Samsonite Group S A

Good morning, good afternoon and good evening ladies and gentlemen. Welcome to the Samsonite Group 2024 Annual Results Conference Call. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. 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, everyone, for taking the time to join the call. Today, we have our CEO, Mr. Carl Gendro, and our CFO, Mr. Reza Taleghani, with us to present our 2024 final results. And to begin, Our CEO, Mr. Jendrel, will have a few opening remarks. Thank you very much.

Okay, thanks, William. Thanks, everyone, for joining us. I'm on page five. I'm sure William will turn the pages for us. We delivered top-line growth in Q4 with improving sequential sales trend improvements across all of our regions. Our net sales for Q4 were $942 million, an increase of 1% in constant currency. compared to a Q4 last year that was up 21% versus 2019. Our top line sales growth was in line with our outlook, and again, improved across all regions. I'll show you that in a second. Our gross margin was very strong and remains robust, 60.2%, up 30 basis points to Q4 of the prior year, really driven off of discipline on promotion and discount that continues off the back of real skew transformation during the pandemic. Successful investments in brand elevation across all of our brands. And increased share, particularly in Q4, increased share of our total sales coming from the DVC channel. And I'll cover that as well. We continue to maintain really good discipline on our expenses. Our combined Q4 distribution G&N expenses were actually $2 million down from the prior quarter of 2020. and despite adding 67 new stores in the past year. So it really speaks to and shows the discipline on the expense management. Reza will cover that in more detail in his section. We achieved Q4 adjusted EBITDA of $195 million, a record EBITDA margin of 20.7%, up 160 basis points to Q4 of 23, driven by a bit of lower advertising as we were managing the business. And the higher gross margin that I covered really feeding to a really great EBITDA position for the business And we continue to generate great cash for the full year and for the quarter 135 million dollars of cash free cash flow generation up three million dollars from q4 2023 On the next page will give you a sense for by region what we're seeing. Okay, and we'll start with Asia and Clearly an improving trend, still negative. So we were minus 11.5 in Q3, we're minus 6 in Q4. India is a big piece of that story. India, as you know, we saw some challenges during the year. If I adjust for India, we're only down 1.6% versus Q4 last year. India was down 27%. Importantly, we're seeing an improving trend in India as we move into 2025. We're seeing a positive Q1, just to give you a scale sense for what India's journey and transformation is. And within the Asia numbers, China was plus 1% in Q4 versus minus 15% in Q3. So you can see within Asia, sequential improvement. As we think about Q1 of next year, we're seeing some continued improvement in the Asia trend as well. North America went from down 8% Q3 of this year to positive, close to 4%, 3.9% growth. There's some timing issues or shifts from customers that pulled in orders from Q1 and generally an improving trend that we're seeing in North America. On the back of sentiment that's really starting to show itself in North America, and we'll cover that when I talk about outlook for the year. Our Europe business really in a really steady position. We were down 1.7 in Q3. That was our best kind of Q3 performer from a region and delivered 5.6% growth in Q4. And I would tell you our Q1 number looks very consistent to that, so steady Europe. And Latin American continuing a steady story, delivering 14% growth, very similar to what we did in Q3 of this year. All core brands showed really sequential improvement as well, particularly Samsonite and Tumi. If you look at Samsonite, this is a brand that was up 4.6% in the quarter off of a growth from Q4 of last year that was tremendous, really that improvement and that recovery from pandemic that we saw in 22 carrying into 23. And despite being up that kind of strong trend, Q4 is up 4.6%. And that, from a trend perspective, was down around 2% in Q3 and up 4.6 in Q4. For the full year, Samsonite brand was up 3.3%. So it was a core brand in the kind of middle part of the market really delivering excellent results. Tumi in Q4 was up 4.4%. Again, off a tremendous story from Q4 last year as the business was really recovering off the back of pandemic. And importantly, the trend from Q3 to Q4 this year, Q3 was down 8.9 and a plus 4 this year. And for the full year, TUMI was almost flat. That's my lens. It was down around 0.8%. Off the back of what we've talked about in earlier quarters this year, I think that's a great ending spot for TUMI for the full year. And we're excited about TUMI on a go-forward basis as well. American Tourister, a bit more choppy, largely driven by India. So if you look at American Tourister, we're down 6.9%. If I take India out of Q4, American Tourister was up 1.3% for the quarter. I think that's a really good story for a brand that's really feeling some of the consumer sentiment and the way wholesale customers are buying in at this entry level. brand is a little bit different, and so I think that outcome's very good. American Tourister in India was minus 31% for the quarter, just to give you a scale for the impact within India. And the brand itself for the full year was down around 6% for the reasons I just said. And again, if I take India out, it's down around 1.9%, so feeling some of the impacts on consumer sentiment in that entry-level brand. If I go into a little more detail on Brand Samsonite, here for North America, top left of the page, and I'm on page eight, you can see we had a really strong Q4, up almost 10%, off of really strong holiday season, so actually leading into holiday, and consumers were moving, even though sentiment was under some pressure, but this is Brand Samsonite performing very well, and wholesale customers, as I said, pulling orders in. So we had a very strong Samsonite Q4 in North America, Asia was a bit softer, down around 3.6%. And you can look at the last year number. This is this kind of slower recovery in Asia that we really felt the boom in Q4 of 2023, up almost 41% to the prior year. And if I peeled into Asia just a bit, it's really driven off a few things. One, again, last year was up 41%. There's a bit of noise in Korea. If you remember, Korea had some political issues that they were navigating. There was a plane crash in Korea that really impacts sentiment within Korea. And our Korea business is down 6%. Hong Kong is still under pressure, down 18%. And Singapore is down 3% really due to currency effects and how travelers are spending when they're in Singapore. But the rest of Asia is actually performing quite well against the backdrop of Q4 of last year. Europe, as I said, very strong. It was up 4.6% versus Q4 last year. Really a steady performance and really excited about it as we step into 2025 in Europe. In Latin America, just continued trend. This is brand stamps tonight up around 26%, very similar to what we saw in Q4 of last year as well. if I go to brand to me here you can see and this is q4 you can see a really improving trend across all regions here you can see North America up five percent to last year Asia is a roughly flat down point two here is where Korea had a big impact because we have a meaningful business within our to me business in Korea and that was down sixteen percent off of what I just talked about our China business was up two and a half percent in q4 for to me as well Really strong result in Europe, up 12% for Tumi, on the back of really great product positioning in store expansion, e-commerce expansion, and further penetrating Tumi in Europe, which we know is a big growth driver for us, and you can see it in the numbers. In Latin America, the numbers are small, but the percentages are really strong. The brand's doing very well there, up 17%. And again, overall, Tumi Q4 up 4.4%, 4.4% is a great result for us. American tourists are just a bit more detailed here. You can see what we're talking about. I'll start with Asia, down 11%. It was up tremendously last year versus the year before, up 35%. A lot of that was actually happening within India, and so that's kind of softened off in India for the reasons we've talked about in prior quarters around competitive pressures. If I take India out, the overall Asian American tourist would be up around 2%. North America is a function of weaker consumer sentiment, particularly at the entry-level price point. We can see and feel some of that. American Tourister is a smaller piece of our North America business. You can see in the numbers. But there is an impact there. And also, wholesale customers, because of that sentiment, are buying in American Tourister a bit more cautiously as well. And so you can see that in the numbers, it looks like a 10% drop. But in dollars, not a tremendous drop, a couple million dollars. But we can see the impact there. Europe was very strong, up 6.4%. Really great result in Europe as we really continue to penetrate American tourism. And Latin America up 13%, really a strong, strong result. And Latin America showed the recovery of COVID in the last year numbers as well. So it's quite a strong number last year, and in constant currency still delivering PINs growth. On page 11, just to dive into travel, non-travel, whereas we'll have a slide in the back just showing the mix, but our non-travel continues to grow. This is a pillar of growth for us. We have the ability to outsize our growth to non-travel. This gives you a good sense across brands of what this means and looks like for us. Across Samsung, this Move 5.0 backpack, the driver, you can see real continued investments in the Voyager collection within Tumi, really moving the needle. And in American tourists, products like Urban Groove backpack has been tremendously successful in Asia, doing well in Europe as well. And then some of our complementary brands, Gregory's really continuing on the mission to penetrate more lifestyle bags and day bags, and this Ruin 22 has been a very successful bag. And LiPo, as you know, we're pushing and investing in this lost in Berlin collection, particularly in the backpack collection is doing really tremendous stuff. So there's real opportunities for us to continue to outpace our growth in the non-travel category. And this is some examples of that in the prior year. Shifting to full year on page 12, you know, we delivered very strong profitability and cash flow in 24. Our business ended up about approximately flat. This is where we had anticipated as we were kind of stepping into Q3. And so roughly flat to 23. 23, as we know, marked a really record year for this business as far as travel and revenge travel off the back of pandemic and consumer spending. Consumers were still leaning in and really traveling and prioritizing travel. larger wholesale customers were rebuilding their inventory levels from from the pandemic so we saw that at the start of um 2000 and um uh 23 and it carried right through even to the start of of 24 we're still feeling some of that and that started to level off as wholesale customers were back in inventory positions so factoring all that in a flat 2024 though not what we originally anticipated is a very good result considering Gross margin is tremendously strong ahead of our expectations, up 70 basis points to the prior year, again, for the same reasons. Real clear vision on promotion and discount strategy with a really organized product assortment. We continue to invest in brand elevation across all brands. I think you can see and feel that wherever you are in the world and looking at what we're doing with our brands. And then, again, our D to C mix for the full year is up just a bit, which has some upside margin, gross margin benefits as well. Our adjusted EBITDA margin, $683 million for the year, or dollars, a margin of 19%, slightly lower than the prior year, off of slightly lower sales than the prior year, and really the ongoing investments in the business. We're managing the business very carefully on expenses. You know, the teams are laser-focused on that, and you can see that on all of our results as you look across the business, the ability to deliver leverage in this business as we drive longer-term growth in the business. We generate strong cash flow. You guys know this if you've been looking at it for a while, and we continue to do that. We really leverage this asset-light model. We generated $311 million of free cash flow. That's up $26 million from the prior year. And we saw, as I said, a very strong Q4 on the cash flow side. We had great progress on our working capital. Our working capital is below our target, so we came in better than our target to 14%. And we reduced inventory by $44 million to 23. And as you know, we had stepped inventory up in 22 and 23 to capture sales. We now have our inventory coming into its more normalized territory without having any impact on sales and helping deliver cash flow as well. Just a picture from 19. You can obviously see the pandemic years are not so focused there, but you can see we're up 22.8% to 2019 on the currency basis. I'll show you a slide, the next slide, to show you what that really means if adjusted. You can see this revenge travel in these numbers, and you've seen these before, but revenge travel starting in 21, continuing very strongly in 22 to 23, which drove a really strong result for 23. We were up 30% to the prior year. off of this. We were flat, roughly flat for this year off the back of that surge. I'd also say we had a few challenging markets, India, as we know. And if I adjust for just India, our numbers for 24 would be a positive 1.2%, just to give you a scale for India. And again, we're seeing really good progress from the initiatives with the team in India, where Q1's looking like it'll be positive for us. So that's a real transformation and story there. And China, which was largely flat for the year. In many ways, that's a good result for China when you consider the year. But flat for us means it doesn't deliver to the growth story. And we think China will get back to a growth story for us as we go through the rest of this year. And we're seeing good early green shoots as we go into 21 for China as well. And again, our net sales in 24 are up almost 23% to 2019. And the next slide, I think I've shown this before somewhere along the way, but I think it's important. What does that mean in dollars when we look at the journey? And much of the management team has been here for a while. You can really see the impacts of currency from 19 to where we are today. And if I adjusted just for currency, our sales would have gone from $3.5 million to $4.2 billion. So a really tremendous story adjusting for currency. We're a U.S. dollar reporter, as you know, but much of our business is outside of the U.S., and so it really shows itself well here in this chart. From a brand perspective, on the full-year basis, I've covered a lot of this already, but you can see Samsonite up 3.3%, really strong results across largely all regions. To me, again, roughly flat, you know, slightly down in dollars. The dollars aren't so tremendous. Off a year that was up 36% the year before, really around us coming back in inventory and that consumer really stepping into travel in 22 and particularly in 23. We definitely saw this in consumer demand and traffic. in this premium luxury sector. We're not alone in this, and Tsumi sits really nicely in this premium luxury space. And that softness in traffic, we could feel some of that within Tsumi as well. But importantly, you saw our Q4 plus 4%, 4.4%. And for the full year flat, I think that's a good outcome for a slice of the market that was feeling some traffic pressure. We covered American tourists quite well. You can see the numbers. If I just India out, it's down around 1.9%. And again, this is customers and wholesale customers that are impacting some of that as wholesale customers, particularly markets like the US are being more cautious and buying into this space. And that consumer is feeling a little bit more of the pressures from inflation, particularly, but overall a good, good result considering those factors. You've seen this slide. I'm on slide, well, I can't see the page number, 16. And I just wanted to show two things here. One, we've historically been correlated to travel very well. You can see the blue line, which is our numbers, compared to the red line, which is global passengers. And you can definitely see our correlation. And I think importantly, when I look at the last 12 years, historically, we outperformed this. We have the ability to outperform this by a few points, and we've historically done that. You can see the 22 and 23 period with the revenge travel. It's maybe not so easy to see on the page, but if you look closely, our numbers were really outpacing travel as consumers were stepping back in and buying. Our 24 number flat, but still very correlated to the travel trend. And the forward look, and I think this is an important part of the slide, the forward look for global travel is still 6%. And if you think about our history and ability to outperform that and think about our forward direction in the industry we're in, which is still very positive, I think that speaks very well for kind of our long-term prospects. Just a few slides to point out, you know, what we're seeing in trends. So first off, world travelers, this is 19 to 24, are up 12%. Our business, as I said, up 123% in constant currency. You look at airline revenues in that same time period, up 15%. Hotel, leisure hotels, up 16%. Airline seats still not fully occupied. There's still capacity. And this is a global number, so there's still recovery to go in markets like China, which is holding that global airline seat number down. And then the U.S. lands up 18% on passports issued 24 versus 2019. So all the indicators really speak to travel from a strength perspective. And again, we've been able to outperform that with the portfolio brands in our leadership position in the market. Just another lens on travel, and I think we feel it and we see it, and I think it's a big driver of the forward indicators as well. But consumer preferences are really driving a greater frequency on travel. People are really prioritizing experiences and travel. versus hard goods, and we continue to see that every next generation has an aspiration to travel different than the previous generation. And the way they're traveling is different. We're clearly seeing luggage growth, but we're seeing unstructured luggage, non-travel in our space continuing to grow in a meaningful way. And importantly, when we look at data, and this is data we recently looked at, travelers replaced their luggage, 52% replaced their luggage every two years. And bags, and we've known this, bags replaced every two years, 73% of those consumers were replaced. So you can see a replacement cycle that's better for non-travel as well, but the travel replacement cycle, I think, is still very, very strong for us. And I think it's elevating as consumers prioritize travel. And particularly, what they're traveling with matters. It speaks something to who they are, and we can continue to see that in the way luggage has been elevated and the ability to personalize with colors or personalization on the product has been a big driver in growth. And there's clearly a growing and shifting preference towards brands that are sustainable, and I think that will continue over the next several years. And as you know, and I'll cover just a bit at the end, we have this amazing sustainability story. Our responsible journey really continues to deliver amazing product innovation for us. And from 0% in 2017 to 23% in 22, where 40% of our products incorporate some meaningful level of sustainability. And more to come as we continue to push the needle on that. On DTC i'm on page 19 just to give you some color our overall DTC growth for the year was 2.7%. If I jump to the bottom of the page that speaks to then wholesale is down just a bit, and for the reasons I just said wholesale our overall wholesale business was down 2% versus last year. But in 23 wholesale customers were rebuilding and so a lot of that is around the rebuild in inventories from the previous year that we're up against from a comp perspective. And so, when you peel it back direct to consumer growth 2.7% a very good result for the year our E commerce was up close to 6% versus prior growth in all regions. Our full year retail growth was up 1.5. Our comp growth was a little lower, down 2.7. That speaks to traffic that we've talked about, the revenge travel that we talked about. When I say traffic or this premium luxury space, And the revenge travel we saw last year, that's impacting some of the comp as well. And this more macroeconomic uncertainties that I think is impacting consumers, which you tend to see in comp. We opened 67 stores last year, net stores. We opened 67 the year before. That's feeding a story here. That's, I think, helping drive a good story in our overall direct-to-consumer as well. And you can see the mix has shifted slightly. We went up almost 100 basis points from 38.9 to 39.8 in the mix of D to C. If I look at the mix for e-commerce, which is the next slide, again, we've been investing here. We're investing across all of our regions. Our e-commerce, our own direct-to-consumer e-commerce is 11.4% of our sales, up from 10.8 last year. If I include the e-wholesalers that we can measure, you know, pure e-wholesalers, I'll use Amazon as the example, our mix there is 19.4% of our sales, up from 18.2%. So clearly consumers continuing to move and shop there. And we're investing. We're investing in content. We're investing in all the platforms. We're investing in how we support our e-commerce customers in a meaningful way. So when a consumer shows up in that channel versus our channel, we show up elevated across all of our brands. And it's delivering really tremendous results. If I look at our overall e-commerce growth, again, up just shy of 6% for the year. Driven by Asia, up almost 4%. North America, up 1.3%. Europe, up 13%, 12.6%. And Latin America, where we're really pushing forward in Latin America, up almost 55% off a business that's up close to 20%. So you can see e-commerce is a big piece of the growth driver as well. On the next slide, we are opening stores. We're very strategically selecting store openings across the globe. We have a little more emphasis in Asia and Europe, as you know. We have a little bit more emphasis in Tumi generally, particularly in Europe and Asia. So you can see across the globe, we have nine stores in North America, five were Tumi, 20 stores in Europe, seven of which were Tumi, 10 stores for Tumi in Asia, and 26 stores in total for Asia. Asia continues opportunities to open stores across the brands. In Latin America, 12 stores with, again, Tumi opening stores, six, and other stores in Latin America, six. all driving a good story for us, all elevating brand imaging and really elevating the consumer experience and a big piece of our story. A few slides on stores. We've opened some stores around the world, as you know. I think some call-outs here just to give you a sense of what we're doing and the elevation they're achieving when we open stores. This is, I'm on page 22, this is the Dubai Mall store. We had a store there. We took a new space and renovated and elevated. We were all there for the opening. It's really quite a tremendous store with high volumes. And if I go to Bangkok, Thailand, we opened a store for Samsonite that really blends really nicely local culture, sustainability, and innovation all into the store so you feel it in the store. And what makes us powerful is we can create a really consistent brand elevated experience across the globe. But because we execute this strategy locally, we can be relevant to that market. And I think this store captures a lot of that essence. within our Asia business, but particularly within Thailand, performing very well. I'm quite excited about this store. This is a Tumi Ginza store in Japan. This was a renovation that we did. This used to be a kind of combined branded store, and this is transformational on elevation for Tumi in Japan. Really a terrific store, recently opened, and I think it will do tremendous things. And if you know the street and you've been by this store, I think you immediately can see the difference in this store for print. And what we can offer and display on the product perspective will continue to drive a great Tumi Japan story, which has been very successful for many years. Within Europe, we opened a new Samsonite store in one of the real prime locations within Cologne. This is a great story. I haven't been to visit it yet, but it's off to a really good start and really a terrific location. And then we opened our first Tumi store in Switzerland on one of the most exclusive shopping streets within Switzerland. And this is one we've been pursuing for a while, but the discipline we have in opening stores is we're opening only stores that get the right location. And so it took us a while to get the right location, but this is clearly it. And we're quite excited about this store and looking forward to great success there. Just on Tumi, and you'll hear it, you've probably seen it already in some of our campaigns and messaging. But TUMI's celebrating its golden anniversary, 50 year anniversary for TUMI. I had lost track that it was 50 years and we're quite excited about it. And you're gonna see some great stuff from us. One, you'll see, Some campaign work made for you since 1975 is the theme. This is a great campaign, really talking about the heritage of Tumi and what we've done to continuously reinvent and drive this brand, which is, I'll call it just shy of a $1 billion business today. We have amazing, exciting products tied to the 50th anniversary. But we always have amazing new products, but we're using 15th Anniversary to really highlight some amazing stories. You'll see iconic collections like Alpha and Voyager. You'll see 19 Degree with really elevation, some gold offerings as well. But importantly, if I go to the next page, and this is starting to hit the streets today, or not today, but in this quarter, We've launched our lightest luggage. And we've talked about this as one of the initiatives we needed to do with Tumi. And so we've launched 19-degree light, really as part of this 50 years of innovation. And this is a tremendous product. I've started to travel with this product now. You will see the difference and feel the difference. And it's really, you know, the attention to design in detail that we have, incorporating materials that really deliver a story of lightweight and durability You'll look and feel this product will be all day Tumi, and when you pick it up, you won't believe the transformation. This will do well everywhere. It'll do well in North America. But importantly, you've heard us say this, this really matters within Europe, and it definitely matters within Asia. And so as we embark on the journey of adding lightweight into Tumi's fleet, I think it'll do a really amazing thing. And more to come is what I would say. More to come as we get into next year. But I would highly recommend you take a look at this product, and you will see the difference, the Tumi difference. On sustainability, just really quickly, we've made tremendous progress on our responsible journey. As I said earlier, 40% of our products incorporate some level of recycled materials, up from 34% last year, 17% from 2021, zero in 2017. We've really further advanced our product sustainability framework to understand what we're able to achieve, understand how we push the envelope for products, and we've set some real clear targets for ourselves through 2030. That's important because that feeds into our ability to reduce our greenhouse gas emissions. The real progress that we make there is off of what we do on product development. Much of that comes from the materials that we use, and we're laser clear and focused on what we need to do to achieve that. Within our own facilities, we're using 100% renewable electricity, and we finalized, and you would have saw this, Presley, but we launched a science-based target, and last week that was validated for us, and this will really be a driver for to our impact on the environment, and we're laser-focused on what we're doing there. And we continue to be focused on the people front, professional development within our own organization. We're ahead of our own targets there. And we really continue to push our approach to human rights and social compliance and really pushing the envelope on what we do there and really starting to develop clear frameworks for how we move forward. That's within our own teams, but within our supplier base. And we, as you know, we have really strong relationship with our supplier base and elevating the game within their shops as well. And in the background, we're doing a lot of work on the governance and the metrics and the accounting that continues to build with regulations on this front so that we're getting the measurements right as well. So again, I'm really excited there. Lastly for me, and then I'll come back, we're getting recognized. We were, in time, we were number 40 out of 500 on a recent survey of world's best companies in sustainable growth into in 2025 so number 40 number two in the retail wholesale and consumer goods space this is real progress this is from a company that six years ago we're just starting you're already number 40 out of 500 we've got a double-a rating for it within MSCI really speaks to leadership this is we're in a different position we're not we're in a really transformative position as a leader on what we're doing on sustainability And our update, our responsible journey report will come out in April. And again, I always say this, but I highly recommend you reading it. It gives you a different lens into our company and what we're really doing to make a difference. And importantly, all of that we're doing while we're moving gross margins up, while we're delivering operating, because of our scale, we can execute this responsible journey strategy without having any impact on the performance of our business on the profit side. With that, I'll turn it to Reza, and I'll come back with an outlook again.