Changing tides

Vision 2030 also calls women’s empowerment a top social priority and seeks to increase the country’s employment rate of women.

Nada Hakeem , CEO and co-founder of Saudi creative agency Wetheloft, said the perceptions of hardships for women in the marketing and advertising industry are outdated and inaccurate.

“As a Saudi woman who founded my company in 2012, I’ve always felt supported by the creative community and the industry as a whole,” Hakeem said. “While every society may have its challenges, I can confidently say that these challenges have not hindered our growth.”

A progression of new laws, policies and incentives are making the industry in Saudi Arabia more inclusive and supportive for women, she added.

In certain parts of the Middle East, “absolutely, it’s still challenging, but they are making the right strides, and they have the right quotas and ambitions in place,” said Rebecca Bezzina , CEO for the EMEA region at R/GA, an agency owned by Interpublic Group of Cos.

“They’ve got wealth, they’ve got world-class ambition, world-class budget. They’re not shy of doing things in the right way,” Bezzina added, speaking of the region overall. “But they still have a talent shortage, especially from a creative and design and product point of view. So often what we’ve found our success has been that they’ve come to us and said, ‘Oh, we want a world-class agency to help us launch this new venture or do this new brand.’”

R/GA said it sees 69% more requests for agency work from marketers in the region today than it did five years ago. It recently handled a brand redesign for Banque Saudi Fransi, which wanted to reaffirm its Saudi roots with a modern identity, and created Weyay, the brand for a new digital bank from the National Bank of Kuwait.

The agency hasn’t notably increased its regional workforce, but it has made changes to facilitate working across Europe and the Middle East.

Other Western players are making moves to capture a piece of the growth. Advertising giant WPP has long worked in Saudi Arabia through units such as Ogilvy and GroupM, but in 2021 established a joint venture with a local company to create ICG Saudi Arabia, a communications and media company based in Saudi Arabia. Ad holding company Stagwell opened new offices for its media agency Assembly in Riyadh in 2021 and in Cairo in 2022.

Regional hospitality

Some executives said certain facets of business dealings in the Middle East are different than in other parts of the world.

Bertrand Morin, a group account director for R/GA who is based in London and works often with Middle Eastern clients, said he spends much more time speaking about personal lives and families with those clients than those in the U.K. or U.S. He has been invited to Middle Eastern clients’ homes to join their families for dinner, something that has never happened with clients elsewhere.

But others say it can feel surprisingly familiar.

Balfour, the Lightblue co-founder, said he was struck by the number of ad-agency workers recently having dinner at the Riyadh location of steakhouse chain Beefbar, and the scene’s similarity to far-off locations.

“The staff are from everywhere in the world. The service and the food is unbelievable. There’s a DJ playing,” Balfour said. “Apart from not having alcohol, you could be anywhere in the world.”

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11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

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Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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