Samsonite Group S A

Good morning, good afternoon, and good evening, ladies and gentlemen. Welcome to the Central Night International 2024 Interim 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, sir.

Thank you very much, operator. Good evening, good morning, good afternoon, good evening, everyone. We just announced our first-time results, and today we have our CEO, Carl Gendro, and our CFO, Reza Pelleghani, with us to present our first-time results. And to begin, our CEO, Carl Gendro, will make a few opening remarks. Thank you.

Okay, thanks, William. I'm starting on page five of our investor deck. Thanks, everyone, for joining us. So just to jump right in, we've maintained strong profitability on net sales growth in the first half amidst a more challenging global trading environment, achieved sales of $1,769,000, delivering growth of 2.8%. over an exceptional first half last year, as you remember. And so our first half last year was up 16% to 2019, up dramatically versus the previous year. which was fueled by very strong consumer spending last year, very high travel demand, and large wholesale customers rebuilding their inventories was the start of last year, as many of you remember. Our gross margin continued to be exceptionally strong in the first half. At a record level, 60.2% gross margin, up 140 basis points to last year. Part of that is our discipline promotional management, but also strong growth in our DBC channels, which were up 4.7% to last year, relative to our wholesale channels, which were up 1.6%, all that contributing to a higher growth margin for us in the half. We achieved first half adjusted EBITDA of $333 million and a record first half adjusted EBITDA margin of 18.9%. That's up 10 basis points from last year, even with 20 basis point increase in advertising. And it really underscores our fundamentally enhanced margin profile, our ongoing discipline on expense management, and our resilient business model delivering really great profitability for the half for us. Increased our investment in advertising, as I said. up to 6.6% of net sales from 6.4 last year. We're generating free cash flow. It's up from the year prior, $18 million, so $82 million of free cash flow in the half, and continuing to manage our cash flows overall very efficiently. Reg will cover that in just a bit. As you know, we're pursuing a dual listing. The board has authorized us to pursue a dual listing in the United States. We expect this dual listing in the U.S. to enhance value creation over time, really by improving liquidity in our shares and making our shares more accessible to shareholders both in the U.S. and globally. And so we continue to progress on that journey. The next page just gives you a sense of what we're seeing. And so while global travel and tourism trends continue, and continue to be in many places record levels of travel, overall consumer sentiment is softer in the second quarter from what we saw in the first quarter. And, you know, despite that, we're pleased to deliver this constant currency sales growth, not just for the half, but even in Q2 we had positive sales growth, definitely with a more uncertain macroeconomic environment softening consumer sentiment and moderating consumer traffic contributing to a slower sales trend that we've seen in Q2. Despite the slower trend, our business continued to deliver strong profitability, again, underscoring a lot of the changes that we were able to achieve during pandemic and really speaks to kind of the resilient business model that we have that we're managing very closely and carefully. Global travel and tourism trends have continued to reach record levels. You know, you look at U.S. travel numbers. You know, every major kind of travel event, they're at record levels for this year. But consumers have become more selective and intentional with their spending habits. If I think about last year as travel was recovering, I think consumers were moving more freely with their wallets and moving in a – a more aggressive way from a travel perspective, they're still traveling, but I think they're definitely more intentional in the way they're spending. And when they're traveling, we're noticing, and other companies are noticing as well, maybe they're not spending at the same levels while they're on their trips as well. But what's clear is the world's still traveling at record levels. We've definitely seen premium and luxury retail sector showing signs of weakness and softer demand, which is impacting our own Tumi business. We'll cover the brands later in the deck, but our Tumi business for the half was up around 0.3%. And, you know, that's the signal of this kind of upper-end consumer and really around traffic and softer demand at this premium and luxury level. And we're seeing that in our own Tumi business, but still delivering positive growth. The midsection of the market is more resilient. And as you know, our Samsonite brand rides right in the midsection of this market, really an amazing performer there. And this is performing more in line with the travel trends that we're seeing. Our Samsonite business is up just shy of 6.6% growth in the half, up 5.8%. And really delivering across all regions. I'll show you a slide on that in just a bit. Promotional activities definitely increased in the marketplace. We knew it would as competitors came back into inventory, particularly at the entry level of the market. And so we'll cover, but in India particularly, we're seeing that. And I think importantly, we're responding very tactically, but our priority remains to drive high-quality sales to build a stronger foundation for long-term profitable brand accretive growth. I think you need to think about that when we're managing the entry level of market. We're being very disciplined on making sure that we maintain the profit profile that's appropriate for this business while driving sales growth, but not following down into levels that we don't want to be. And exchange pressure, you can see in our numbers, we talk constant currency exchange rates continue to put pressure on our reported top line numbers and profitability, but that's less something we can manage. For the quarter, achieved Q2 net sales growth of 1.5% against a tremendous number last year, Q2 23, while navigating pockets of headwinds in 24. So we're still delivering growth in the quarter. As you recall, we had outsized growth in Q2 of last year. You can see it on the chart to the left of the page, up 36%, really driven by extraordinary demand in post-pandemic travel resurgence, particularly in Asia, particularly in China, which had a tremendous resurged last year in Q2. Increased sales in North America, Tulsa customers We're filling inventory in ahead of travel season, and maybe they were behind leading into that. So we had very high numbers last year from that perspective. And Tumi really had tremendous growth driven by elevated demand for our core products, but also supported by arrival of inventory that was, if you recall, was coming in at the end of Q1 and Q2 of last year. And we're comping against that as well, where they were a little bit delayed on inventory compared to the rest of the business. In the quarter, we achieved positive constant currency growth, you know, despite a shift in the retail landscape. And so we look at softer consumer sentiment among Chinese consumers, significant promotional activities, particularly in our India business. We'll cover that in the residence section as well. And just general moderating consumer traffic in North America and increased customer cautionness. Despite all of that, we delivered a positive number for Q2 as well. And just on slide eight, What gets me excited about our business, not just for this year, but for future years, is the sheer growth in global travel. So IATA air passenger forecast numbers continue to be very strong. You can see on the bottom left of the page just the global number across all regions. But globally, you know, the travel number is quite dramatic, up 10% for this year, 8% for the next year, and blended over the next five years from 4 billion global travel. we're going to add 1.2 billion travelers in the next five years is the forecast. And for me, this is what gets me very excited about our business and the industry we're in, and all those trends continue and will continue to be in play for us for next year as well. Grand Samsonite, as I said earlier, which is kind of part of our three core brands, really led the way from a growth perspective. You can see off to the left, the first half, 22, 23, and 24. I might start with first half 23, tremendous growth from the year before, as you'd expect. The world was recovering up 47%. And on top of that, we continue to deliver growth this year, just shy of 6% growth. And first half 2024, Samsonites up almost 36% to first half 2019. It really talks about this kind of fundamental underlying growth and core. So the real... When I look at Samsonite and the growth it's achieving, it's really matching what we're seeing in the travel industry as far as the travel growth numbers in this brand riding right along with that. We saw strong growth with Samsonite, both travel and non-travel, helping drive those sales. So really excited to see that result. And we saw it across regions, so I'm on page 10, and you can see across regions, Samsonite delivering growth, up 2.6% in North America, 6% for Asia, just side. Europe, 6.8%, and 23, 24% for Latin America. So that core is Samsonite delivering great growth for the half. As I said, to me, it's feeling a little more pressure, and it's really a bit more pressure in that kind of premium slash luxury space. Our business is up 0.3% off of a really tremendous number last year, as I said earlier, around coming back into inventory and people starting to move. We saw growth in Asia of 2.7%, Latin America 32% as we penetrate to and within Latin America, but slightly offset by some slight declines in North American Europe, really affected by moderating consumer traffic in the high sales comparative to last year. The Tumi brand has a strong pipeline of products. We'll see products in the back half of this year. We'll see some exciting new products in the start of next year. And we'll continue to see opportunities for store openings. We continue to open stores for Tumi as well. And then American Tourist, which is our entry-level business. If I take India out, and we'll cover India, taking India out, that business was up 1.5% for the half. Our net sales on a reported basis were down slightly to last year. American Tourist is largely impacted by reduced sales in India. where we've seen dramatic competitive discounting as well as some decreased selling to some of our North America customers off of a tremendously strong number last year, up 43% the last year. The next sales in India after three very significant double years of double digit growth and up almost 30% to 2019 was down 9% versus last year. and really against increased promotional activities by competitor. And again, as I said earlier, we're very carefully and tactically prioritizing driving quality sales to build and maintain long-term profitability for this business while going to get the right levels of sales. For us, it's around getting the right positioning for the brand and not falling down into lower levels of the market that we don't want to participate in. And again, if I take Indy route, the American tourist business is up 1.5% since 2024. Rez will cover regions a bit more in his section, but all regions largely delivering growth. Asia up 2%. If I adjust just for India, Asia is up almost 5%. North America, largely because of the two mean numbers, about flat. And Europe's up 4.6% and Latin America is up 20%. Rez will cover that more. And we continue in the business to really drive innovation across all of our products. A couple of samples here on page 14. Essence Limited, which is a largely recycled bag. I'll cover that in a second. Really an amazing story about sustainability and where we are on our journey there. 19-degree frame case following off the 19-degree collections within Tumi that are very, very successful, adding a frame case, which will do well in many markets around the globe. And then Dash Pop is a fun, colorful American tourister brand, as you'd expect, really fun, vibrant, and delivering great sales. We have a lot of exciting products launching in the back half of this year. Proxxis Aluminum off of the Proxxis collection is launching in the back half. And this is a great collection. There's a real trend in aluminum luggage. And you can see this product fits the bill. Really quite an amazing product for our Proxxis collection. On page 16, we relaunched, we're calling it ReStack, so this stacked collection, we're launching ReStack, which is one of our better sellers. It's a modern, minimalist design that's really played well across the globe. This is now made out of lightweight polypropylene. It comes with packing cubes. It's a very sustainable product as far as kind of interiors of the product, and we're quite excited about this, and this is launching in the back half of this year as well. A 19-degree frame that covered this well. This is a terrific product. We do quite well in pockets all over the world. It incorporates recycled polycarbonate, which is exciting for this product, and recycled interior linings as well. And then Dash Pop, as we said, this is a vibrant, colorful, exactly what you'd expect for American tourists or really made out of super strong polypropylene lightweight and 100% recycled interior for this product as well. It also allows personalization, which is a big trend in the market, so consumers can personalize this luggage as well. And it's fun. It matches American tourists perfectly. Just a few points on the marketing side. You know, we continue on our journey to push our businesses. We had great partnerships with the U.S. gymnastics team and the U.S. sailing teams ahead of this year's Olympics who are sponsoring these teams. And that was all well received and quite an exciting Olympics that we've all just watched. On the Tumi side, we continue to push our global reach and brand awareness. And as you know, we launched Tumi Golf earlier in the year or at the end of last year. We have some wonderful new ambassadors for Tumi. Nelly Korda and Ludwig Oberg is part of our team and quite excited. And as we head into some of the end-of-season golf, you'll see Tumi showing up in a more meaningful way. It really allows us to broaden awareness for the brand to new consumers. We're excited about what we're achieving there. And then on the Samsonite side, just a few campaigns within Europe. We're launching a You Are the Journey backpack collection, and we've seen our non-travel growing slightly faster than our travel in the half, both growing really well. But non-travel really has a trend, and so Europe will have a dedicated campaign as we get into the second half of this year, going into kind of end of summer, fall season, which will be very exciting and really featuring these amazing collections of backpacks and non-travel products for our business. Moving to North America, we have a Bring It campaign, and you can see it's a campaign focused on kind of legacy of innovation, which we're known for also embracing kind of the changing landscape of travel. So we have ultra-lightweight proxies here. Lightweight, we have really exciting Outline Pro and the adjacent products, the non-travel products that really coordinate well. This product's doing quite well within Europe and other markets of the world. And then EcoDiver, which we initially had launched in Europe, now launched in North America this year, performing really well and really a kind of more unstructured way of travel that lots of consumers are shifting to today. And this is off to a great start, and we'll be putting campaigns behind all this as we head into the fall of this year as well. On the sustainability side, we continue to make great progress. We fine-tune our vision statement and to more clearly articulate our commitment on sustainability. If I could, I'll just read these two points. Corporate purpose, to empower a lifetime of journeys that move the world forward. We take this very seriously within our organization across all of our brands. And on our sustainability vision, and you've heard me say this, but it's just a very clear statement. Use our leadership position to create a path towards a more sustainable future for our industry. And that's what you should expect from us. That's exactly what we're working on against our four pillars, planet, product, people, and governance. We continue to make tremendous strides. And if I look at the product pillar, we're really moving in a really positive way. We've been very focused on our product sustainability framework, helping us define where we are going and what we can do to increase the use of recycled content in our products. On this second half highlight, we've launched Essence Limited Edition. This is a suitcase which is effectively helping close the loop. This is a suitcase that The first version of Essence is using post-consumer waste for the outer shells. Here we've incorporated recycled luggage. So we're working with our recyclers and recycling luggage into this product. We've increased the weight of the product with recycled material up to 70%. The previous version was 50%. But importantly, closing the loop as we test the waters and how we cycle old luggage back into luggage. This is a terrific example of what we're able to do when we focus on it. More to come. And Essence is off to a good start. On the planet pillar, we're very focused on... setting our near-term science-based target. We'll publish this later in the year. We're doing the work now, and this is really around how do we move the needle on our carbon emissions on our planet pillar. And we're quite excited to set this target, which will be coming out soon in the back half of the year. Just a picture within TUMI. We've expanded our TUMI distribution center in Vidalia, Georgia, and we're putting a solar array there. By the time we're done with this, almost 80% of our electric needs in that one facility will be covered just on our own solar capabilities on the property. So we're excited there, excited for the teams. On the people side, we continue to make great strides. We're focused on really elevating the employee experience throughout their journey and also on strengthening social compliance, human rights, diligent efforts, all the things that we've been doing, continue to push. Importantly, we ran our second global culture and inclusion survey. And over 80% of our employees agree very strongly that they're proud to work for an organization that is committed to sustainability. Importantly, and you've heard me say this, sustainability works when your entire organization is behind it, and that's what we have here as we move forward on our responsible journey. So with that, I'll turn it to Reza, and then I'll come back at the end for some closing comments.