Q1 2024 Amer Sports Inc Earnings Call

Participants

Omar Saad; VP, Finance and IR; Amer Sport Inc.

Jie Zheng; Chief Executive Officer, Director Nominee; Amer Sports Inc

Andrew Page; Chief Financial Officer, Member of the Executive Board; Amer Sports Co

Stuart Haselden; Chief Executive Officer of Arc’teryx; Amer Sports Inc

Matthew Boss; Analyst; JPMorgan Chase & Co

Brooke Roach; Analyst; Goldman Sachs Group Inc

Jay Sole; Analyst; UBS Investment Bank

Irwin Bernard Boruchow; Analyst; Wells Fargo Securities LLC

Laurent Vasilescu; Analyst; BNP Paribas Exane

Michael Binetti; Analyst; Evercore ISI Institutional Equities

Presentation

Operator

Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amer Sports 1Q '24 Earnings Call.
(Operator Instructions) I would now like to turn the conference over to Omar Saad, VP of Finance and Investor Relations. You may begin.

Omar Saad

Hello, everyone, and thanks for joining Amer Sports' First Quarter 2024 Earnings Call. Earlier this morning, we announced our financial results for the first quarter of fiscal year 2024. The release can be found on our IR website, investors.amersports.com.
A quick reminder to everyone that today's call will contain certain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and SEC filings.
We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures.
We will begin with prepared remarks from our CEO, James Zheng; and CFO, Andrew Page, followed by a Q&A session until approximately 9:00 a.m. Eastern. Arc'teryx CEO, Stuart Haselden, will also join for the Q&A portion of the call. With that, I'll turn the call over to James.

Jie Zheng

Thank you, Omar. The momentum behind our strong financial performance has continued through the first quarter of 2024 as we delivered sales and margin above our guidance. Our transformation to our brand direct business model 4 years ago continues to fuel Amer Sports' profitable growth today and it will for years to come.
Our high-performance technical products are resonating with consumers globally, and we are gaining share in the premium sports and outdoor market. Our consumers are engaged, and our end markets are healthy, giving us confidence that our unique portfolio of brands is well positioned to deliver another great year in 2024.
In the first quarter, we generated 12.6% sales growth, or plus 14.2% excluding currency impacts, and we achieved an 11% adjusted operating margin above our expectations. We continue to enjoy strong gross margin expansion, which reflects the strong pricing power of our brands as well as ongoing mix shift toward our high-margin franchise, Arc'teryx, which continues to generate best-in-class financial performance. And as Andrew will discuss, we have significantly improved our balance sheet. Five key factors give me confidence for 2024 and beyond. First, we own and operate a unique and valuable portfolio of premium outdoor and sports brand. Each one is fueled by technical innovation and the position at the pinnacle of its respective segment. Our brands have high engagement, conversion and satisfaction with consumers everywhere, but are still relatively small players on the global stage with significant room to grow.
Second, Arc'teryx is a breakout growth story with unprecedented growth and profitability for the outdoor industry, charting new territory with its disruptive DTC model and a strong competitive position. Fueled by tariff Amer sports' highest-margin channels, regions and the categories are growing the fastest. Third, Salomon, Wilson and all of our other brands are also healthy. They have long-standing authentic heritage premium position, high-performance products and the leading market share. Although they are earlier in their growth impression, we are building very strong foundation for future growth for these brands across categories and geographies.
Fourth, we believe our deep expertise and the unique scalable operating platform in greater China gives us a significant competitive advantage across the brand in our portfolio in this large and important consumer market. Last but not least is team. Our great journey begin with our great team, and we have assembled an experienced management team with a great track record that's energized and motivated to drive value creation for our stakeholders.
Okay. Now let's review the performance of our brand segments. First, Technical Apparel, led by Arc'teryx, Technical Apparel revenues grew 44% to USD 510 million in Q1. Excluding FX, Technical Apparel sales increased 48%. The segment was fueled by 46% DTC growth, including a 36% omni-comp against a difficult plus 61% comp comparison from last year in the first quarter. Technical Apparel growth in our direct channel was fueled by both new and existing consumers, and both strong traffic and conversion trends in stores and online.
As a reminder, Omni-comp encompass growth from both owned retail stores and e-commerce sites that have been open at least 13 months. The Arc'teryx brand continues to experience broad-based strength and is over delivering across every region, channel and category.
DTC remains the core growth engine, but we also experienced strength in the wholesale channel, which grew 40% for the segment. Wholesale growth was driven by existing comps endorsed, not expansion into new accounts or new (doors). Wholesale performance was boosted by strong reorders and the continued improvement in on-time delivery and inventory availability.
Please note that we don't expect Technical Apparel wholesale to continue growing at this rate in Q2 or for the remainder of the year.
Originally, Technical Apparel grew fastest in Asia Pacific, led by Japan, followed by the Americas and Greater China. In Japan, stores were also lapping very low inventory levels from last year. EMEA growth was driven by Arc'teryx, offset with a decline at peak performance, which faced a difficult growth comparison due to promotional activities in the prior year period. Importantly, Arc'teryx continues to generate outsized growth in key opportunity areas including footwear, women's and (inaudible) and accessories.
Arc'teryx did a great job executing its commercial expansion strategy in Q1, with several brand development I would like to highlight. This was the first full quarter for our new Shanghai flagship, which we call (inaudible). This 4-story, one of a kind, highly expensive store in (inaudible) square represents the pinnacle expression of the Arc'teryx brand at retail and has created incredible buzz for us in the market. We expect this store to generate sales well over USD 20 million in its first year.
Globally, we executed well our retail expansion plans, opening 9 new Arc'teryx locations in total in Q1, including Pasadena, Nanjing, China, (inaudible), London and in Paris, a shop-in-shop in (inaudible) department store.
Second, Arc'teryx launched its first footwear line that was designed, developed and sourced by the in-house footwear team in Portland, Oregon. Arc'teryx started its footwear journey 7 years ago, leveraging Salomon's existing platform. And 3 years ago, Arc'teryx began building in-house footwear capabilities. This launch represents the first model designed by the Arc'teryx team. We are very pleased with the market reception to what we believe is the best line of technical performance footwear designed for the mountain athlete. Since the launch, the penetration of footwear to Arc'teryx total revenue has jumped from 6% to 10% and (inaudible) has emerged as our breakout style. Based on the enthusiastic response from consumers and the key wholesale comp, we are gaining early confidence that footwear can become a meaningful profitable growth avenue for the brand.
Lastly, I'd like to address upcoming 2025 change in regulation bans PFAS forever chemicals. This new regulation are not expected to have an adverse impact on our business. We have been at the forefront of the industry, developing alternative work through materials with our key partners for a number of years. And the early reads from the consumers are very encouraging. The Arc'teryx team has already started selling the new FIFA compliant materials in our most popular model with no negative impact on sales trends. The consumer isn't reacting to any difference in the look, feel or performance of the new materials. Across the rest of the portfolio, our other brands have much lower exposure and are already well down the path of transition to FIFA's free inventory by next year.
Turning to the Outdoor Performance segment, where revenue increased 6% to USD 400 million, above our guidance for flat sales. Excluding FX, Outdoor Performance sales increased 6%. The upside was driven by strong top line performance in Salomon DTC and soft goods, particularly footwear in Asia Pacific and Greater China. This strength was partially offset by softness in our winter sports equipment franchises, which were negatively impacted by warm weather late in the ski season, 2022 delivery shifts and elevated inventory levels in the market.
Although winter sports equipment sales declined in Q1, when we look at the performance of that business over the entire winter ski season, which starts with wholesale shipments in the third quarter, our portfolio of brands had a strong season overall and top market share. The industry is healthy with solid annual bookings and the traffic in the big skiing epicenter in Europe and the Americas.
In the DTC channel, Outdoor Performance grew 42% in Q1, driven by strong results in both e-commerce and stores fueled by increased traffic and conversions. Wholesale declined 3% and was negatively impacted by challenging trends in the outdoor sporting goods channels in the Americas. Originally, Great China more than doubled, while Asia Pacific grew double digits, driven by an overachievement in footwear, especially Salomon sports category. The growth in Asia was partially offset by a decline in the Americas as the North America business has been affected by soft preorders from key retailers who are relying more on refreshment orders as they order stuff closer to (inaudible). EMEA single-digit growth was led by soft goods, partially offset by winter sports equipment softness.
As you know, we are undergoing our management transition at Salomon, and I'm operating as interim brand CEO, where we perform a comprehensive search for the next brand leader. Now 6 weeks into my interim role, I'm even more confident in the Salomon brand, our team. Salomon is a strong and unique brand with a sizable opportunity to grow its footwear franchise globally. We believe the global (inaudible) market is at a unique crossroads. More than ever before, consumers are open to new brands, (inaudible) and products. And we believe Salomon's authentic mountain sports heritage and unique performance technology will allow us to become 1 of the most impactful and upcoming (inaudible) brands.
I see 3 key strategic priorities for the Salomon brand as we look to accelerate footwear growth globally, particularly in EMEA and North America. Number one, the new customer acquisition; number two, amplifying leadership in footwear; and number three, elevating the accessibility and the visibility of Salomon's products. I believe it's very important for the brand to win its home market of Europe, and we are focused on leveraging both the Paris Olympics this summer and the 2026 Milano Cortina Olympic Games, where Salomon is an official partner.
This high-profile event will elevate profile and the reach of Salomon across Europe. To support our commercial strategy in EMEA, and to build upon our brand feeds along this event, we are opening a Salomon flagships on the (inaudible) Bay in addition to our recent store opening in (inaudible).
I'm confident in the brand and our team (inaudible) to deliver continued profitable growth in the near and the long term. With that, I will turn it over to Andrew to discuss Ball & Racquet as well as the group results and the outlook.

Andrew Page

Thanks, James. Moving to Ball & Racquet. Revenue decreased 14% to $273 million as Wilson continues to be constrained by challenges comparing against strong growth and profitability last year in Q1. Recall, this time last year, both retailers and consumers were buying earlier in the season to avoid stockouts. Retailer ordering patterns have now returned to a more normal seasonal cadence and are back to buying stock closer to need. Importantly, Wilson continues to hold or gain share in terms of retail sell-through in almost every one of its categories, which positions us well for when order trends improve.
From a category perspective, in Q1, Wilson Sportswear achieved very strong double-digit growth, although off a small base, which was more than offset by declines in other categories. Tennis declined due to slowness in the overall market across geographies, except for slight growth in China. Despite the decline, Wilson returned to the #1 performance racquet brand in the U.S., fueled by the launch of the new blade racquet in February. During Q1, Wilson opened 4 new brand stores, 2 in the U.S. and 2 in China. We are seeing positive signals in China DTC with the new Wilson store in Shenzhen generating extremely strong early sales results led by our Tennis 360 presentation.
Looking ahead, we are confident that our market leadership position and flow of innovative products positions Ball & Racquet well for when industry inventories reach balance and retailer orders and sell-ins began to reaccelerate, which we still anticipate beginning in H2 this year. We are getting some early indications from retail partners of improving future order trends, and we're also seeing reorder velocity pick up.
Given the inventory cleanup in the back half of last year, our year-over-year comparisons will become easier in Q3 and Q4. Wilson has strong product plans in place for the second half of the year, including a unique partnership for an exclusive line of basketballs with Caitlin Clark, which we announced earlier this morning. Caitlin Clark is one of the most visible and popular basketball stars in the game right now, and she will be the new face of Wilson basketball. Caitlin is a true sports and cultural superstar and will play a leading role in developing our basketball marketing campaigns from men's to women's and youth and professional, a clear sign that the women's game and its influence is exploding. The women's NCAA championship game was more watched than the men's final for the first time ever this year. Not only will Caitlin star in our marketing, we will also develop with her a dedicated Caitlin Clark basketball product line to express her personal story through our innovative basketball products.
Additionally, Wilson is accelerating its new baseball glove merchandising strategy to flow more newness and colorway launches more frequently. We are also happy to announce that Wilson and the NFL has renewed its contract for a long-term extension, ensuring that Wilson will continue to be the only brand to ever score a touchdown in the NFL history for more years to come. This news coincides with the opening of a new state-of-the-art leather football manufacturing facility in Ada, Ohio. This cutting-edge plant will also become a center of excellence for customization and personalization.
Lastly, we are relaunching our NBA ball with new products and storytelling at retail which will be our most expensive product refresh since our contract began in 2021.
Now to the numbers. As James alluded to, the fast growth of our high-margin Arc’teryx franchise is elevating the growth and profitability profile of Amer Sports Group in total. This dynamic allows us to deliver best-in-class profitable growth for our shareholders while continuing to reinvest in the many growth opportunities across our portfolio of brands, especially Arc’teryx and Salomon.
In summary, 14% constant currency growth means that we are winning with consumers, allowing us to deliver results ahead of the expectations we set in March. At the group level, sales growth was fueled by outperformance in technical apparel and strong growth in the D2C channel, China and Asia Pacific.
Turning to profitability. Adjusted gross profit margin rose 110 basis points to 54.3% in Q1, primarily driven by the company's highest gross margin business, Arc'teryx, growing faster than the other brands. Lower logistics costs, improved sourcing performance and channel and regional mix also drove gross margin expansion. This was partially offset by an unfavorable FX impact in technical apparel and inventory adjustments related to the outdoor performance in Ball & Racquet segments.
Adjusted SG&A expenses as a percentage of revenue increased 420 basis points and represented 43.7% of revenues in Q1, in line with our expectations and guidance. The primary drivers of higher SG&A include anticipated spend related to the higher mix of D2C sales as well as key investments to support our growth, including IT infrastructure investments, and new store openings.
Adjusted operating margin fell 240 basis points from 13.4% in 1Q of 2023 to 11% in the first quarter of 2024 above our guidance of 9% to 10%. Looking at margins by segment. Technical Apparel adjusted operating margin contracted 40 basis points to 23% versus a strong margin comparison in Q1 of last year driven primarily by lower gross margin from foreign exchange losses. Peak performance was also a slight drag on Technical Apparel segment margin. The Outdoor Performance segment adjusted operating profit margin contracted 340 basis points to 4.8% as expected. This was due to DTC-driven gross margin expansion that was more than offset by higher investment and operating expenses to support Salomon's growth opportunities in footwear in both the Americas and Greater China.
As expected, the Ball & Racquet segment adjusted operating margin contracted 1,040 basis points compared to the first quarter of 2023 to 4%. This margin compression was due to a deterioration in gross margin driven mainly by discounts, customer mix, inventory cost update SG&A deleverage in a difficult margin comparison.
Corporate expenses were $18 million, and depreciation and amortization was $62 million, which includes $26 million of right-of-use depreciation. Adjusted net finance cost in the quarter was $76 million, well below the $100 million to $110 million we guided to on our last call. This reflects the benefit of hedging strategies and the exclusion of approximately $17 million of onetime finance costs related to our debt restructuring in February. Also note that the $76 million still includes approximately $30 million of other finance costs that won't recur on an ongoing basis.
Our effective tax rate in the quarter was 25%. Adjusted net income was $39 million for the first quarter of 2024 compared to adjusted net income of $27 million in the prior year period. Adjusted diluted earnings per share was $0.08 compared to adjusted diluted earnings per share of $0.07 for the same period last year.
Turning to the balance sheet and cash flow. We significantly improved our capital structure in Q1 using the IPO proceeds to retire approximately $1.4 billion of debt. Our net debt to third parties declined from $3.2 billion at year-end to $1.7 billion at the end of the first quarter. Using the midpoint of our 2024 adjusted operating profit guidance, our net debt to adjusted non-IFRS EBITDA ratio is already approaching 2.5x. Please note that we will focus on bringing down the leverage ratio to 1.5x or better in the next few years through both EBITDA expansion and debt pay down.
Our focus on inventory discipline is paying off as inventories finished Q1 in healthy condition, up only 6% year-over-year versus 13% sales growth. This is better than our goal to grow inventories in line with or slower than sales growth, a target we will continue to aggressively pursue going forward.
Before discussing guidance, I want to touch on the ENVE sale announcement and the status of the Amer Sports portfolio. As we published in early May, we sold our ENVE business. This is a small franchise serving the premium cycle market and noncore to our portfolio of premium technical sports and outdoor brands. ENVE generated approximately $25 million of annual sales, evenly spread across the 4 quarters. Following this divestiture, we are comfortable with and very excited about our 10 remaining brands. They all still have significant profitable growth opportunities. Although the ENVE sale and other previous divestitures indicate our willingness to evolve the portfolio when necessary as certain franchises are no longer strategic and material to our value creation algorithm, M&A is not a priority in the near term.
Now turning to guidance. Given our confidence in our portfolio, and its financial performance, we are slightly raising our guidance for the full year adjusted diluted EPS despite a higher-than-originally-anticipated effective tax rate. However, the fact that we have only 1/4 of the year under our belt and absorbing the loss of the ENVE revenue for the remainder of the year, we are not raising full year revenue guidance at this time. However, should trends continued and stronger-than-anticipated demand materialize, there is no structural reason to prevent us from continuing to deliver financial performance ahead of our expectations.
For the full year, we continue to expect mid-teens revenue growth. Given the upside in Q1, we are more comfortable that we will end the year towards the high end of the mid-teens range. This incorporates greater than 25% growth in technical apparel, mid- to high single-digit growth in outdoor performance, including the ENVE divestment and low to mid-single-digit growth in Ball & Racquet. For the year, we expect FX to be neutral to reported sales growth at the group level. We slightly increased our adjusted gross profit margin guidance, which is expected to be approximately 54%. We also still expect an adjusted operating profit margin of 10.5% to 11% for 2024. Our net finance cost for the year will be $215 million to $225 million, and we expect to have an effective tax rate on an adjusted pretax income of approximately 38% versus the 25% to 35% expected previously.
The higher effective tax rate reflects deductibility limitations related to interest expense associated with our debt. We are designing and implementing strategies to reduce our effective tax rate, and we are confident that we will be able to reduce our effective tax rate to a level that is consistent with other global consumer companies.
We now expect adjusted diluted EPS to be towards the high end of the previous guidance range of $0.30 to $0.40 per share.
Looking at the segment. We expect 2024 adjusted operating profit margin of slightly above 20% for Technical Apparel, high single-digit for Outdoor Performance and a low mid-single-digit adjusted segment margin for Ball & Racquet.
Looking at Q2, we expect revenue growth for the group to be approximately 10%, led by Technical Apparel. We expect 2Q adjusted gross margin to be approximately 54%, driven primarily by mix shift benefits and an adjusted operating profit margin of approximately 0%. Based on current interest rates, our net finance cost for the quarter will be $45 million to $50 million and an effective tax rate of approximately 38%.
This leads to adjusted diluted EPS in the range of a $0.04 loss to $0.08 loss per share.
With that, I'll turn back to the operator for Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Lorraine Hutchinson, Bank of America.

Regarding Arc’teryx, you spoke about outsized growth in footwear and women's. Can you talk about how big these 2 categories are today, goals for the penetration going forward? And any margin implications of growing these categories?

Stuart Haselden

Lorraine, it's Stuart. Yes, thanks for the question. And very excited about the momentum that we're seeing both in our new footwear line as well as a potential that we see for our women's -- so women's is just over 20% of our business. Currently, we think that could be upwards of 40% in time, and we've organized a powerful team inside the company to work on that strategy. Footwear, we've been working on it now for about 3 years (inaudible), exciting launch of the 3 new models that have been designed in our Portland design center that was mentioned on the prepared remarks.
And we see that business growing rapidly. Through the end of last year, it's right around 6% of sales. Since we launched the 3 new models, we've seen our penetration of footwear grew to 10%, I think as James mentioned, and really seeing exciting momentum with these 3 new models that represent almost 50% of sales since we launched them.
We're seeing, in the 10-week central launch, our footwear revenues have increased over 100%. So we really believe that Arc’teryx has a future as a legitimate competitor in the athletic footwear space. And from a margin standpoint, it's a relatively small business today. It's slightly dilutive to our overall margin. But we think as we grow it (inaudible) invested in our product margin. So not a real challenge from margins (inaudible). In women's margins are very healthy, very strong and on par with our men's margins as well. So 2 important parts of our business (inaudible) we have identified (inaudible).

Operator

Matthew Boss, JPMorgan.

Matthew Boss

Maybe, Stuart, just to pick up on that at Arc’teryx, could you speak to new customer acquisition trends that you're seeing at the brand? And any change in momentum at the brand as we think about second quarter to date just relative to first quarter performance?
And Andrew, on gross margin, so this year 54%, is there any ceiling as we think about gross margin performance moving forward? I think 54% was the long-term target. So just any constraints to further gross margin expansion from here?

Andrew Page

This is Andrew, I'll start off with the gross margin and turn it over to Stuart. With regard to gross margin, as you recall, our long term, we thought that we had meaningful upside on a long-term basis gross margin -- up 300 basis points. And we have -- as you can see, as we continue grow our business and we grow our fastest franchise and our most profitable channels faster, it is a meaningful compounding effect (inaudible) margin. We've also talked about the fact that we have planned our business and structured our business around what we believe to be prudent growth rates. But to the extent that demand materialize, we are able to service that demand as those structural constraints that prevent us from service that demand.
So you saw that in Q1 with regard to Arc’teryx and its overall performance, again, has a compounding affect. So I do think that as we continue to grow that business, it is going to have a strong impact on gross margin, as Stuart just alluded to, even the new categories that (inaudible) women's footwear, we don't see those deteriorating gross margin as well. We continue to drive D2C in our Outdoor Performance business and footwear. That's also -- and it's built in our guidance (inaudible).
Stuart C. Haselden
Yes, Matt, to your other questions on our carry. So really happy with the momentum that we saw in the first quarter, strong KPI fundamentals across regions and channels saw the omni-comp that we reported, and that was up against some very difficult last year comparison and pleased with the balance of the business regionally, strong results in North America, China and our APAC business as well. So, it's really exciting momentum that we're seeing across really every part of the business. As we look at the second quarter, we're seeing these trends continue, we're lapping the toughest comparisons this year on a quarterly basis versus the second quarter of last year. And yet, we're still very pleased with the Omni-comp momentum that we're seeing in the second quarter.
And it's really -- it's a high-quality full-price growth story. And again, we're continuing to see great balance regionally and by channel. We're in a strong inventory position that we all haven't been throughout all of last year. We're much stronger coming into this year (inaudible) outperform if and materialize. So -- and in regards to your other question on customer acquisition, we continue to see strong customer (inaudible) expansion, very healthy average purchase patterns and retention and acquisition statistics that we measure across every region.
So we're pleased with how the guest file is expanding and something that we feel we're cultivating a very strong level of engagement that is -- that may offer years to come.

Operator

Brooke Roach, Goldman Sachs.

Brooke Roach

As you contemplate the stronger momentum in the Arc’teryx brand, how are you thinking about reinvesting upside for future growth back into SG&A versus flowing through that stronger leverage to the bottom line? And then perhaps for Andrew, you spoke to improving future order trends from retail partners in North America wholesale. Can you elaborate on inventory levels today for both Ball & Racquet and Outdoor performance? And the drivers of your improved confidence for stronger growth in those segments in the back half?

Stuart Haselden

Brooke, it's Stuart. So absolutely, from an SG&A standpoint and reinvestment, we are taking a portion of the beat that we're seeing on the top line and reinvesting the business. Given the pace of growth that we're seeing, it's imperative that we are looking into the future and identifying the critical strategic investments that we need to have in order to seeing the trajectory and build the business for the long term. We've seen explosive growth over the last 3 years that we can only sustain this by building a very solid foundation.
Areas that we're focused on for investment include our infrastructure, our supply chain, technology (inaudible) talk about in the past, the investments that we've made to strengthen our supply chain, our ERP systems and technology, our digital platforms for our e-commerce. So these are all areas that we're very focused on ensuring a strong (inaudible) scale of business that we're (inaudible).
And otherwise, just across key parts of our infrastructure from product team to the brand team to our commercial team as well and the business has seen exciting growth (inaudible) and that's only sustainable if we're able to invest. And I'd also mention we're seeing very strong store expansion, which is another (inaudible) of investment. The second quarter, we're going to see the highest number of store openings this year. We'll open 17 new stores, we'll close 4 or 5 stores in the second quarter. that will be the most stores that we've opened probably ever and the highest quarterly (inaudible).

Andrew Page

Thanks, Brooke, this is Andrew. And you alluded to inventory North American wholesale (inaudible). So as we exited 2023 really nice (inaudible). You can see as we move through 2024, inventory was up about 6% year-over-year. But exiting 2023 in a strong inventory position set us up well to very responsible to our wholesale partners. We understand that the ordering cadence and the ordering patterns has been off in 2023 given the fact that wholesales were rushing to inventory exiting 2022 and the first quarter of 2023. And so that's a tough comparison.
But we look at both our sell-in to our wholesale and as importantly, we look at our sell-through. Our sell-through from our wholesale accounts has been (inaudible). It's been leading across most of the categories that we participate in and the velocity is starting to pick up (inaudible). So we have a healthy inventory position, not aged, except the levels that we'd like. We're not carrying excess inventory. We cleaned that up and made meaningful investments fourth quarter of 2023 (inaudible) inventory. We're well positioned.
As we stated a couple of times, we do feel like exiting H1 and moving into H2, a couple of things. One it's easier comparison for us because of the investments that I just talked about and cleaning up inventory last year. And signals from our wholesale accounts is that they believe that they are cleaning their inventory up and the data that we get from them is that even in a constrained -- position, we're taking share (inaudible) to get out of H1 (inaudible) going to do very well to take advantage of the inventory in the market. But our inventory is (inaudible).

Operator

Jay Sole, UBS.

Jay Sole

James, I'm wondering if you can comment on the company's performance in China. Revenue in China was better than expected. And I think there's a view of the consumer spending environment in China is kind of choppy. So can you just tell us more about how you're delivering really strong growth in China, and if you think that strong growth can continue?

Jie Zheng

Jay, this is James. Thank you for your question. I'll give a quick snapshot about how China current retail environment looks like, okay? So actually, overall Chinese economy still face a big challenge, okay? We usually look at the macro situation in the -- especially in consumer sectors, we have seen certain fixed slowdown from the luxury segment as well as the cosmetics. However, I mean, in our industry, sports industry, I think the trend is still moving to a very positive direction given the more and more consumers they view their health is the most important matter in their lifestyle.
So basically, there are a lot of consumers that participate in the sports at the very high level and especially for outdoor activity. So this gives us a very strong background to -- basically to grow our business, especially for Arc’teryx and Salomon, both brands really position a very unique premium segment in China outdoor markets. And the Arc'teryx really taking on leadership role in Chinese -- overall Chinese outdoor segment and this segment, which I mean basically it's booming at this moment.
And likewise, Salomon also -- in China also created a new (inaudible) based on the great introduction about our sports footwear business in China market.
So in an nutshell, I would say the market is getting more challenging given the overall economic development and the -- our segment is still very promising and we see more and more consumers like to spend money on sports activity and especially for outdoor activity. So the team here, I mean, still get a very high level of confidence to continue to drive our business based on our current footprint we set up for these 2 major brands.

Operator

Ike Boruchow, Wells Fargo.

Irwin Bernard Boruchow

Two questions. Andrew, a big picture for you. Just in North America, I guess, Jay hit kind of the China macro. Just in North America, kind of just what are you seeing versus 3 months ago? Anything to call out by kind of income cohort or price point across the brand? Just kind of -- I'm trying to understand, it's very dynamic. Just trying to understand if there's anything to read into there, good or bad?
And then maybe a quick follow-up for Stuart. Just on the wholesale number for Arc’teryx in Q1, just kind of explain what exactly drove that robust number? And then why we should be expecting everything? What exactly -- what kind of growth rate should we be expecting that to moderate through the rest of the year, would be great.

Andrew Page

Yes. So let me touch on North America, again, a little bit tough on last question, and I'll let hand it over to Stuart to talk about (inaudible). We really started coming out of 2023, we were definitely hearing whispers that they thought that H1 was going to be a tough year. Retail (inaudible) with H1 is going to be a tough year, not as much around consumers, but just around the fact that they needed to work through their inventory.
And we set ourselves up to be able to take advantage. We cleaned our inventory up. We made sure that we had premium products available to be able to service the replenish orders going into 2024. So 3 months later, what are we seeing? Three months later, we are actually seeing that we're on strategy. There are no indications that would suggest that our expectations coming into 2024 were off of the fact that I think about the cadence of Q1 (inaudible) Q1 was actually on par with our expectations and look at how we exited Q1 and into Q2, we're starting to see some pickup in the last (inaudible).
We're excited as an example to think about baseball we lead the category. We're excited about both our gloves and our bat launches that we have later this season. We're excited about some of the things that wasn't in our plan. So the Caitlin Clark basketball was something was not part of our plan, our blade racket regaining the #1 position in U.S. and sell-through there. So we continue to be excited about what we expected coming into 2024. And as we've moved through first quarter of 2024, felt like we've built in all the things that we can control in our plan and we built in the risk associated with the macro environment -- been a surprise to us through the end of Q1.

Stuart Haselden

Ike, it's Stuart. On the wholesale question, I would say stepping back, and we have a new focus on wholesale after several years of building our D2C strategy. We still see D2C as the primary engine for our channel strategy, but we're the important relationships points of distribution for us on the wholesale side, and we created a new focus there and feel good about the mix of the business. I think, in the first quarter, we were about 70% D2C globally. And the upside that we saw in the first quarter from a wholesale standpoint, really in our North America region and it was related to just timing of certain deliveries and (inaudible) wholesale partners saw some revenues that we had originally planned in second quarter, shifted in the first quarter and it's a tactical move -- more to make sure we are servicing accounts in a high-quality way. But we see a lower growth rate for wholesale over the course of this year is still quite healthy, and we're pleased with the overall mix of the business, but we see wholesale as a strategic part of our business that we believe is (inaudible).

Operator

Laurent Vasilescu, BNP Paribas.

Laurent Vasilescu

Andrew, last quarter, you gave us a very helpful guidance on segment revenues for 1Q, I think you mentioned this morning that for 2Q Arc’teryx will lead, that would make sense. For the audience, is there any way you can give us some kind of bridge across the 3 segments? And then I have a follow-up question on Salomon.

Andrew Page

I think in the prepared remarks I talked about with regard to the revenue development. Outdoor Performance is high single to low double digit growth in the second quarter and Ball and Racquet Sports is (inaudible) also we talked about (inaudible).

Stuart Haselden

Yes, sorry, I just want to add. So technical apparel over (inaudible) it's still performing extremely well even against a difficult comparison. Outdoor performance in Ball and Racquet second quarter and much more muted performance in single digit.

Laurent Vasilescu

Okay. And then as a follow-up question on Salomon. I know Franco recently departed on the Salomon brand. James, could you talk about what the criteria you're looking for, for a new Salomon leader? How long do you think you expect that search process to last? And what is the Salomon's growth trajectory going forward, particularly around footwear?

Jie Zheng

Laurent, I mean I -- So we are on the way to have a search, okay? And for us, the ideal candidate for Salomon brand, we really like a person who got experience (inaudible). And on the other side, we also like the candidate coming from the similar industry, footwear and apparel segment. (inaudible) how to run our overall (inaudible). And the -- obviously, the leadership, a strong leadership (inaudible) also the criteria (inaudible). So these are the major criteria. We are trying our best to find the right candidate. So I assume we will have another 6 to 12 months for us (inaudible) trying to find the right candidate for the brand.
And in terms of the overall growth trajectory for the business of Salomon, So obviously, so we will continue to stick on the strategy. We give to you guide at the beginning of the year. So basically, the footwear will be the key growth engine for us. So given the successful story, we built up both in China and APAC, we really believe we have a very strong footwear franchise to build up in the market to address the needs from the cross-border (inaudible). We position the brand as a modern outdoor lifestyle brand. And so we've also created a new category for outdoor sneakers, driven mainly by the sports style franchise.
I think that part will really lead us to grow our business in both Europe and North America. So we are under way to really drive this. We just opened a new Salomon footwear inspired shop in (inaudible), which is the main commercial street right in the center of Paris commercial areas and with 100 square meters and in the first 2 weeks, sales is really out of our expectations, really demonstrating our new product lines really adjusting in the market besides our quality well-established (inaudible) outdoor professional, technical outdoor segments, okay? So we really believe this kind of strategy can -- the products can really drive us to have higher growth for our footwear (inaudible).

Operator

Michael Binetti, Evercore ISI.

Michael Binetti

I just want to ask 1 preliminary one before I ask my questions. I think the audio is breaking up a little bit. So we had trouble hearing the growth rates by segment that you gave, the audio actually broke out. If you wouldn't mind just restating the 3 segments for 2Q. My questions would be, I guess, just to maybe go back to a question you spoke on a little bit earlier, Andrew. I'd be interested to know the trajectory of wholesale through the year, particularly for Salomon Outdoor and I guess, Ball & Racquet seems to be holding back the revenue growth rates a little bit in the first quarter. You're speaking to sellout improving. Anything maybe on what sellout growth looks like -- I guess, sorry, what wholesale revenue looks like? Like when can the growth rate of revenue start to improve and look like -- more like D2C in those 2 segments?
And then I think Americas was guided to mid-teens growth in 2024. I'm curious if there's any change to that, given where first quarter came in?

Omar Saad

Michael, it's Omar. Just to kind of clarify. So we're not giving quarterly -- we're not going to provide quarterly detailed segment guidance, just to update the annual, but more a rank order. So obviously, Technical Apparel is leading the growth in the second quarter and for the full year and followed by outdoor performance in Ball & Racquet. And I'd say single digits for the second 2 outdoor performance in Ball & Racquet in the second quarter is probably the right way to think about it.
In terms of your other comment around mid-teens Americas growth, that must have been a miscommunication that's not guidance that we've provided.

Michael Binetti

Any thoughts on the wholesale question?

Stuart Haselden

Yes. Andrew, you can talk about kind of the (inaudible).

Andrew Page

Yes, trajectories are wholesale, how does it build throughout the year in Ball & Racquet (inaudible) the performance. So from a Ball & Racquet perspective trajectory throughout the year, as we've talked about, wholesale in Q1 was going to be by far a toughest comp. Q2 will continue to be a bit tougher, but we definitely expect we give you guidance that we expect the trajectory to accelerate, especially as you get in the next Q2 and in Q3 and Q4. We expect (inaudible) Ball & Racquet.
Similarly, with regard to Outdoor Performance, we expect a similar trajectory back half weighted primarily in the different regions. With Ball & Racquet, you're pumping all of the cleanness that I talked about last year from an inventory perspective, Outdoor Performance to get into benefit, as you remember last year, added about 97 stores in Greater China, some of which were also related to the partner stores have captured in wholesale. So you get the full year benefit of that. And we're also adding additional stores in Greater China this year.
So we expect an acceleration as it relates to our wholesale accounts (inaudible). Again, easier comp for Ball & Racquet, (inaudible).

Omar Saad

Operator, unfortunately, I think that's all we have time for, Jay.

Operator

Understood. Due to loss of time for further questions. This concludes the Q&A session. I will now turn the conference back over to Omar for closing remarks.

Omar Saad

Thanks, Jay. Thanks, everyone, for joining. We look forward to reconnecting with you on our second quarter earnings call in approximately 90 days.

Operator

This concludes today's conference call. You may now disconnect.