Samsonite Group S A

Good morning, good afternoon, and good evening, ladies and gentlemen. Welcome to the Samsonite Group 2025 Interim Results Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note that this event is being recorded. And I'd like to hand the conference over to Mr. William Yue, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you, Operator. 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. And Mr. Gendro will begin with a few opening remarks. Thank you very much.

Okay. Thanks, William. Thanks, everybody, for joining. I'm starting on slide five. I'm assuming that is up and running. And I'm going to start with an overview of first half performance and, importantly, the market dynamics that we're seeing. When I think about where we are today, we're significantly benefited from unprecedented revenge travel from 2021 to 2023, a period where the recovery of our business significantly outpaced the market. From 2021 to 24, our reported net sales category grew six times faster than the bag and luggage industry, as we were really set up to capitalize on that return of travelers in that time period. Our recent sales trends, particularly in the back half of 24 and first half 25, reflect a normalization from this record-setting 23 result, which has caused us to trail travel and pass-through to miles just a bit in the short term. That said, our Q2 net sales, Generally, we're consistent with our outlook down mid-single digit. While our gross profit margin and our adjusted even margin remain stable, in our first half net sales, importantly and notably, we're still up 24.4% compared to pre-pandemic first half 2019. We're navigating a shifting travel landscape. While travel growth has continued as consumers have still prioritized travel and experiences, We've observed a softening in travel demand during the first half of 25 in certain key markets around the world, particularly North America, influenced by macroeconomic uncertainties, shifting trade policies that has some settling, as we speak today, but still kind of fluid, and importantly, a weakening consumer sentiment off the back of, you know, much of the macroeconomic uncertainties and trade policies that's carried into our business. From a channel performance perspective, our wholesale customers have adopted a more cautious purchasing approach, resulting in our wholesale channel being down 7.4% in the first half of the year. In contrast, our direct consumer channels have showed greater resilience, declining only 1.6% in that time period, and it really highlights the strength of our direct connection with consumers and the resilience in consumer demand, as we can see it closer with the direct consumer business. Our focus remains on profitable growth and brand positioning. We've observed in our marketplace, and you'll see it when we talk about the brands, an increased presence of low-priced, unbranded competition, which is that we've consciously chosen not to compete with to protect our profitability and the brand positioning of our business, particularly American Tourister. And we believe this remains tremendous long-term opportunity for us to pull consumers from this unbranded space into branded products with brand American Tourister. So we're managing that very, very cautiously and the positioning we've achieved across all of our brands in this environment. We're driving growth through D2C and category diversification. Our strategic investments in the D2C channel are paying off. Our D2C mix now is 40% of net sales, up from 38% last year. We believe this evolution enhances margin profile in our business and strengthens brand loyalty. Concurrently with that, our non-travel category showed constant currency growth during the first half as well, which continues to represent a significant long-term growth opportunity for us in a section of the market that we're underpenetrated as a category from our business. Non-travel is up 180 basis points to 36.2% in first half compared to the prior year. We continue to demonstrate agility and discipline in managing our cost base. Despite adding 57 net new stores since June 2024, our combined distribution and GN expense are up less than 1% or approximately $5 million compared to the prior year, really speaking to the level of management we've put on the cost side of the business. This illustrates the effectiveness of our commitment to operating efficiency and prudent resource allocation. This focus has led to an improvement in our long-term margin profile with first half 25 adjusted even margin still remaining 400 basis points over where we were first half 2019. We have a very resilient gross margin. Our gross margin remained robust and well managed at 59.2% in the first half of 25, while slightly down from a record 60% last year at the same time period. And this was largely due to a mixed effect with relatively lower contribution from our highest margin region in Asia, as well as the effect of certain strategic promotional initiatives to drive sales, which we've been doing to push the business. partially offset by the net sales contribution DTC, which has a margin benefit for us. We continue to strategically invest in our business, particularly in product innovation, our DTC present, marketing initiatives, while maintaining discipline on overall cost, as I just talked about. We continue to focus on remaining at the forefront of creating innovative and exciting products that we believe drive demand. and elevate our market leadership position. We have very strong introductions of products in the first half of 25, 19-degree lights, a good example for Brandtumi. And we have more coming in the second half. We'll be launching our 2025 Red Dog Design Award-winning Parallax in just a handful of weeks, which is an amazing collection of products that we'll be launching globally as we step into September. And we believe these investments across all those fronts are critical in positioning our business for strong, sustainable, long-term growth in a dynamic market environment. And we continue to invest. The next slide is a slide you've seen before. And I think the key takeaway from this slide is when we look at where we are, we'll talk about revenge travel in just a second and what that looked like for us against the industry. But the important number is that when we look forward in this business, this business or this industry is back to consistent growth profile that we've seen in the past. This is a business that from 24 to 29 outlook category growth of 4% in global passenger travel. And as you know, we correlate really well with that. And we have a history of over delivering against that industry growth. So we're well positioned in an industry that's moving despite the macroeconomic challenges we're seeing. So I see a different slide, but a lens, something we've talked about in the past, but I think it captures a really important lens for the business. Sales trends recently have deviated from travel growth as we lapped significant outperformance, and I'm gonna show you that, along with consumer sentiment that's definitely softened in this environment, particularly in 2025. In the chart, the purple line is the bag and luggage industry, what we would label as the industry that we're playing in. And you can see over this time period what the growth profile is. The blue line is us, okay? And you can see how we navigated pandemic. But importantly, when we step out of pandemic, and this is really where Revenge Travel captured those steps in, we significantly outperformed this industry, up 37% in 21, up 47% in 22, meaningful growth of 28% in 23. If you combine the CAGR growth 21 to 24, this is a business that had a CAGR growth of almost 23%. Against the bag and luggage market in that same time period, that was up 4%. And it speaks to our ability to bring in inventory. You know, we were well ahead of the industry, our ability to continue to innovate and deliver really strong product. And it's fueled a really good story. As we step into the end of 24 and 25, we start to comp this period, okay? And so we're seeing and feeling that. And we have on top of that a softening consumer sentiment. So I think we're navigating this well. We've significantly outperformed the industry. And as we look at industry forward growth back to historic levels, I think you'll see us catch right back up to that as we come out of this short-term period that we're navigating today. On the next slide, just a bit on the numbers. And again, our first half numbers definitely impacted consumer sentiment and what I just talked about as far as trends and macroeconomic uncertainties that have kind of played in. Our first half sales were $1,662,000,000, a decrease of 5.2% compared to last year, which was up 2.8% last year first half. And again, that's off of a tremendously strong first half 23. So we started last year in a very strong way. We're comping against that. Our low performance in the first half was primarily to advise wholesale customers perching more consciously, as I said earlier. Wholesale customers are acting carefully in the midst of this shifting tariff environment and unsure where we were landing on this. And you'll see that in the wholesale numbers. And, again, I mentioned this already, but noticeably our first half numbers still remain tremendously higher to pre-pandemic, up 24.4%. Our wholesale channel sales were down 7.4. It's a handful of big customers that are buying differently right now because they manage. And, again, if you think about that, it's impacting North America. This is where we're seeing it. Our D2C channel, in contrary, was only down 1.6% as a true measure of kind of what we're seeing in consumer sentiment and what we're doing to push and drive those channels that then direct the consumer. Gross margin very strong at 59.2 despite the unfavorable geographic mix as well as us. leaning in strategically with promotions, but still managing margin in the lane, what I would label as the lane that's kind of our natural place for gross margin, you know, roughly 59 to 59.5% is the way to think about it. We're up against a really strong record gross margin last year. And I think when we talked about last year's results, we signaled that these were record numbers and maybe higher than the normal course for this business. And importantly, as many of you know, and you've been following us, we significantly elevated our brands over the last three and four years. And our gross margin today sits at 320 basis points off of where it was pre-pandemic in 2019. And we've had tremendous success in elevating the position of all of our core brands, and it still carries really strongly in the gross margin, despite the consumer sentiment and despite the noise on tariffs. Reza will cover what we've done for tariffs in the back section of the presentation. I said this earlier, but we're managing costs with tremendous discipline. Our distribution and JAN expense, $640 million, was up less than 1% despite adding 57 new company stores. You know, we continue to manage this business, pushing it, driving it, but with discipline on the cost structures that we have in place and what we've been able to maintain really and achieve through the pandemic. Our first half adjusted EBITDA margin, $269 million, and EBITDA margin of 16.2%. We saw an improving trend in Q2 versus Q1, so the margin is really holding up. And just as a reflection of the transformation we've had in this business in the midst of all of the past four or five years is we're 400 base points higher than where we were first half of 2019, and all that stays really completely well intact with its enhanced margin profile for this business. I covered this, but just a little bit detail. We continue to have great success in D2C channel. We continue to invest enhancing our D2C presence, both in brick and mortar, in e-commerce, particularly in our under-penetrated TUMI brand in Asia and Europe. We continue to push and open amazing stores. I'll cover that in a second. We believe these investments yield strong, tangible results and enhance the overall gross profit profile of business. while continuing to elevate the brand presentation to the end consumer. B2C, the mix, as I said, was 40% of our sales, up from 38% last year. And I think we've seen this in the past. There's no reason over time we don't shift closer to 50% direct to consumer as we move and push the business forward. We also believe that these shifts not only enhance gross margin, but again, it elevates our brand positioning and presence to the end consumer. We're seeing that across all of our channels, across all of our regions. and across all of our brands. And we continue to expand non-travel opportunities. There are tremendous opportunities to grow the non-travel category for this business. Our focus efforts on non-travel continue to deliver with positive constant tendency growth in the first half of 2025, despite consumer sentiment, and it highlights really a significant long-term opportunity for us to grow in this under-penetrated category with amazing products. You can see it across brands and what we're doing to push the business. And again, our non-travel business today is now 36.2% of our sales, up almost during our basis point to where we were last year. If I look at brands, and Reza will cover some of this in the back, but, you know, how are the brands playing within this period? Brand Samsonite are basically our kind of two main Samsonite brands, which are more targeted middle upper income consumers are performing better than American Tourist, as you might expect. American Tourist is really addressing a more value conscious consumer, maybe feeling more of the impacts of consumer sentiment and uncertainty, and more of a wholesale business. So our American Tourist business down 12.7%, really driven by wholesale customers, buying more cautiously in this space, those consumers being more cautious And it's a space where we've seen tremendous influx of unbranded, really low-end product that we've consciously chosen not to follow, which is the right answer as we manage the elevation of the brand and the positioning of the business. Samsonite was down 4.7%. We saw growth in Europe. We saw growth in Latin America. We saw the pressures within North America and Asia off of consumer sentiment and the macroeconomic backdrop, down 4.7%. But you can see Asia down 8% and then North America down 6% with positive numbers for Europe and Latin America. Tumi, to me, performed quite well. We're not used to a negative for Tumi, but down 2.5%. We saw growth in Latin America. We saw growth in Europe. We saw some modest decline in Asia, 2.5%, and we saw a decline of 4.7% in North America, really driven by reduced traffic, consumer spending reduced. And I might say, when I think about being in a performance luxury space, we perform better than most in this space at down 2.5%, and we see improving trends for this as we go into Q3 in the back of the year as well. So I think, again, brands are acting the way I would have anticipated in this environment, and we're managing well. Just one shout out for Gregory. We don't often shout out, but Gregory is a brand that we're pushing and it's on the move. This delivered 15% growth in the first half of the year. This was really driven by really strong distribution expansion and particularly strong D2C growth in our digital channels in North America and Europe. And we saw brick and mortar expansion in Asia. We opened the first retail store in China and Shanghai. I visited this store at the start of the year. There's more to come. This store is open, tremendously successful. We've immediately had malls approaching us for more opportunities to open this business. As you know, Gregory within Asia has a bit more of a lifestyle along with its technical aspects, and it supports these stores really well. And we've been innovating in the business. We've been driving new product innovations in the active lifestyle and core outdoor categories. Gear organization has been a big win. It's broadening distribution, and it's having tremendous success with the customers. If you haven't touched some of this product, I've got a garage full that's really amazing products. And we've been expanding in particularly the everyday active lifestyle outdoor consumer space with tremendous success with this brand, and we're pushing it quite well. And then lastly, and I'll get into some specifics, but, you know, I think this concept of investing in profitable long-term growth and building resilience for the future is something that we're always doing. And I think even in this environment where it looks like sales are, you know, down slightly, we can understand the reasons why, either from a comp perspective or consumer perspective, we're still pushing the business. And we're committed to continuing to invest across the business to drive long-term net sales growth. We can continue to invest in product innovation. Again, product is one of our keys. That's why we've been here for over 115 years, really developing compelling new products designed to meet consumer needs and expanding our market reach driving sustainable revenue streams, and driving sustainability within our products. There's tremendous momentum here on the product side. We're continuing to push that. As we said, strategic retail expansion, disciplined opening of new stores, 50 to 60 stores a year is something we can handle, and it's expanding brand presence. It's capturing new market opportunities and ensuring this strong footprint in retail, particularly in underbranded underpenetrated brand to meet within Adrian Europe gets in front of consumers. And we're doing amazing work here. And that will continue. We have targeted marketing advertising, we're capitalizing on our strength in our in our marketing spend to really amplify brand awareness, we see tremendous opportunities to do that cultivate customer loyalty, but importantly, stimulate demand, particularly in these environments, we're stimulating demand, and we can really lean off the strength of our marketing, we continue to do that. And I think these deliberate investments underscore the confidence in our business and our commitment to drive long-term sales growth for the business. A few call-outs to some really interesting things we've done. We opened this amazing flagship store in Shanghai in one of the best locations within Shanghai. You can see the pictures of this. This store opened in July. We had a grand opening for this store a week ago. I missed getting there because of the typhoon that happened to be flowing through, but I was due to be there. But tremendously successful. We opened this store with a new China-specific celebrity for the brand Tumi. With great success and this is also a great start. We've opened other stores across Asia We opened our 50th to me store in Europe on page. I'm on slide 15 50th store in one of the most vibrant shopping streets in Cologne one of my favorite spots within Cologne and this is a great you can see the footprint of the store and location of the store and Really a testament to where where we can continue to go with to me in Europe and again our 50th store On our 50th anniversary for the brand. It's quite exciting and they had a great opening here as well. I We're focused on products and messaging and collaborations. We launched in June our exclusive Vex and Samsonite collaboration, really a vibrant, colorful collection that will be launched on a limited basis, but you can't miss this when you're in an airport or moving around, and it really just brings tremendous interest. The bags are fascinating, and we've launched those, and we'll continue to do things like this within the brands to stimulate interest and demand. Even at Brand American Tourister and Squid Games, which I'd never watched, but my kids were quite into it, This is a younger focused collaboration. We have really a fun, exciting product launch with both luggage and tote bags, a neck pillow that's totally fascinating. And I was in market in Korea just a few weeks ago. This really shows up well and stimulates brand American Tourister. And just another message around what we can do with collaboration is to bring real interest and scale to our brands. We have very strong marketing campaigns across North America, which have really helped brand positioning, elevating brand position. We have Peyton Pritchard, which, you know, we happen to sit in Boston, so he's a Boston Celtics player, with tremendous success and really exciting ads. We have John Trattoro, who's kind of been a star for a while, most recently in the series Severance, which is quite exciting and award-winning collab, and we're doing some really amazing city-themed advertising with John across our North American market, really well received. In Europe, we continue with Kat Baroud, who's been a huge Samsonite fan and driver, and we have a You Are the Journey campaign, which is a meld of some of our best-performing luggage, along with our non-travel categories. And this campaign has been tremendously successful in stimulating demand, interest, in showcasing how non-travel and travel really work together in our Grand Samsonite in a really exciting way. And then lastly for me, and I'll come back at the end, we're continuing to advance the consumer-facing communications on our responsible journey. So, as you know, we're pushing the needle on sustainability. We're doing amazing stuff. We have such confidence in where we are now. We're leaning into the messaging, okay? We're leaning into what makes a difference in our space. in a careful, subtle way across websites, within store prints, and really off of the work we do with consumers, we believe durability, repairability, and recyclability, in that order, consumers really care about when they think about a sustainable product built to last. And all this messaging ties really well together on all those fronts. And in all those fronts, we're winning on durability, design for repairability. We're making tremendous impacts in the marketplace and more to come. And we continue to push the envelope on recycled content. This Pyrolex collection that will launch for Samsonite, for me, is a tremendously commercial product that touches across all of the sustainable attributes that we've been working on in our products. It's an amazing product and a testament to what we're able to do. And we're telling our customers more and more about what that is as we move forward. With that, I'll go to Reza, and then I'll jump in at the end.