Lululemon Athletica founder Chip Wilson is betting billions of dollars of his fortune that 2024 will see investors clamoring to own a piece of Wilson footballs and Salomon skis.
Chip Wilson is the 20% owner of Amer Sports, a conglomerate that includes some of the sporting goods industry’s most-recognizable brands, including its three largest, Wilson, Salomon and outdoor clothing brand Arc’teryx. It has eight other niche brands headlined by baseball bat maker Louisville Slugger.
Amer filed for an IPO last week that promises to add a few more billion to Wilson’s net worth of $6.8 billion. But the appeal of Amer’s clutch of brands isn’t as straightforward as it seems. In the years since Wilson and partners have owned the business, the company has put much of its focus on a new market—China—to the apparent detriment of others, pushing the business into the red and saddling it with shareholder debt.
In 2019, Wilson, through his investment firm Anamered, joined three Chinese firms–ANTA Sports, Tencent and FountainVest–in buying out then-Finland based Amer Sports. The consortium paid $5.5 billion to take the publicly traded business private. Assuming the parties split the equity based on the sales price, Wilson put $1.1 billion of his fortune into the deal.
Now he’s hoping to nearly double that. Amer Sports filed for an IPO last week seeking a valuation of $10 billion, according to a report by Bloomberg News citing sources it didn’t disclose. That would make his 20% stake in the business worth $2 billion. If Amer succeeds, it will be the largest IPO of Wilson’s life, dwarfing the money he made when Lululemon went public in 2007. At that IPO, Wilson made a fortune of about $550 million in stock and cash from shares he sold. Of course, the athleisure-wear company’s stock market run has made Wilson a multibillionaire in the years since.
“I remained chairman until 2013 when I lost control of the culture and product development,” he writes on his personal webpage. “At odds with a board of directors who did not want to invest in the future, I departed in 2013.”
Ever since then, the outspoken Canadian has periodically taken shots at Lululemon and its customers, even as he remains the largest shareholder. In 2013, he said some women’s bodies “just don’t actually work” for the Lululemon pants in a ham-fisted attempt to defend the quality of the garments. More recently, he slammed the company for its efforts at diversity, equity and inclusion. “I think the definition of a brand is that you’re not everything to everybody,” he told Forbes. “You’ve got to be clear that you don’t want certain customers coming in.”
Wilson isn’t an executive at Amer, but he and his fellow owners have a very clear idea on the customer they want coming in: Chinese consumers.
In late 2018, when Wilson and his Chinese partners first bid for Amer Sports, the group of brands collected just 15% of its $3.16 billion in annual revenue from the Asia-Pacific region, according to Amer’s financial reports of the time. Now after four years of ownership, the consortium says nearly 15% of its $3.55 billion 2022 sales came just from Greater China (China, Taiwan, Hong Kong and Macau), with the rest of Asia-Pacific contributing a further 7% of sales.
In its pitch to investors in the prospectus, Amer Sports notes that its appeal in China is a great advantage for the business: “We have grown our Greater China business significantly at a time when others were facing challenges or retrenching. We now have a deep understanding of the average consumer in Greater China and are able to deliver authentic, technical and premium products that align with consumer preferences.”
Strength in China is, of course, a plus–Salomon and Arc’teryx are especially popular with consumers there. But growth there appears to be overshadowing weakness everywhere else.
Amer financial data isn’t easy to compare over years; the company used to disclose sales in Euros prior to the 2019 takeover, while it now reports sales in U.S. dollars. In additions, regions may be defined differently in different years, and two small brands were sold off.
However, adjusting for annual exchange rates, financial data strongly suggests that the increase of sales from 2018’s $3.12 billion to 2022’s $3.55 billion is all China. Other regions appear to be losing sales. In 2018, Europe, Middle East and Africa sales were $1.37 billion and fell to $815 million in 2022. Sales in the Americas slipped from $1.33 billion in 2018 to $1.03 billion in 2022, while Asia-Pacific fell more than half, from $392 million to $154 million. The first nine months of 2023 have shown a rebound in each, but only the Americas appear primed to exceed 2018 sales. On top of that, the once profitable Amer business has been posting regular net losses under the Wilson consortium, including a loss of $253 million in 2022.
In another red flag for potential buyers, the proceeds of the IPO aren’t going to fund Amer Sports’ business. Instead, the money will go to pay off debt taken by Chip Wilson and his Chinese partners. According to a footnote in the prospectus, their joint venture has more than $4 billion in debt.
“I think an entrepreneur is someone who is… driven to bring unpopular ideas to fruition,” Wilson says on his website. The stock market will soon decide if Amer’s IPO is an unpopular idea that will bear fruit.
