Samsonite Group S A

Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the Samsonite International 2024 Third Quarter Results Conference Call. Please note that this event is being recorded. I would now like to hand the conference over to Mr. William Yu, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you very much, operator, and thank you very much, everyone, for joining the call this evening. To begin with, we have our CEO, Kyle Jendro, will make a few opening remarks, after which our CFO, Mr. Reslik Telagani, will go deeper into the financials before we go to Q&A. Without further ado, we'll have Mr. Jendro begin with some opening remarks. Thank you very much.

Okay, thanks, William, and thanks, everybody, for joining. I guess if you're joining from Hong Kong, I hear there's a typhoon, so everybody stay safe with that. Real quickly, I'm starting on page five. As we anticipated going into Q3, our top-line sales were impacted by softer consumer sentiment, and we're comping, as we were in Q2, comping against a very strong period last year, record Q3 of last year. Importantly, our margin profile remained high in the quarter. So let me walk you through some of the details. So our net sales of 878 is a decrease of 6.8% compared to an exceptionally strong Q3 last year, but importantly still up 21% in 2019. Global consumer sentiment was softer than we anticipated. We had anticipated a softer Q3. We're a little bit softer than what we anticipated, particularly in China, and we're impacted by an elevated promotional environment across all of our markets, but particularly in India, as we were indicating on our last call. Importantly, we're seeing an improving trend as we go into Q4, and we're seeing sequential improvements month to month as we navigate Q4. Gross margin for the quarter came in at 59.3%. 30 basis points below where we were Q3 of last year. And importantly, that's really driven by mix, Asia mix and Tumi mix. I'm a little softer. All regions from a margin perspective are continuing to perform very well. We made discipline on our fixed expenses. Our Q3 fixed SG&A at 216 was relatively unchanged from Q3 last year. But as a percentage of sales, with slightly lower sales, the percentage was roughly 200 basis points higher than where we were in Q3 of the prior year. Our adjusted EBITDA of 155 represented an adjusted EBITDA margin of 17.6, down 270 basis points really off of the SG&A and margin points that I've just raised. And importantly, our cash flow remained very strong, $94 million, up $5 million from Q3 of last year. When we look at Q3 in comping against last year, as we were seeing earlier in the year, we're clearly seeing in Q3, we're comping a very strong period last year where revenge travel really was in play. The chart on the left of the page really shows what we're talking about. So you can see we're up 20.8% to 2019. We're down 6.8% versus last year. But last year was up 22%, really a record result. And when we look into last year, A lot of that was driven by all regions delivering growth, but Asia delivering outsized growth. If you remember, in 2023, Asia had a lag effect of recovery. So our Q3 numbers for Asia last year were up almost 45%. And we had really extraordinary demand in China, up 73% in Q3 of last year versus 2022. Our net sales in China for Q3 of this year, really off the back of a softened consumer sentiment within China, decreased by 14%. And really this kind of macro environment that we've seen carrying to China, particularly on the upper end and luxury space of the business, we could see and feel in our business as well. Global consumer spending was softer as we went into Q4. We had started to feel that at the end of Q2 last year. We're definitely facing a more promotional environment, as you'd anticipate, as everybody came back into inventory. But despite these challenges, I think a real important focus we've had is on maintaining margins. And I think you can see and feel that in our gross margin and our overall financial profile for the quarter as we manage through that. And then one important note in Q3 is our Stamsonite brand remained definitely more resilient, particularly in North America, where it was up 3.5% in Q3. Our Tumi brand was particularly impacted by slowdown in the premium and luxury retail sector, particularly in the United States and Asia, where we saw slower traffic and slower spend from the consumer side. But within Europe, we saw a Tumi continue an upward trend as we continue to penetrate and push Tumi within Europe as well, and that was up 7%. On page 7, I think this is an important slide to get a sense for really a couple of things. One, our sales really correlate well with global passengers effectively travel. The blue line is our sales and the red line is what we've seen in global passenger traffic. And you can see the dip with the pandemic and then the recovery that we've seen. And importantly, when you look at 22 and 23, you can see some outsized growth in our business. from a recovery perspective. And I would say this is really this moment of revenge travel that we were seeing last year. And we really outperformed what was happening from a recovery perspective. We're seeing some normalization this year. That's really this cop effect that we're talking about for our 2024 numbers. But when we look ahead and we look at the forward indicators for travel, which remain very positive, if you look at this trend, it'll calculate to approximately 5 percent growth per year on the out years. And as you know, we have a very strong history of overachieving this trend, and I think we're set up to do exactly that as we move into the next year. If I move to page 8 and just give you a regional lens, and Reza will cover some of this in the back too, but just from a regional lens perspective, what we're seeing, Asia was mostly impacted or most meaningfully impacted off of, as I indicated, a very strong moment last year. Asia for Q3 of last year was up 45%. That was really many markets starting to turn on, particularly China turning on, where China last year, Q3, was up 76 percent. China this quarter is down 15 percent off the back of this, you know, really meaningful step up. And then we've had pressure in India. We were feeling pressure in India last year, and this really speaks to this promotional trend. environment, particularly in India, where it's been very aggressive. And that's impacted our India business as well. And our India business for the quarter down 24%. And we're feeling some of that in the quarter last year as well. The blend of that is driving a big piece of Asia being slightly off from where we were last year, which was really a tremendous recovery. North America, as you know, started to recover earlier. And so when you look at North America, we're down around 7.8%. Within that number, our Samsonite business is plus 3.5%. really speaks to the resilience of Samsonite brand in that premium space in the market, in a market that was recovering largely in 22 with a bit to go in 23. But within Asia, we also have the effects of Tumi, which was down 14% for the quarter, really, you know, shadowing the effects that we've seen in lots of luxury and premium branded products where traffic's been down and sentiment's been a bit lower. And that's noticeable in this Q3 North American number. Europe very, you know, very strong relative to sentiment. So we were down slightly, 1.7 percent. Last year we still had some recovery going, but, again, Europe had recovered largely in 22 and carried a bit into 23. And by the time we're in Q3, that recovery had started to settle out. And it's really, you know, a function of sentiment. So you can see our Samsonite business was down slightly, around 2 percent. American tourists were a bit more, down 8 percent, as that entry-level consumer is feeling more of kind of the pressures from inflation. But Europe was up 7%, as I just said, and really on the foundation of us continuing to penetrate and grow that brand within Europe as well. And Latin America has continued a strong trend. We're up almost 14% for the quarter, still continues to play well in Latin America, real opportunity to continue to grow our size and scale within the Latin America business, and that continued even with softer sentiments. From a brand perspective, just quickly, there's a lot here. I won't cover all of it, but you can see for Samsonite, again, less impacted than the other brands. We had a strong number last year of 20%, down 2% this year. You know, year-to-date, plus 3%, you know, so it gives you a sense for how Samsonite's performing. And as I said, North America was positive. Importantly, our Samsonite numbers for Q3-24 are almost 40% up versus 2019. This really speaks to this amazing journey we've had with Samsonite and really the elevation that we've been achieving across all of our regions with this brand. Tumi is a little bit of a different story. If you remember last year, we were coming back into inventory, and so we saw a lot of the recovery for Tumi last year starting Q2, carrying into Q3. And you can see our last year numbers were up quite tremendously, almost 30 percent up off of this kind of recovery and the Tumi brand coming back into inventory. Now, we're down 8.9% this year. Year-to-date, we're down just shy of 3%. Still up from 16%. And a lot of that's really being driven by what we're seeing in North America and a bit in China for Tumi, as I said, offset by the growth that we've been seeing within Europe for Tumi. And then American Touristers, you know, a bit of both stories. You can see that we still had some recovery going on in American Tourists for last year. Still really a tremendous number. Still up comfortably versus 2019. But this year down... 15 percent off of a consumer that's feeling a little bit more of the inflationary pressures. And this is also the space where we're seeing more meaningful competitive discounting within the marketplace, particularly India. India's numbers largely fall into this American Tourister Camp. So you can see the impact of that within the quarter. Just quickly, from a grant perspective, again, just reminding, Samsonite's up almost 40 percent to 2019. You can see the strong recovery off to the right of the page versus last year was up 20 percent. We're down slightly for the quarter, down 2.2 percent. And you can see the makeup within the region. So, as I said, North America, positive growth, 3.5 percent, very strong result in continuing. Asia, which had, and I circled this, if you look at 22 to 23 quarter, up almost 60%. This is a surge in recovery that we're seeing in Asia and surge in recovery that we're seeing in China last year. And you can see that's moderated this year, slightly down 10% off of general sentiment being a bit softer. Europe, a bit of a similar story, a bit of a stronger recovery last year at 14 percent, slightly down this year, 1.9 percent. I think considering sentiment and inflationary pressures, that's a good result for Europe in relative terms. And then Latin America for Samsonite, up 19 percent, even higher than what we were seeing last year. That just continues to broaden our penetration within Latin America. So for Tumi, I'm on page 11. We definitely had a softer Q3 in North America and Asia, offset, as I said earlier, by growth in Europe, and actually very good growth in Latin America as that brand starts to further penetrate within Latin America. Within the U.S., you can see up 28%. That's up much differently than we're seeing for Samsonite. This is the Tumi business coming back into inventory. But more importantly, we've seen traffic and sentiment down within Q3. And then for Asia, you can see the surge last year, 43%, down slightly 6%. It's down less than U.S. because we continue to penetrate. We have real opportunities to grow retail within Asia, and we continue to do that. We continue to move forward with that, which has offset some of the softer sentiment. We see real opportunities to continue to do that. I'll go through some of the direct-to-consumer retail that we've been pushing for the business. And that will be a big driver for definitely Asia Tumi. And the reason you see Europe the way it is is a function of that. We've been very active in opening and expanding our footprint for Tumi within Europe as well. And, again, overall, Asia Tumi continues to be up 16 percent to where we were in 2019 and up, you know, tremendously from last year or from 22 to 23. American Tourister, as I said, a bit more impacted by promotional activities. All the brands are experiencing it, but definitely within American Tourister we can see it. You can see in North America down 27% off of a pretty strong number last year. Europe's got a meaningful – I mean, Asia's got a meaningful up last year as Asia was recovering up almost 40%, down 16%. A lot of that's being driven by India within the Asia business. Europe, you know, down just a bit. This is sentiment, for sure, within the American Tourister and competitive pressures. And Latin America, you know, across all brands, continues to grow as we continue to penetrate up 6 percent. On balance, American Tourister, managing well considering the competitive pressures, ends up, you know, just shy of 20 percent to 2019 state. Just shifting on the focus on direct-to-consumer, so as you know, We have the ability to grow our business from a D2C perspective across, you know, both selective retail openings, and I'll cover that, and also driving our e-commerce sales. These are year-to-date numbers. Our year-to-date D2C is up 3% through September. D2C e-commerce, these are e-commerce sites that we're running, up 7.3%, and up in every single region. I'll cover that in a second. Our retail growth overall up 1.2%. driven by 83 net new stores since September of last year, and I'll give you a breakdown of where that is, offset by a bit of a softer comp, 2.9% comp, and this is a sentiment that we're talking about. It has a bit to do with the surge in demand last year, but it's also a softening consumer sentiment that we started to feel in Q2 carrying into Q3. Our wholesale numbers decreased by 2.6% year-to-date, and I think importantly as a mixed perspective, and we look at our D2C journey as a percent of our sales, that's up 100 basis points, approaching 39% from roughly 38% last year. And I'd expect that that will continue to grow as we outsize growth in our D2C business, both e-commerce and direct-to-consumer. Within our D2C e-commerce business, we continue to invest across all regions and brands. Our D2C e-commerce as a percent of sales is up 70 basis points, so approaching 11%. I'd expect that to rise as we continue to push the business. As I said, all regions, you can see on the bullet to the right, all regions delivering growth across the business from a D2C perspective and some outsized growth in Latin America, where it actually really started to push and penetrate our direct consumer digital business in the last two years. On the DTC retail growth perspective, we are very calculated and carefully, strategically selecting store openings in key markets. You can see a footprint of the globe here and where we've opened. With particular focus within Asia and Europe, you can see the impact of tuning store openings within those two regions, 17 stores. We see opportunities to continue to open new Samsonite stores, so that's north of 30. A bit more calculated in North America, some Tumi openings, some Samsonite openings, but in a very disciplined way. And Latin America has opportunities to grow with six Tumi stores and 11 Samsonite or other stores there. We have other brands that we're operating as well. And all of that feeds into a really good overall direct-to-consumer strategy with a balanced view on driving our D2C business. Just a few examples. I won't dwell on them, but you can see on page 16, this is a a relocation of a Tumi store within a plaza. This is our Lenox store. And this is a store that starts to embody something that we're exploring and expanding within our Tumi fleet, which is expanding the square footage of some flagship stores in key cities. And this is one of the first ones we're getting a very good read. And what this really allows us to do is elevate consumer engagement. and really optimize store assortment and performance. And so you can see from the pictures they don't really do it justice to get into the store and see this footing. And what you'll see is us tactically open some of these flagship stores in key cities, all of which I think, and we're getting very good early reads. We've opened one in Tokyo. We have another one in Tokyo open. We have another one identified for the U.S. We've got a great store identified for Shanghai. And I think these will be very brand-elevating and also allow us to really broaden the engagement with consumers and broaden the offerings that we're selling within the TUMI business. So that's off to a good start. As we said earlier, we continue to penetrate TUMI within Europe, so I'm on page 17. And you can see store openings at the TUMI store in Helsinki, Finland, Great location, great store. These are the type of opportunities we have in Europe to further penetrate the brand, all with great success and results. As we open these stores, they very quickly ramp, and you should expect and see more of these for us within Europe as well. This is just one example. We continue to open Samsonite stores within Europe. This is a store opening in Berlin, Germany, really an amazing store. and it's really a good piece of driver in our business within Europe to open collectively stores in the right locations, and that will continue for us as well. Within Asia, we're driving expansion, both Samsonite and Tumi. This is a Tumi store in Shanghai that's off to a very good start, and you can get a sense for the store and the fit-out and the consistency of the brand imaging as we open stores across Asia. More to come across China, definitely more to come within Shanghai as well. And then lastly on the store, this is a Samsonite store in Singapore. This is Suntec City. I happened to hold my town hall here six months ago to really showcase this store, which is a testament to not just an amazing store, flagship store within Singapore, but also a message on sustainability in a large part of this store. and the elements within the store from fixtures and recycled content and lighting and everything that goes into creating a really sustainable store is played in this store. So if you happen to be in Singapore in Suntec City, I highly recommend you check this store out. And this store is off to a great start as well and a great location. And there'll be more of that to come within Asia as well on the Samsonite side. And then just lastly for me, before I turn it to Reza, just our responsible journey. We continue to push the envelope here and really make progress. We put a press release out at the beginning of November announcing our near-term science-based climate target. We're well underway there. This is focused on making sure we continue the use of 100 percent renewable energy in our own operations, but more importantly, reducing our Scope 3 emissions from purchased goods by 52 percent by 2030 from a base year of 22. And we're on that journey, and a big piece of that will come from how we use materials in our product. a large part of our emissions come from, and significantly increasing the recycled content used in our materials. And this is working. It's playing out. I was in China a handful of weeks ago visiting an aluminum recycle factory. This makes a huge difference as we incorporate and recycle content, and it's a big piece of how we reduce our carbon footprint in a go-forward basis. We're partnering with our suppliers in a meaningful way. They're all on the journey, as they need to be. And they're excited, as we are, about what we can achieve as far as reducing our impact on the planet. And so that continues. I'd recommend taking a look at that press release, which gives you some really good insights on what we're doing on that front. And so with that, I'll turn it to Reza, and then I'll come back at the end.