Samsonite Group S A

Good morning, good afternoon, and good evening, ladies and gentlemen. Welcome to the Samsonite Group 2025 Third Quarter Results Conference Call. At this time, all participants are in a 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 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 very much, everyone, for joining the call. We have the pleasure today of our CEO, Carl Gendro, and our CFO, Reza Talagani, with us. And our CEO, Carl Gendro, will start off with a few remarks. Thank you very much.

Okay, thanks, William. Thanks, everybody for joining for Hong Kong, I realized we have a time change. So sorry, this is at 10 o'clock on your time, if I'm getting the times right. But thanks for being with us. I'm on page five. And I think the way I would start the title sums up really well strong momentum in the business supported by innovative products, which you'd expect from us. But importantly, all regions in our core brands, actually, all of our brands are delivering sequential improvement from in q3 versus q2. We've seen clear sales momentum in Q3. Our net sales declined for the quarter. Constant currency is 1.3%, coming off of a Q2 that was down 5.8%. Encouraging net sales growth was positive in the month of August, September, and October. And all regions and brands, as I said, are seeing sequential improvement in constant currency growth, Q3 versus Q2. If I take one lens, the one market that's continuing to have some challenges on the wholesale side with wholesale buy-in, consumer sentiment, and lower inbound tourism in North America. We'll cover North America in a little bit of detail as we're going through. Our net sales would have increased in the quarter by 0.3%, just adjusting for North America. Our Q3 benefited from growth in our overall direct-to-consumer business, and also our non-travel sales had noticeable positive growth. Clearly, sequential improvement on those, and we continue to see sequential improvement on our travel net sales. Our direct-to-consumer sales consolidated up 3.5%, period over period. Our D2C e-commerce was up a little over 10%. Owned company stores were up 1.1% off the back of store openings and building momentum. Our D to C mix today in Q3 is 42% versus 38.9% last year. We'll cover that in a little more detail later, but we continue to move in that direction, similar to what we saw in Q2. Our overall wholesale chain of net sales declined 4.5% period over period, with sales for our traditional, I call it brick and mortar, wholesales down around 7% due to more cautious purchasing. by a few of our key wholesale customers, particularly in the U.S., that are driving a lot of this. But this was partially offset by meaningful growth in our e-retailer sales, up 12.3% in the quarter. And then lastly, I talked about non-travel. I've got a slide in my deck, and Reza, I think, has one in his as well. But our non-travel sales were up almost 7% in the quarter as we continue to focus on this opportunity, which is white space opportunity for us, becoming a more meaningful percentage of our overall business, as you know, but really a very strong trend there. I think one of the real highlights of the numbers as well beyond improving sales trend is the gross margin story our gross margins expanded in the quarter. With impacts from tariffs really well managed our Q3 gross margin was 59.6 that's up 30 basis points to last year and importantly up 60 basis points to the prior quarter. And when you think about the full effect of tariffs going in at the beginning of Q3, it speaks to kind of our tremendous ability to navigate and mitigate tariffs. Our US business is around a third of our business, but well managed. You can see it in the overall gross margin of the business. I can't thank our sourcing teams enough. What they've done to navigate is tremendous. What our teams on the front end have done and the relationships and the partnership we have with our suppliers really speaks to our scale advantage and the ability to manage the gross margin of this business well and it trends into Q4 looking just as strong. But we do expect sequential improvement in our sales in Q4. Relative to Q3, we believe we're capitalizing on the growth in travel, which continues. We have really amazing products. We'll talk about a few that we've launched in the midst of the quarter, like Parallax that you can see to the right of this page. And we have a positive sales trend leading into Q4. Last three months have been strong. The first month of Q4 is a positive growth story. And there's good momentum leading into holiday. A lot of Q4, as you know, depends on holiday. And I would say the early reads from across our markets are feeling good on the holiday story. But a lot happens in the next four or five weeks, but we're well positioned on that front. And as you know, we're really very positioned really well for profitable long-term growth. I'll cover it in my outlook as well, but the median long-term growth prospects for our business and our competitive advantage on product innovation, real strength on advertising, and really being able to capitalize on the underlying growth and travel that continues And seizing the white space on the non-travel opportunities, which we were shown over the last couple of quarters, and for sure in this quarter, really underpins kind of the strength in our ability to continue to deliver medium and long-term growth for the business. Next slide. From a brand perspective, you can see each, every one of our brands delivering improvement over last quarter. Importantly, Samsonite improved from, you know, roughly down five to down four in Q3. But when you peel into that, Europe's positive 1.3, Latin America positive 8. Tremendous performance shift in Asia with building momentum in the quarter, down 4% versus down 9% in Q3. And our North America business, again, largely driven by wholesale customers and some of the buying behaviors and cautionary approach was down 10%, just a bit better than what it was in the previous quarter. A real tremendous shift in to me trajectory, you know we were performing down, you know, two to 3% for the first half of the year Q3 shifted to positive five. Importantly, it came from across all of our regions, particularly in Asia, which was up 7.1% in Europe of 6.3% off the back of initiatives pushing the business new store opening. In a consumer group in this higher income class that are shown more resilience in Q3 than the rest of our consumers. And North America, importantly, was up 3.3% in the quarter. And if I call out China specifically where we have a laser focus within our Europe business, that was up 10% in Q3 for the Tumi business. It's a really solid performance, good trends as we move into the back half of the year. An American Tourister had a really quite dramatic shift. That was at the start of the year, and we talked about this in the last two earnings calls. A consumer group that's under strain more than others, particularly in the U.S. market, but around the globe, that consumer was moving more cautiously. We saw a really meaningful shift in improvement, largely off of what we've done to shift the product offering within the brand, particularly in Asia, particularly in India, which shifted to positive 3% growth for American Tourister. And as you know, that's our biggest market for American tourists during the globe. And really sequential improvement, noticeable improvement from where we were in the first half of the year. And I think we're set up well as we finish the year and go into the start of next year. Page seven is a slide we've looked at before. And I just want to, you know, drive the point. And for me, this company is hitting an inflection point that we've been talking about coming. As we exit Q3 and step into Q4, you can clearly see the shift. But importantly, if I go back to this revenge travel period 21 to 23 where our business was up 23% against an industry that was up 3.8% tremendous growth, we were six times growth in industry off the surge of travel that came back. Global air traffic is still projected to grow this business correlates really well with with air travel, I have a slide that you've seen three before a little later in the deck. 4% growth in global air traffic really underpins the resilience of consumer spending on travel. Maybe they're not spending the same way. I think that's had some impact in our business, but the sheer travel numbers continue to grow and the outlook continues to be very positive. We've continued to invest in this business on product innovation, new product innovation, capitalizing on the white space within non-travel and pushing the advertising and elevating the advertising stories of the business. We're continuing to invest in marketing spend, changing the lens on the way we spend these dollars to really go after not just existing customers from a loyalty perspective, but to deepen our relationships and broaden our relationships with new customers. And we're seeing clear traction on that front and investing there. I believe we're about to get the benefit of replacement cycle in this industry for the same reason that revenge travel slowed down at the end of 24 in the first few quarters of 2025. I'm certain that we're going to see the inverse of that as consumers continue to travel at a very good pace. As you know, and I presented this, I think, in the past, Over 52% of travelers replace their luggage every two years. In non-traveler bags, 73% of travelers replace that every two years. And so we're now at a moment in the cycle where three to five years pass that surge in travel. And I think we're starting to see the benefit of that in our numbers as well, which I was anticipating. We also believe consumers in this environment and many markets around have shifted towards value. I'm going to shift it to e-comm. We can clearly see it in our own e-comm members, both our direct consumer e-comm and wholesale. And I think importantly, because of our scale advantage, we're well positioned to capitalize on that. Our brands can hit price points, competitive price points across all of our markets, across particularly Samsonite and American Tourister. And we've been doing that. That's fueling some of our story. And as you know, we're investing in a strong digital platform, both digitally and importantly on the wholesale side as well. And it's delivering. And you can see it in our numbers in Q3. And I think we're really set up for medium-term growth on both of these avenues as we move forward. We're focused on profitable long-term growth. When you think about what I'm focused on as a leader, it's really around getting this business back to its normal growth profile. We have a long history of delivering outsized growth against industry. And I think we're heading there. And importantly, we continue to strategically invest in our business. Even as we face headwinds, we're pushing the business to really strengthen our competitive advantage in the marketplace from the leadership, platform capabilities, and scale advantages to continue to move us forward. We're continuing to win through product innovation. We've got some really exciting stuff that we've launched across all brands, a lot in the pipeline as we move into the start of next year. We're really laser-focused on amplifying and elevating brand awareness. As you know, we're leaders, our three core brands are leaders in the markets in their own rights individually, but collectively we're looking to amplify and really push more efficient, more effective marketing and have a vision to increasing this as we move forward. And we're really set up to do that to, again, cultivate customer loyalty, but importantly, continue to attract new customers for our business. And so you should be seeing and feeling that in our marketing messages today and as we move forward. We will capitalize on the growth and travel the forward view for global travel continues to be strong and as a leader with really the most trusted brands in the space, we will capitalize on that growth. I say it again, this white space around non-travel, there's tremendous opportunity. I've got a slide that talks about market size and what our shares are. We have tremendous opportunity to grow the non-travel business, of which we've been doing consistently for a long period of time. I think we can accelerate what we're doing here on the non-travel side, and you'll hear and see some of that in the numbers that we're showing today. We're strategically growing D2C, really through enhanced e-commerce platforms across the globe and across brands. and really discipline store openings and expanding our retail footprint in the markets that it makes sense for us to do. It provides this really unique competitive advantage to us that we're executing wholesale, but we're executing perfectly digitally and pushing ourselves on the digital side. And we have a foundation of retail stores, almost 1,300 stores globally, that consumers can interact with. And these are direct-owned stores that we can have this deep relationship with our consumers. And we'll continue to do that. And I think over time, our D2C mix continues to slow but steadily increase in the business at the right pace. And we remained... strictly disciplined on overall cost structure. You can see that in our overall numbers. Obviously, gross margin is an art and a skill that we have, and we manage gross margin for a long time really well. But how we manage the rest of our cost structure, Reza will talk through that as well, even as we face some headwinds over the earlier quarters of this year, the cost structure has been really well managed, and it's well entrenched in who we are as a business. I think this is a new slide. It's a slide that we use internally quite a bit, but we operate in a really highly attracted, fragmented global bags and luggage business. I'm on slide nine. If you look to the right, global luggage. This is what you typically think of us as when you think about us today. It's roughly 64% of our business is travel luggage. We have a 19% share in what in 24 was a $22 billion business. that grew at a CAGR growth of 2010 to 24 by 3%, and that's with the COVID years. The reality is, take the COVID years out, it looks more like what the forward indicators are for this industry, 2024 to 2029, 6% CAGR. And as you know, we have the ability to outpace this growth, and that's the way to think about this space. So we have a growing industry, we have meaningful scale, and we have the ability to continue to grow and attract consumers into our family of customers. So the right of the page is bags, global bags. This is excluding luggage and excluding handbags, which is not us, right? This is the rest of the bag business, what people are carrying around and moving, backpacks, duffels, crossbodies, things that we see every consumer in the world traveling with. That has very similar underlying growth dynamics. You can see the 10 to 24 impacted a bit by the COVID years, and the forward indicator is not so different than luggage, 5% growth. And importantly, our market share here is 3%. We've been growing high single, low double-digit growth for a period of time in this space, and we have clear ability to continue to expand with collections that we've launched and been launching. I think my next page will show you a few of those. That shows that we have tremendous ability to grow share in this bucket, and it's a larger bucket without plenty of opportunity for both ongoing growth and just gaining share. And just as a reminder, in this 2010 to 24 period, if you blend the two, our CAGR growth in that time period is 8.2%. That's including COVID years. That is almost three times the industry growth that we saw in that same time period. So it speaks to kind of our ability to leverage our scale to move across these two big categories of the market we operate in. Our growth, we've covered this before, has historically been really strongly correlated to travel. And the outlook for travel remains tremendously strong. If you take a five-year forward view, travel growth expected to be around 4%. If you shorten that up a little, I think it'll actually be a little more. If you look to the left of the page here, from where we are to 2019 levels, call this pre-COVID, we're up 22% in sales against the global passenger growth in that time period, including COVID, that's up 8%. So you can see this tremendous outpace that we have in growing against an industry that continues to grow. The chart on the right, we've shown before. Okay, the red line is travel industry. You can see the impacts of COVID, but the real impacts are really where we are now, which is this revenge travel that I covered that we really over perform. And the forward indicators, the most important page here is the forward indicators for global passenger travel, 4% growth. And we're at importantly at this inflection point that we're getting back on course. The history clearly shows we outperform this industry and we're, we're, pivoting into positive growth again is the way I would describe it at the end of Q3, Q4, and for sure in the years to come. And we should do better than what the industry underlying growth is like we have for the last decade. On page 11, non-travel category. 14% CAGR for us, 2020 to 25, right? So I just showed you a number where the industry growth was something like 2%, and we had 14% growth here. We've gone from $480 million to $912 million. We've talked about this for several years. There's real opportunity to continue to grow in this space. We delivered close to 7% growth in Q3, and we're focused, and it's across all of our brands, brands like Gregory that are largely non-travel, High Sierra, which has a meaningful piece of travel, But to me samsonite and American tourists are all delivering meaningful growth in this space and plenty of opportunity to gain share and continue to grow. As a team we're laser focused on really further penetrating what I would label is a big business of us at 1.4 $5 billion business but under penetrated from a category perspective that I know we can do more. And in this Q3 period rep 270 basis points to the percentage of our sales approaching 36% of our sales. non-travel. I think when I started a long time ago, it was something like 12% of our business, right? So this is really meaningfully moving, and again, in a huge market that's got tons of potential for us. On page 12, what does it look like? You know, I think you know this. A good example of Samsonite's Better Than Basic, designed and developed in our U.S. team, performing really well. This has a whole collection of backpacks, duffels, crossbodies that is performing tremendously. It's what you see consumers moving with today. EcoDiver in the middle of the page. This has been a home run, started in Europe. It's a home run all across the globe. A whole collection of duffels, backpacks, more unstructured travel goods that consumers are traveling with today. It's a top three collection in Europe overall, and it's penetrating the rest of the world over the last couple of years in a meaningful way. American Tourists are Take to Cabin Under Cedar. There's this huge wave of under cedar bags within Europe as discount airlines put pressure This under-seater category, we're hitting with all of our brands, and there's so much more to go. And this American Tourister bag's been a tremendous success. And when you think about American Tourists, you think about bright, colorful luggage, but this non-travel capacity we have in backpacks and duffels is tremendous, and the teams around the world are doing great stuff. Gregory, you get it. You know, this is Gregory, which is super technical mountain bags as we come off the mountain and we really penetrate into everyday bags that make you feel like you're on the mountain, but you're in an urban setting. And more lifestyle approach products with Gregory. Gregory is delivering significant double-digit growth this year for us, and it's got tremendous room to grow. Samsonite Parallax, this is a collection that we launched. I have a slide on it. This is the backpack component of this. This has been a huge success. This is a two-in-one backpack where you can separate that backpack and you have a bag that you can take with you for the day. And a travel component of that backpack that you can use as effectively your underseater has been a huge success, a Red Dot award-winning collection. And then Tumi Selena, part of the Tumi Voyager collection, really an amazing bag, big part of Tumi's journey, and so much more to go on Tumi from a collection perspective. Think about owning totes and business bags and what Tumi's known for. There's real opportunities to drive further that space, particularly in the women's category. Just a little call-out. We've been here before. This is Business Travelers Award. Samsonite was rated number one. Tumi was number three on the list. No surprise, Samsonite's number one. This is a survey with 95,000 global travelers voting in, a panel of 20 experts. And importantly, when you think about scale and the ability for us to innovate and bring products to be recognized as number one business traveler luggage is meaningful. And you'd expect that from us. And I'm just sharing that this is the type of stuff and pushing the business to really demonstrate this amazing product development, this focus on functionality, focus on sustainability, and creating inspiring bags that people want to travel, and this award speaks to that. On page 14, we've had a very successful, I would say ahead of our expectations, launch of a Parallax collection. I think I indicated we were working on this. This launched in September of 2024. It's a collection that really brings... the best of our innovation. From a sustainability perspective, the bag's largely sustainable. Almost every inch of this product incorporates sustainable materials. It's built for self-repairability, another real sustainable attribute. You know, this is a bag that you can replace the wheels at home. We can help you do that very easy. And it's built to last, and it's built with superior design functionality. It's become one of my favorite bags to travel with, from a carry-on perspective. It's got front access. mid-access. It's really designed perfectly for the way consumers think about traveling and ease of travel when you're moving through airports and in hotels. What this bag delivers is tremendous. And it was recognized. We won two Red Dot Awards for this, both on sustainability design and overall design. And again, it's exceeding our expectation. In our view, it's just getting going. I think it's been a really successful collection. And it speaks to the power of a globally launched product with you know, cohesive high impact media campaigns across all of the regions in the world. This talks about scale advantage when we put ourselves together to deliver on a really amazing product. You should expect more of that from us as we move forward. And Tumi's really on a run. You can see the shift in performance as we stepped into Q3. We continue to focus on elevating this brand on all fronts. It's a very product centric and communication strategy focused business. Okay, this is around delivering performance luxury products. and then really meaningfully elevating the messaging to consumers on what we offer here and what this means. We had a 50-year anniversary for Tumi. Even that surprised me. I hadn't fully appreciated Tumi. It was 50 years in the making. It's hard to find brands in our space that are 50 years. And it was driven. It was well presented. The signature Tumi Red that you can see on the left incorporated in some of the products and materials as we were launching our 50-year messaging to consumers. We launched 19-degree light as part of this 50-year, really a testament to the innovation that continues to be deep in the brand Tumi, both on travel bags and non-travel bags. Very successful line. Clear focus on lightweight that Tumi's been needing and waiting for. Very well received by consumers. And more to come is what I would say as we go into next year. And then just lastly, Tumi's icon tested campaign as we talk about the icon of Tumi and what it means to travel with a Tumi that fits the true definition of performance and luxury, how it comes together. This we launched in September. We've already had 56 million impressions off of a campaign that I think has been well received, both focused on men's non-travel, women's non-travel, and talks about the true DNA of what Tumi is all about when you think about performance luxury. So we're quite excited and more to come on the Tumi journey as well. We've opened some amazing stores for Tumi around the world. I just wanted to give you a few of these. South Coast Plaza in California, just a tremendous store. I think we talked about the Tumi store in Shanghai, this flagship location in the bottom left. That's been a tremendous success. Really distinctive Tumi. When you get into that store, you feel the brand in a meaningful way. Chengdu, China. So when you see China moving and the types of stores that we're opening within this region, really amazing. And Beijing, China as well. This speaks about the power of this direct-to-consumer model and the strength of the brand as we show up, not just digitally, not just with amazing product, but on a footprint that consumers really embrace kind of what the brand's all about. So with that, I will hand over to Reza, and I'll come back with Outlook right at the end.