Samsonite Group S A

Good morning, good afternoon and good evening ladies and gentlemen. Welcome to the CentralX International 2024 First Quarter Results Earnings Call. Please note that this event is being recorded. I would now like to hand the conference over to Mr. William Yu, Senior Director of Investor Relations. Thank you. Please go ahead Mr. Yu.

Thank you, Operator. Thank you, everyone, for taking the time to join the call tonight. We have our CEO, Tal Jendro, and our CFO, Reza Telagani, with us. And Mr. Jendro will begin with a few opening remarks.

Okay. Thanks, William. Thanks, everyone, for joining us. I know for many of you, it's the eve of a holiday in Hong Kong, so forgive us for that, and thanks for being with us. So we're excited to report Q1 results. We achieved record Q1 net sales, adjusted EBITDA, and adjusted EBITDA margin on top of an extremely strong period, Q1 of last year, as we indicated on our last earnings call. We achieved Q1 sales of $860 million, delivering sales growth of 4.1%, again, off of a tremendous Q1-23 that was already up 18% to Q1 of 19, and up 57% to the previous year. My next slide shows the trend and the story on revenue. But even against these tremendous numbers, we continue to deliver growth. Gross margin, tremendously strong, the highest Q1 gross margin ever at 60.4%, and that's 240 basis points higher than Q1 of last year. We achieved record Q1 EBITDA of $161 million and adjusted EBITDA margin of 18.8, up 40 basis points to last year, continuing this trend of elevating our EBITDA margin, even with 20 basis points increase in advertising, where we stepped up to $53 million or 6.1%. sales from 5.9 last year and as you know we have a plan to bring advertising for the full year closer to 7% and we're still on track for that particularly as we head into the summer season in Q2 and Q3. We continued our Disneyland retail expansion strategy, opening 77 net new stores for the last 12 months, from March 31st last year to March 2024 this year. Tremendous story on selected retail store openings. Reg will cover some of that in his presentation. And all of that feeding to a good story, not just for the growth side, but importantly, you'll see in our fixed cost structure that our fixed costs remain consistent to the last two quarters as we continue to push the business forward. Adjusted net income, $87 million, or 10.1% of sales, up from 9.5% of sales, Q1 of 23. And we had very strong Q1 cash flow compared to last year, this time, $68 million increase, $6 million of free cash flow in a quarter. That typically is kind of a more neutralized quarter for us, very strong, driven off of strong EBITDA, obviously, and working capital timing as working capital really starts to settle into a normal course for us as well. Off the back of strong earnings and strong financial position, and as we indicated on last call, the board's recommended $150 million distribution to shareholders that will get paid in July. When we go to the next slide, it just shows the story. And I think just I wanted to highlight here what was happening last year and what we're seeing this year from a trend perspective. Last year, Q1 was tremendously strong, up 57%. You can see on the chart to the side. And we indicated this on the last call, but importantly, Last year in Q1, wholesale customers, particularly in North America but across the globe, started to buy in in a heavy way as they saw this rapid recovery in travel happening. And so we saw some very high wholesale sales last year ahead of a really robust summer travel season. So that was impacting this very strong Q1. Tumi branded North America and a bit in Asia and Europe had come back into inventory in a meaningful way. And that really fueled the tremendous Tumi story up 57%, 56%. to the previous quarter as the Tumi business really came back into stock and really delivered tremendous sales growth in Q1 of last year. And Europe, as we had indicated, had accelerated some sales into Q1 ahead of a warehouse management system last year. And I guess the point for all of these is we had these big monumental events, and we still delivered really exceptionally strong Q1 growth this year off the back of these moments last year. So we're quite excited with the results we're seeing. By brand, you can see all brands delivering growth. Importantly, Samsonite, our really core largest brand in the fleet, delivered 6.5% growth year-over-year. Tumi was 1.6% growth, so still positive growth, but again, off of that really amazing Q on last year as we came back in inventory. And American Tourists are delivering 3.2% of growth, and this is where we saw the largest impact in Europe as far as accelerating sales. So even with that acceleration from the previous year, we delivered very strong American Tourists to growth. So all three core brands delivering. All of our four regions delivering in a meaningful way. Asia was up 7.5%. I think importantly, Asia was led by China, which was up 23%, Japan 26%, and Korea 13.3%. These big markets delivering real growth. We did see in Q1 India in a negative zone, but this is an India that was up well over double what it was in 2019 off of two years of really record growth in India. And so that's balanced to an Asia at 7.5%. North America up just shy of 1%, but again, this is where we saw this really heavy-duty wholesale buy-in last year, and more importantly, the Tumi inventory position that fueled a very strong Q1 last year. So we're quite happy with this North America number continuing to deliver growth against that. Europe, constant currency down 0.5, but that's off of last year's tremendous numbers as far as accelerating sales into Q1 of last year. Just for scale, we're looking at Europe in Q2 being up, you know, mid-peen 15% plus off of what we saw last year in Q2 when we actually you know, had reduced shipping days because of the warehouse system. So Europe's doing exactly as we'd expect, and Latin America continues at close to 18% growth as we continue to capitalize on the opportunities within Latin America. On the gross margin side, we saw a tremendously strong gross margin, much higher than last year, a margin that's really a record level for Q1, north of 60%. And what we're seeing is in a couple of places, this is being driven by mixed shifts. So we can see on the chart on the top right, you can see Asia as Asia is coming back into the fold and moving at a faster pace. you know that's a 100 basis point increase in asia and as you know that has a higher gross margin so that shift is very important and our d2c business continues mid shift continues to grow at a very um calculated way up 100 basis points to 37.1 percent We saw e-commerce growth quarter to quarter at 11%. We saw retail sales up close to 6.5%, feeding this growth in D2C. And why these are important is these feed into the mixed effects of our business that's driving some of the gross margin expansion as well. We continue to add D2C stores, as I indicated. That's fueling a good story as well. And our adjusted EBITDA margin up 10%. 20 basis points or 40 basis points despite having 20% increase in advertising. Importantly, when you look at our EBITDA margin, we're stepping up advertising. Our fixed cost in dollars has stayed consistent Q3, Q4, into Q1 of this year. And all of that feeds into expansion and EBITDA margin that we've been guiding as well. And we've added 77 stores, 14 of which were in Q1. And all of that still allows us to deliver a fixed cost structure that's consistent with the last two quarters. So we're really managing this all very, very well. From an industry perspective, I think you can read your own headlines, but a few that stuck out to me that I think are important. Consumers intent to travel, off of Morgan Stanley piece of research. 60% consumers planning to travel in the next six months. Importantly, that's the same level that we're seeing last year, and last year we had this tremendous sales story and recovery. And so the intent to travel continues to be very strong. The other piece that's really playing out when we look at the space that we're in, particularly tied to travel, is that it consistently has a higher share of wallets. This is a study from Deloitte focused on American consumers. But in general, consumers are really in a new era of prioritizing travel. And we can see it. I can see it traveling. I'm sure most of you see that traveling. And so as consumers might be feeling some inflationary pressures, it's clear their intent to travel and their lean into travel continues to be very, very strong. Global travel is expected to fully recover this year. We indicated that before. It looks like it'll be 106% pre-pandemic. I have a chart on the next page that shows that. But you could clearly see this continued recovery in travel. And I think importantly, the travel for 24, 25, and 26 blended looks to be over 9% CAGR, which is really this continued trend of recovery. My next slide will show that as well. And then the other piece that we're all waiting and watching is the China recovery. And China recovery is probably a little slower. Travel recovery is a little bit slower than what we probably would have thought maybe six months ago. But it's recovering. And so when you look at Chinese arrival, 67% below pandemic levels in 23. And for 24, it looks like it will be down below by 39%. So the inverse that you can see, the recovery, it continues. But there's still a lot of recovery to come in China. which will fuel for travel which will fuel a good story for the back half of the year this year for us but importantly um we'll continue into next year as well um and so uh on page 11 this gives you a sense graphically of what i'm talking about and i think um to the left probably the easiest chart to look at you can see 106 pre-pandemic from a from a traveler's perspective And importantly, I look at 25, 26, 27, where you see this continues to grow at a meaningful level. And off to the right, it's a bit more aligned. It's hard to read. But if you look at the red line and the yellow line, but particularly the red line, this is Asia Pacific, which has a more steady onward growth trajectory, which bodes well for our business. And you can see growth in North America and Europe. The two blue lines are light blue and dark blue. continuing growth, but as we indicated, starting to normalize to a trend that's consistent with what we see in these markets as well. So again, all the forward indicators are very positive for our space and we're excited to see and we're experiencing it in our numbers. And then just lastly for me before I hand the resume and then I'll come back, we published your issue report. I always guide people to look at it. I think it gives an amazing lens into our responsible journey and what we're doing on the sustainability front. We've made tremendous progress in 23. Just a few call-ups. I won't go through all the words on the page here. But when we think about using sustainable materials, 34% of our products incorporated some level of recycled material. That's up from 23% last year, and you should expect this to continue to move for us. We've established a true global product sustainability framework looking at the sustainable materials, circularity, and product footprint, carbon footprint for products, really deep into kind of our understanding of products and how we move the needle on that front for our consumers and for our own initiatives on reducing our carbon footprint, which feeds into the planet column where, first off, we achieved 100% renewable electricity for all of our own operations, two years ahead of our expectation to really great accomplishment. We reduced our carbon intensity in our own operations by 85 percent, really well ahead of our own expectations. And third, we're really focused on setting clear expectations on reducing our scope three emissions, which involves our third-party suppliers. And so we've spent and set meaningful expectations for our supplier base to be part of our journey to reduce our emissions. And so I think we're on a good front there. And we continue to be focused on people, gender balance, which we're making progress up 1% from where we were in the prior year. We continue to focus on professional development and social compliance in meaningful ways. There's not an employee in the company that isn't aware of what we're doing on professional development and social compliance with all of our suppliers. We continue to make tremendous strides there as well. And just lastly on expectations. I think you should continue to see us make efforts on all these fronts, okay, as far as product and setting our standards on recycled content, circulatory packagings in our window. We'll continue to push on our people initiatives. On the planet side, and I think this is probably one of the most important pieces from the ESG report, is we will set a science-based target this year. And we will really work through, we're doing the work now, we'll announce that this year, and really moving towards the direction of systematically reducing our carbon footprint. And I'm quite excited there, and the team is as well. And on the governance side, we continue to work towards being able to measure and have compliance with our measurements and the statements we're making. Subject to audits, we continue to develop our teams on the ESG side, both our dedicated teams within the company resources And what you should expect from us, and another piece you'll start to hear and feel from us, is us elevating our communication on this front, you know, so that we start to elevate more, not only to the investors, but to our consumers, our employees, and a really concerted effort to tell more about what we're doing as we now start to make some really amazing traction on the ESG side. So, More to come there. And with that, I'll turn it over to Reza.