Thule Group AB (publ)

Good morning everybody

for this 2023 Q1 report and as we had expected it was a slow start to the year. So if you can go to slide two please. We knew that we would be facing a tough bike retail situation with bike retailers having significant stock on hand and on top of that of course we are also facing in reality a very tough comp period because last year in 2022 during the first few months of the year there was an extreme stock build-up by bike retail. So our sales ended up at 31% down, effects adjusted, which is very much in line with our expectation. It is a small growth versus 2019, the first pre-pandemic year of 12%, so it's not catastrophic from that sense but of course clearly we are feeling the situation of bike retail placing very limited orders as they instead sell down their stock. What I'm very happy with in the quarter is our ability to still deliver a very strong gross margin. Our gross margin improved to .2% which is a .2% improvement but actually at 1.5 percentage points currency adjusted and the key contributor to that is of course the fact that during 2022 implemented price increases also mid-year because of the situation of costs out there. If you look at a positive situation as well is this that we see that freight costs are returning to more normalized level after having been extreme during 21 second half and 2022. We also see a clear positive channel mix as retailers are having an inventory sell-down period therefore are buying less product from us. We don't have that impact in our own direct consumer where we therefore have grown our share of sales that goes direct to consumer. That was happening anyway even without retail inventory adjustments the channel mix would have anyway gone to direct consumer because that is the winning and fastest growing channel we have but that it was accentuated in Q1 than when retailers sold down stock levels. There was a negative effect in the fact that we still have a significant under absorption in our factories and that is of course because we have decided not only was our sales limited but we are also on the journey of reducing our own inventory levels which did go down in the quarter with 158 million Swedish krona. So the fact that we are seeing an inventory reduction plan going ahead at the same time as we're selling less means we're producing significantly less hours in our plans than we did at the same time last year and in fact we are at the end of the quarter 900 people less in our plans than we were at the same time in 22. That has been done because we have a very efficient three-tiered staffing level in our production facilities and we couldn't react fast enough during the second half of 22 with a very rapid and significant slowdown in the bike orders but we could then act anyway during the second half and now we see the positive impact from that. From an SG&A cost point of view we are a steady level in fact we have a cost reduction in terms of constant currency of 17 million Swedish krona and that is despite a very aggressive continued product development push and an earlier than normal push also in marketing efforts as we see a number of key launches and also fairs and events coming earlier than they used to do in the past. Overall that meant that we delivered an EBIT margin of .2% which is close down significantly versus 2022 but still a strong margin considering the negative sales development and the under absorption of our factors. If we go to the next slide we'll talk a bit more about the timing logic in what will be an extreme year once again to compare to. So if we look at slide three and talk about what we're seeing in terms of sales by quarter we knew when we stepped into the beginning of the year that we would be facing the toughest quarter in terms of a comp reality in the first quarter and the logic is clear that was due to the fantastic sales in 2022 as especially bike retailers were aggressively filling up inventory expecting a fantastic bike sales in years. Now we are seeing the absolute opposite of that but therefore we see also that if you look from a comp period now going forward the second quarter is also a challenged quarter which had 43% growth versus pre-pandemic times while the first quarter had 64% growth and then we have two clearly weaker quarters which only grew 23 respectively 28% versus 2019 as we already then saw a dramatic and rapid bike retail slow down on sales. So a tough first half and a very easy second half comp wise. We therefore have had a lot of discussions and I know there's also been investors and analysts a lot of attempts and speculation and tries to try to find where is that point when bike retailers will find their normal inventory levels and if you remember what we stated already way back in September last year when we did a profit warning for the coming quarters we announced that we felt it would not be possible for the bike retail sector to normalize their inventory levels until sometime during the peak season which is always in the spring of the following year. We said already at that time and we have reiterated that in the last two quarterly reports that it's going to happen sometime between April and June and the most optimistic people in the world were saying April and the most pessimistic people in the world. It's clear that the most optimistic people were wrong. We were not among them. We did not believe it would materialize in April and we're starting to see finally towards now the end of April some good bike orders coming in. We know that the situation will be improving from a retail inventory level on a weekly basis now because we see the sellout are starting to happen and we're starting to see orders picking up. So by the end of the second quarter I am convinced that we will have seen a normalization of those inventory levels. That will mean also on a comparative basis we will have our worst performing months versus compared to last year in the beginning of the quarter and then as sales started to slow down of bike related products towards June we will towards the end of the quarter see stronger comparable numbers with bike retailers having now adjusted their inventory levels. It is of course in general though still uncertain market conditions out there and I know all of you speculating the same way what will happen in total with the concerns that consumers have in terms of what their spending can be and we will needing to be very flexible on various product models and be very much on top of the trends that happen also in the coming quarters. If you go to slide four we'll talk a bit more about what has happened in the region Europe and rest of world and if you look at region Europe and rest of world we saw a 26 percent decline versus the very strong 2022 in constant currency. It is the catcher that was hit very hard but we also have seen a relatively cautious retail in the total outdoor arena and that is as people that have followed Tule for many years and have been investors for Tule in many years knows that in the months of March and April we have always said that there might be due to when the Easter season hits and how good the weather is. You might see sales moving between those ending of the first quarter and beginning of the second quarter. So what we clearly have seen is a cautious retail sector being a bit worried about what will happen in the consumer pattern and also never blame the weather it's just facing its timing differently but it didn't help us that it was a week and late spring. When we look at the RV products category in Europe and which is the dominant part of our RV product sales with more than 95 percent of sales in that product category happening in the European region it was a strong solid quarter with positive growth thanks to that the motorhome manufacturers are now starting to catch up with those order book backlogs that they've had for a very long time during the pandemic. So despite everybody's concerns about what will happen when motorhomes are significantly more expensive since the last few years and also the discretionary spending opportunity for consumers there is a very healthy backlog that now finally the motorhome manufacturers are filling up and sending out. As our products are mounted and assembled either by the manufacturer or at a dealership because the consumers won't trust themselves just quickly attaching it that means that we are partly connected to that performance. We are outperforming the market once again as we've been doing for the last 17 years and I'm sure we will continue to do that but we have to be aware as we have noted a few times that the biggest interesting point for the RV product sector in will not be what the order backlog is at the moment there will be solid sales it is more how many new consumers are filling up at the end of that order book now and there might be more concerns about the signing thing on those vehicles. We also had a very strong tax backs and luggage performance but that's logical to be honest because if we talk about tough comps we can also talk about easier comps and as most of you will remember 2022 Q1 there were still significant limitations on travel opportunities for people in Asia and Southeast Asia those have been loosened up and when people are commuting back and forth to work and commuting back and forth to universities they buy laptop backpacks and other things and when they are starting to travel internationally they buy carry-on bags and duffel bags so we are seeing a solid sales growth driven by a more return to normal in Asia but also by very strong collections in our new luggage series that have been receiving very positive reviews in the marketplace. So if we look at it from that point of view you also naturally can follow as a consequence which geographies did best in the it was the Southeast Asian and Japanese markets and also China because those are markets which had limited sales last year and are also markets where we have a higher share of our sales in the packs and bags and luggage category and less in the bike related categories. We also had a very strong performance same thing due to a weak comparable last year in all the markets close to Ukraine so we saw a significant and very natural concern after the Russian invasion to Ukraine and consumer market concerns were significant in 2022. Now there is a positive normal momentum actually in those neighboring markets which means that we have a strong performance in Eastern Europe in the quarter. As I mentioned for the total group is also applicable specifically for region European rest world that are direct to consumer sales shows a very strong growth in actual numbers and then if you combine strong growth in actual numbers all by from a very low percentage it still impacts us positively as we also saw a clear retail slowdown in ordering as they were selling down imagery. Our path of growing direct to consumer will definitely continue in the coming quarters. In next page we look at the Americas region so on slide five we can see that the actual number in terms of comparative versus the fantastic 2022 was a 45 cent decline. The reality is that in North America we were catching up much later as we've reiterated few times in our ability to fulfill the orders during the pandemic so we were still more in than in region Europe and rest world actually selling bike related products still into early Q1 22 that had been already ordered for 21 late which means the compass extreme. If we would go all the way back to 2019 comparatives it is actually very similar performance between the two regions. As I said bike category is also here the one that has hit the hardest and also here similarly as to the major retailers in in Europe there is some cautiousness in the how much they're bringing in orders ahead of the spring. In this market the very small niche product of RV product impacts very little we've had fantastic growth numbers there for a while and you won't be surprised at me telling you if you've looked at motorhome sales and the whole caravan and motorhome industry that that was not the case in the first quarter of 23 because it's been very slow in general in that market. With impact spice and luggage we continued to grow after commuting to back and forth to work and universities start to pick up and as people fly around more. In terms of geographies it was the Latin American distributed markets that showed the growth the smaller markets we deal in and that's partly once again if we're honest as we always are it's due to the fact that we saw a relatively weak ordering in 2022 in those markets in the first quarter. Also in the North American markets US and Canada where we do direct to consumer sales we saw a significant share increase of our sales in direct to consumer. Once again a combination of us continuing to show actual growth and then as a share of course with retailers adjusting and balancing inventory it became also higher share sales. If we then go over to the financials I'll leave it over to Jonas.

Thank you Magnus. We are now on slide number six. The sales of ,000,000 sick in the quarter was 31 percent below the sales for the same quarter prior year excluding FX effects. This is on an expected level and as in the previous quarter sales of bike related products continued to be slow. Please bear in mind that we are looking at tough comps from last year's first quarter and part of the strength in that quarter was because of sales of bike carriers at the end of 2021 spilled over into the comparison quarter. A Q1,22 and that was due to delays that we had in 2021. As Magnus said our customers are still reducing inventory so our sales do not reflect and customer demand. On the positive side we saw an increase in sales of packs, bags and luggage and a continued good level of sales in the area of RV recreational vehicles. The gross margin is slightly higher than for the same quarter last year and the improvement comes from our ability to quickly adjust variances in production volume, drastically reduced freight cost and effects from price increases. Regarding freight costs last year we had to accept container prices on sea freight that were almost 10 times the current level. Operating expenses have increased slightly from 522 million sick to 534 million sick but excluding FX effects it's a reduction of 3%. Savings are coming primarily from sales and marketing costs as a consequence of the lower variable cost relating to sales. We are continuing our spending on product development. As a percentage of sales the operating expenses are 24% compared with 17% prior year Q1. The EBIT margin of .2% is .6% lower than last year's 22.8 but only .3% below the average for 2017 to 2019 that is before COVID. The finance net in the quarter is lower than Q1 2022 because of higher interest rates and higher utilization of our banking facilities. The tax for the quarter of 84 million sick corresponds to a tax rate of .3% which is in the middle of our guided range 22 to 25%. We now move to slide number seven. Operating working capital was 3 billion 418 million at the end of Q1 23. Excluding currency effects the inventory has decreased by 200 million sick compared with the same time last year which is in line with expectations since the first quarter of the year is not a big quarter for bike related products and that is what we stocked up last year. Inventory levels on these products will come down substantially during the coming two quarters. Accounts receivables of 1 billion 85 million sick are lower as a consequence of the lower sales and so are accounts payables compared with prior year. As a percentage of sales the operating capital is .6% at the end of Q1 2023. The operational cash flow for the quarter was much higher than last year primarily because of the increase in inventory in Q1 22. The stock buildup we usually have in the first quarter is going the other way this year. Capital expenditure was 59 million in the quarter to be compared with 148 million for the same quarter last year. The capital expenditure relates to investments made in our production. As we have communicated the capital expenditure for the full year will come down in 2023 but proportionally not as much as in the first quarter. Thank you.

Thank you, Jumnos. If we then go to the next page, page eight and talk about what is so key for a true global lifestyle brand. We are in a very positive momentum in terms of the strengthening of the brand and one of those key efforts that has been recently implemented is that we made a significant upgrade of the most important consumer interaction point we have. So in March 21 we went live with a significantly enhanced. We do that mostly because it's our most important channel drive sales in all channels. We also will get, we are convinced, a help and boost in driving more share to direct the consumer by having significantly improved the site. It wasn't like the site was bad before. It was actually according to many a very good site but we've taken all the learnings we've had over the last few years and new expertise into truly user interface designed approach because we with very different product categories, some more emotionally easy buys like a good looking to the eye on carry on bag and some where you truly need the technical advice to make sure you have bought the right product like a roof rack for a specific car means that the whole approach that we guide the consumers through is needing to be different in terms of how we assist them as an online expert advisor. At the same time we have one global brand with a fantastic lifestyle positioning so if we correctly like we do better today on the refreshedtoday.com show and cater for that feeling and propose other new products we are convinced it will drive sales in all our channels. What we also are doing significantly is to use our great product offer to now when the world is back to a more normal place and everybody is allowed to travel around and be at fairs and events is we are once again with all the very exciting launches that we're doing for trade for next year but also for consumers in stores this year. We have dialed up our efforts and as I said have some earlier than normal seasonality facing of some of our marketing spend. The image on the below right is an image from the Copenhagen airport where we showcase during the big Swedish and Danish winter sport holidays our new Thule Caprock roof platform and a lot of other cool Thule products to showcase the lifestyle that our brand enables. If we go to the next page I'll talk a bit more about them on the new product launches as we are on page nine. We are doing some key consumer launches in the spring 2023 and we quickly have mentioned some of them here but I can tell you there are many more. The Thule approach tent is the most spacious rooftop tent in the market. It is also recently awarded with a new red dot design award and also if we look at our fantastic Thule Arcos rear of car premium hard shell box it has garnered significant attention in the marketplace as not only is it great looking and very practical it actually enables to reduce the famous range anxiety for all those e-car buyers. In fact in several studies proven both by ourselves but also of external third parties and media it is in fact with a number of car models the fact that if you put a Thule Arcos at the back of your car on the tow bar and load your bags in that one versus having the same bags in the trunk of your car it actually reduces battery consumption so that has been a very big pr and media attention grabber. I already mentioned the fantastic Thule Caprock that is something for the true outdoor enthusiast those people that used to love the Land Rover Defender and nowadays maybe are already ruling about the Grenadier coming out with very cool vehicles but it actually works for a normal vehicle like a Subaru or a Volvo also to create that platform for new adventure and put a lot of gear on top. And then as I will show you more soon on another page a fantastic launch of Thule Epos a revolutionary premium rear car bike carrier that hit the stores as of last week. A fantastic step up on what is today's the world's best the Thule Easy Fold XT and now we're taking another level with the Thule Epos. We're also coming with a number of key launches as you are aware for 2023 and I think we were a little bit hot to trot to show the Thule Epos so since we are on the image of the Thule Epos I can mention and show a little bit what it does. It is foldable, it has wheels you can roll it out your tow bar you can just tilt it on your tow bar you have a loading ramp it can grab virtually any type of bike in any type of position on the bike there is the possibility to add a locking for a key lock for your bikes there's a possibility to have a bike repair stand sitting on the carrier and when it's sitting which is the below picture on the low end it when it is not having bikes on you don't even need to tilt it away to open your trunk because you can just fold down the arms. So to go back and you don't need to go back to the slide but can we still mention it the fact is that we are launching also our dog products as expected in Q3 the Thule Alex dog crate the world's safest dog crate and we will also of course launch a number of new bike collections etc. I also want to use this opportunity to let you know that we have decided to delay the launch of our car seats to the market which were planned for Q4 in 23 to the spring 24 the reason is we have had longer than expected lead times of deliveries of the assembly equipment and some of the electronics for those products and we want to 100% sure of course from a pure safety point of view but also from a mass manufacturing capability that once it hits the stores we can continue with solid supply throughout the launch period and the ramp up period. So we are entering into a very exciting trade introduction period and that trade introduction period will start with a huge fair that is called Eurobike where among other things Thule Epoch as you see on the screen will be showed but also some very high volume driving new products that will hit the market in 24. So if we go to the last page page 11 that is a key focus on what we're doing at the moment preparing for those launches our growth strategy remains unchanged we will definitely focus on driving profitable organic growth with great products we have the strongest assortment of new launches we've ever had in the history of the company in the coming 18 months and it is high volume driving type of product so it's not niche products so feel very strong about that we are continuously dialing up the efforts of the lifestyle brand Thule with the bring your life tagline we are of course capable now of handling growth since we have invested well in the back end of our business so we are underutilized a little bit with the sales we see at the moment and we are continuing to support those right retailers with the right tools to sell but we will see a much faster growth in our direct consumers sales channel so when we look at all those exciting news we also have clearly a reality that we have a low level of production staffing that's a reality we can't say anything else because not only do we have less sales we also have a higher inventory ourselves so we decided to ensure that we reduce that inventory we will be low running with lower production levels but the plants are extremely well invested with modern equipment modern automation lines and ready for that volume growth that we're convinced will come and as you sell down inventory you of course generate a lot of cash which means we will be very cash strong so as a conclusion before we open up four questions it is a tough first half to come against we have a very easy second half to come against there is a fantastic number of launches hitting the market both for the season 23 and for the season 24 there is however many uncertainties still in the moral so we need to be quick to act and as flexible as we've been in the recent years and we will be that and i will be around also for one more quarterly report but we are already well underway myself and martias in ensuring that he is well versed and running fast when he hits the ground running in august so with that we leave it to you bruno to lead the questions thank you very much

perfect thank you ladies and gentlemen if you'd like to ask a question please press star followed by one on your telephone keypad that's star followed by one on your telephone keypad if you'd like to withdraw the question press star followed by two and please also remember to unmute your microphone if it's your turn to speak okay we have our first question comes from daniel schmidt from dankse bank daniel your line is now open please go ahead

that's good morning magnus and jonas a couple of questions from me and and starting off with what you said in terms of that you're starting to see orders pick up when it comes to retailers and especially i guess bike retailers after a very slow start to the year and also maybe the start to april if we would get to a normalization of bike inventories among retailers in the end of q2 are you then sort of insinuating that that that would lead to growth in that segment in the second half of this year given the comp level that you have

i'm not only insinuating it i'm 100 sure that because the q2 q3 and q4 22 were so weak in bike so clearly we will grow in bike in the second half of the year no doubt

yep okay good and and just trying to get to some more details on sort of the slowness of the start to the year and also maybe q2 and of course as i said you are seeing sort of orders pick up but do you feel that the direct consumer and the other segments bags especially maybe also rv and the fact that you are launching you do have a couple of more new sort of high runners or new models in in high runners in the legacy business out and you mentioned e-posts will that be able to compensate a bit better as we go into to the spring

now i think reality is this we april was such a huge month last year and it is such a key month and a slow start of april therefore means in practice of course that we will not be able to compensate for that in the quarter it will be dragging us too much but when we come towards the end of the quarter the comps are starting to cool down and at the same time retailers will have adjusted inventory fully down and so it is going to be one of those quarters where it is actually like that already today for every day of the month that we move forward it gets better and better so to speak right it started terribly in the beginning of april for every week that it goes it goes better and better but it will be only towards the very end of the quarter until it starts to be okay so to speak

i where we sort of could reach the same levels as last year is that and then from there hopefully grow is that sort of correct should be absolutely okay yeah and and then maybe given that is so many moving parts and the gross margin really surprised me in a positive fashion being up 120 basis points and that was despite the under absorption there that you're experiencing in production and also higher raw materials on the other hand you do have the tailwind from freight is there any way to quantify these effects the freight the raw material the under absorption and how we should view it sort of going forward

yeah i think the most important in the first half of this year is of course that we did do price increases mid-year 2022 that as we now have those prices in place we are getting a positive price effect which is compensating as you said for those very significant costs that we saw at the same time last year so our pricing power is the key positive contributor you have a and that will continue in q2 clearly right but then as we come into q3 we're now comparing with like for like prices because that's what's when the second pricing increase round was done in 22 but it will contribute and help also in the second quarter the other positive factor is of course a higher share of sales in direct to consumer is positive for the gross margin and although from a small basis when that category is and that channel is growing and at the same time as a retail was placing fewer orders due to selling down imagery the share grew faster than it would normally that will continue partly into q2 but then it will be more than normal comparison that is that means we will grow faster in direct to consumer but not at the same extent so that positive contribution will take off a little bit and be less positive contribution the freight i'm convinced will continue to be a positive contributor but the reality is the worst prices were in q1 and q2 so the upside versus last year is less towards the end of the year because freight prices were coming down and then the product mix which is negative at the moment as we are doing better with the low margin categories that will start to be positive towards the second half of the year so i wish i could make it easy for you but as you said yourself there is a lot of moving parts going into this

i hear you uh maybe you're also the raw material is that that was that was a negative in q1 is that going to turn into a tailwind as we get to the summer

it only really goes in to be a tailwind when we've sold down our inventory because we have to be clear about the fact that we bought that inventory at high material costs so there is no true tailwind utilizing the higher cost products that we do have an inventory and we will be driving down inventory significantly in q1 q2 and q3 as well so we we don't get that positive boost effect of the current market prices and it isn't as much as some people think but we are definitely not getting any effect positively on it

okay and then this final question on on related to tiller.com and direct consumer and you mentioned that you've done sort of an upgrade of your of your sort of front front office basically is that sort of is there more needed in order to to grow that business to become twice as big in terms of investments or are those sort of investments now in place in terms of infrastructure and maybe i

feel

yeah

i i we feel very comfortable that we will be able to double what we're doing without needing to do significant investments those investments have been done over the last two in terms of reach you're right donald we will add a few more countries but we are in the key countries we believe where we can in a good way at good margin reach those consumers with the service levels that a consumer would expect from a strong brand in a direct to consumer reality so we will add a few more countries in the european region to this but we are really in the markets that will drive the volume and we do have all those key investments in place so now it's the tactical and classical just utilizing those tools on a continuous basis in doing a better job

yeah and maybe your last one and follow up on that when it comes to product development spending you made it clear that i was still quite elevated in q1 but you also said in connection with q4 the development spending in absolute terms if i got you right it's going to be lower in 23 versus 22 is that more going to happen in the second half

of this year that's correct so we see a very aggressive spend at the moment we're bringing some volumes but if you look at a comparative logic as we highlighted 22 had a very heavy spend in the second half so they'll be compacing realities differ but we have at the moment with for example to lay up us and some of other products that we are also showing to trade a very significant spend as we speak in the first half so there is there's a little bit of phasing logic more in in when we spend it thank you that's all for me thank you

so our next question comes from gustav huge from seb gustav your line is now open please go ahead

hi

guys this

is huge um so a few questions that's your new

nickname goes

now a few questions if i may firstly on inventory again could you um just kind of elaborate a bit on geographical differences is it fair to assume it's a bigger an issue in in parts of north america than continental europe or could you help us out a bit on bike related absolutely yeah

you're right i saw your study that you've done and it it is correct which is quite normal as as historically it tends to be that the swings are always bigger in the u.s they run out inventory more aggressively and they overload on inventory more aggressively so you're absolutely right the bike retail inventory situation is worse in north america than it is in continental europe and it is also we have to say for me it is quite interesting to see how much it can differ even between brands and companies as in terms of retailers in some markets making sure that they are really on top of it while others clearly have too much and so it isn't as clear as saying country a has too much and country b doesn't it even is between retailers and even between specific cities for retail chains but it is clearly worse in north america you're right with that

uh yeah makes sense and referencing the same study that that that we published it it sort of indicates that perhaps there will be a swing from too much inventory to perhaps going an intention from the retailers to go a little bit lower than what they would consider normalized a few years ago is that part of sort of your guidance here that you assume that they will go from high to low before they start to reorder or how do you want to think about that yeah that inventory cycle it's all

yeah you're right it's already clear for us that retailers are already choosing to go lower than they would normally do at this time of the spring season where they would want to have more and i understand that having been burnt and also needing cash so i think it is clear that they are waiting longer and longer versus what they would normally do in terms of ready for a season or bike and so it's going to be slower thanks to that or due to that and then i am not guiding in the second half for another bullwhip the other way that they get then overly hungry for inventory i don't think they will i think they will run the entirety of 23 on relatively meager uh inventory levels

yeah

it makes sense

and then i have a question man if you now you bring forward the direct consumer opportunity invest a lot and and and revamp it is there a risk here that perhaps your business btc is sort of putting some stress on your relationship with with the external retail and to the extent that your products are sort of a buy sale too when someone buys an expensive bike and the guy on the floor is sort of quick to say should you get perhaps how you're taking that bike home today is there a risk of that extra sale you get from from floor sales or are sort of hurt by by more competition from yourself

i don't think so because the reason is we're not penalizing all the professional and great retail partners we have we are always selling at full price we're providing fantastic on our own direct to consumer we're providing fantastic service and assistance to help those retailers as well and i think in reality you have a little bit the situation maybe i think adidas is probably the best natural point of comparing with where they new management have maybe changed the view of how aggressive they should have been and what they're doing we've never been as aggressive as adidas was for a while maybe overly uh hurting their situation so i don't see us hurting any retail relationships due to that

and your price point in europe where you cannot decide retailer price versus sort of will you be price competitive in in europe on your dcc offering

i think there will always there will always be a product cheaper than ours you will always find on idealo or price runner and pricey act a retailer prepared to sell at discount that we don't sell at but as as we see it over time what we see with strong brands that that discount level is less than it is with more medium brands we can actually already see that in the marketplace this year when we have seen too much inventory in general so i feel that yes if you would go purely on price but if you've done all your search you've found that perfect right product you've been guided right there is a certain number of consumers that are prepared to buy it straight from the brand even if they might be able to find it from another site at a discount and then there are other consumers that will always prefer to hunt for that discount we're okay with that as well because we're also very profitable selling to those retailers

okay and then uh lastly from me i know you you was last quarter you said that while the rb backlog in europe looks big you were a bit concerned about potential recalls and those orders uh sort of uh not not being backed really what have you seen any recalls from your end from european rb or is that backlog seemingly a true backlog recalls

is maybe a word that pains everybody bad it sounds like you have a product recall so what you mean is somebody stepping out of line and saying i had an order but i don't want it anymore that is not order cancellations yeah order cancellations yeah so order cancellations we have not when we talk to the three big players they're not seeing order cancellations in any significance and i think it is uh uh i think it is one of those uh where it honestly is it will be more on how many new ones that fill up because vast majority of those that sat in uh the long order book backlog have been very very keen on that vehicle they're finally getting so it is less of a concern i would say from this financial impact on the ones already in the queue and more of a concern of how a new person because there's a great visitor numbers at all the big fairs and events around rv still but are people as prepared to commit when now those vehicles are significantly more expensive than they were a few years ago and at the same time cost of life has become more expensive as well that's going to be telling i think throughout 23 from those three big ones for knaus tabbert and triganao or how they announced that

and if i can speak one last one in a bit of news that you are pushing the the launch for car baby car seats then into the next year for europe does that impact your entire rollout for you had america's rollout north america's rollout in h2 2024 if i recall correctly and other regions 2025 is that whole ladder pushed forward or

yeah i think in practice you want to make sure that everything lands well i will i will not be here when they make those decisions but i think it's logical to say that you absolutely want to land well you want to so it's likely even if i'm not going to be the decision maker for that i see it likely that the team will postpone all those other markets the same type of time period thank you so much thank

you our next question comes from carl deisenberg from carnage carl your now open please go ahead

thank you morning mayon so you know so just a a couple of few one follow-ups i think most of it has already been answered my questions but i have to go back to the course the gross margin development here in q1 i mean i understand the dynamics here with the price adjustments and i'm afraid and also that you've adjusted your your production capabilities but what was the reason why why we didn't order the signs of this in q4 and then you're talking about freight trade already coming down in the second half of last year and i guess the mid-year price adjustments from 22 also had an impact in q4 so so yeah anything on that would be helpful

yeah there's a number of factors the the most important one is as we said we did not fit and wait on taking decisions to reduce staffing levels but we took the choice as we mentioned during q2 and q3 with incoming components and having committed to seasonal workers to actually use those incoming components and those seasonal workers to fill up inventory that happened during q3 in q4 we were then in as we did mention in the worst possible situation very low sales no production to fill up inventory but still some of the staffing costs associated because we got them all out as quickly as much as we would have wanted so q1 was we had more time to be ready to have staffing levels in the right way there is a higher in every you know there is a higher sales sales does have an impact in economies of scale we are selling more in q1 than in q2 so you do get an absorption than in q4 last year right so you do get an absorption from that so those are two key things in the matter and then there is the freight impact because although they started to go down we're now seeing some of those materialized in the full impact of what we're doing so that's the main reasons

okay perfect that's very helpful and then i wanted to ask you on on the d2c development here again obviously some nice development here in in certain regions and and i just wonder if you could remind us of the share of sales d2c on the group level today and maybe also the the respective share of your sales in in in america and europe and rest of the world

so overall direct consumer is a very small share of our sales we're talking low single digits for the group today we have the strongest markets is us and canada where it's 13 and 12 last year in those two markets then we have sweden as the only other market where it's above 10 and then we were very new in some of the other european markets those other seven european markets so now we're starting to see growth in the bigger european markets being live now in in germany uk france and the benelux region and so of course what we will and expect to see is a strong continued growth in those markets where we already established and to daniel's questions before we are going to add a few more countries as we move on as well but it is mostly going to be driven the growth from those markets where we already are live

okay perfect and and the final questions from my side on the inventory development your inventory development and not among real traders and then down sequentially here in q1 and also talking about we've been talking about in in the fall of last year's well a reduction here in in the coming quarters i'm just wondering if you could say anything on your full year ambitions here going out of 23 and then pre-pandemic years i think q4 inventory has been around one billion obviously it's a much larger company today but anything

yeah i think there are there are three factors if you look why inventories will be higher also in the coming years i'm sure that matteo's and team will keep the inventory levels high one because we're a much bigger company two because we're into new categories where we don't have a historical long professional track record of being on top of things and so you're going to need if you want to have a good service level as you do need if you want to take market share in a new category you're going to need to be a little bit higher stock level than you are in something where you've been forever in and you can forecast extremely well so reality due to new categories that will be higher due to a much bigger company will be higher and actually even if people think that supply chains are back to pre-pandemic a reality the world has gotten a lot more complicated and a lot more more complicated and longer lead times so if you then choose to be a high service provider with high on time in full next day delivery which is what we do you're going to need to hold more inventory due to that factor as well so we haven't given an exact and i don't want to commit on matteo's and team's behalf but clearly we will we have a target to significantly reduce down in 23 and then as we see how things roll out in 24 i think they will potentially reduce a little bit more but they will be keeping on pretty convinced higher levels than we used to have

okay perfect that was all from this so thank you very much

thank you our next question comes from adela the shine from jeffries adela your line is now open please go ahead

hi minus and unis a few questions from me the first one relates to timing of your sell through in the second half so given that you have such high on time in full delivery time what you're selling in the second half is that going to be delivery for building up levels for 2024 although it's being more real time demand what we sell in 23

well no what we'll settle in the second half of 23 is what is sold to consumers in 23 there will be nobody building up inventory levels for 24 those buildups if if they will happen for inventory levels will be then as historically done more in the months of march february march early april where historically retailers have wanted to be sure they have the things in house in case the spring hits hard so to speak and early they don't build up and keep inventory in a normal reality during the second half of the prior year so what we sell in the second half is sales to consumers

and in that case you don't expect a very strong first half of 2024 if let's say inventory levels are completely replenished yeah once again

as strong versus a terrible comp because then we will matthias will have the discussion to say it was a weak comp because we had very high inventory levels if you then take it more from a long-term perspective i believe 24 will be normalized retail levels and normalized sales which is not the extremely strong 22 numbers it is not the extremely weak 23 numbers and you're going to need to go back a bit on that so it's it's going to be a complicated comp reality because versus the very weak this year it will look good but in reality i think it will be more normalized when we in the year sell products

got it that makes sense and then i have a similar question but related to the rv products so you've been having pretty good growth for over a year now but at the same time the manufacturers are just seeing that growth starting in Q4 and now in Q1 could you explain like who were you selling to throughout 2022 absolutely

and historically our biggest share of sales has gone to big dealerships so you would go as a buyer or a consumer wanting to buy a small motorhome you would go to big dealership you would look at a lot of different versions and then there were two ways you would potentially buy it in normal times when lead times had been working they would have a number of vehicles on display you would say i like this vehicle but i want it with this bike carrier that warning and that tent the dealership would then say to you come back next week and i will have assembled it for you they would order that from us they would assemble it and the consumer would pick it up part of the orders were done the other way that that same consumer would go to that dealership and say i want a cool new motorhome but i want this super duper cool new one from knaus tabbert and then knaus tabbert was offering maybe a summer package deal where you could get all this extra cool you could get the fridge from the matic you could get the awning from taule you could get the toilet from somebody else etc in a package deal so for us at taule it was about a slightly more than half of this was dealership sales historically and a little bit less what then happened when the manufacturers were struggling to make new vehicles the dealerships sat on a number of vehicles so we could sell to those guys much more and we sold very little to the manufacturers then now the dealers are not having so many vehicles because the manufacturers haven't sent the many for quite some time or very few what we see the good numbers is that when the manufacturers are now doing things they are showing up at the dealerships but also there are manufacturers now finally delivering those fully kitted out that some people ordered maybe even 12 18 months ago with also tool accessories from them from the beginning so that's the logic of why we have seen a better split than the actual manufacturers

so i'm just trying to so does that mean that the inventory levels of your product that the dealerships are pretty high at the moment because you have been delivering your product no

because they have been using those aside from bike related actually even there in the most even in rv products they have a little bit too they were too excited about bike even in the rv products category but otherwise it's been a it's normalized inventory levels for awnings and other things in in that

sector okay thank you very much

as a reminder if you like to ask a question please press star followed by one on your telephone keypad that star followed by one on the telephone keypad our next question comes from karen rintas from hhb karen your lines are open please go ahead

yeah good morning this is karen i missed the first part of the presentation so i am i apologize if you have to repeat something that you have already discussed but the uh the first quarter sales stronger in europe in america is this all about the inventory levels as you already discussed or is there something else explaining this deviation it

is uh also a category exposure where rv product is doing better and we have a large chunk of sales in region european rest of the world which is rv product and a very tiny niche part of it so that product category exposure difference of course helps than european numbers partly right but aside from that it is this inventory level situation and also as i said in the beginning was that we had an extreme comp period specifically in 22 q1 filling up inventories later on catching up with orders that we had from our retailers that we caught up already in the second half of 21 in europe truly only catching them up in 22 q1 in america so when you look at the q1 numbers versus 19 actually the two regions compare relatively similarly

good thanks for pointing that out then in europe um can you discuss specifically germany because my hypothesis is that germany was a really strong marketing queue last year and then now facing a really tough comp clearly weaker is that if that's

correct actually in the european markets there isn't huge differences in market performance if you look in individual product categories and thanks to the german market actually being a strong market for us for rv price the germans love their motor homes that actually helps the european german market performance but overall i would say if you look at various product categories a surprisingly similar performance aside from those eastern european countries next to ukraine where that was a complete stop of orders in march last year and why are we that's why we're growing in these markets because march is normally a strong month for us and then as we also mentioned in southeast asia and asia we're doing well because there we do a lot of bag sales and in those countries they weren't traveling in 22 qm but aside from that specific eastern european focus by categories very very similar performance in the european markets

all right then going back to this weather comment is there any difference in how weather impact europe versus the u.s because i've seen some reports that some of the workers are still catering to skiers and maybe it will not open at all for mountain biking this that this summer yeah it's been it's been a weird reality

in north yeah carrie it's been a weird reality in north america because it's very much west coast east coast reality where the snow was fantastic on the west coast right so oral our ski products did fantastically well in the west coast canada west coast u.s and down to you know colorado but while the classical not so fun ski resorts to be brutally honest on the east coast were struggling now they're struggling the other way around it's been terrible weather there now while it's still very wintry over on the west coast so i think those things normally normalize out a few weeks into the season but it's been a

great then finally going back to the direct to consumer so how do you i mean this is more of a long-term strategic question because we've seen a trend of some of the pioneers in this like yes the nike when they have pushed hard for the direct to consumer that means that they have also quite aggressively cut the number of physical retailers that have traditionally sold their product of course i can understand the temptation because in short term that will probably mean that your margins will go up so what would be your sort of instructions or guiding words to matthias to not make this mistake i think

matthias is a very savvy direct consume online versus retailer with all his experience in that but i can say the team here is also savvy and i think that combination is we're not going to be dramatically reducing the number of brick and mortar stores where you can buy a tulip product because our product makes a lot of sense in brick and mortar what maybe is obvious that we won't be needing as much in the future is a mediocre pure online isn't the ideal channel for our products so if you have great omni-channel players which have a good online presence and really good store for pick up and store and showing we're very happy those retailers if you have strong true truly service adding high quality online players with a strong presence it makes a lot of sense but some of those online retailers that grew 10 15 years ago purely on providing a pretty crappy service and on the logic of that the brands couldn't do themselves generally i don't think they will be around that much in tula shouldn't be with them either

thank you very much

our next question comes from daniel schmidt from banks bank daniel your line is now open please go ahead

thank you just a follow-up from me magnus i think you mentioned maybe i got it wrong so caressing you if i'm wrong but did you bring forward some marketing spend was that what you basically we

did and that was because we actually managed to launch the tula a post bike carrier a few weeks before it was planned to be launched so some of those marketing costs which is our biggest launch ever in the category of bike carriers came actually therefore in the q1 which were planned and normally historically would have happened in q2 so that was the reason for that

and and are you saying that that is going to even out in q2 or is that sort of yeah

over the year we will see a more normalized we spent it slightly earlier but if you look at our spend that we would normally do it for the full year we will be at normalized spending levels so would

you care to say that you how far above normal you were in q1 or does it is it a meaningful number or any any no i i i

i now i wouldn't do that you've tempted me for so many years already to say those type of things daniel i'm not going to fall for it's my last two quarterly reports okay maybe

then just a last follow-up on on the direct consumer a lot of focus on that today but and as we talked about you upgraded the tula.com and sort of does that sort of have you also done upgrades when it comes to delivery capacity or was that already state of the art or is that needed going forward

that was already state of the art and i reiterate our single most important purpose of upgrading to little comm was to drive sales in all channels because it's the consumer interaction point many of those people will then go to an ri store or a stadler store or even buy it on a berghuis.de so why else doing great job it will drive sales in all of them there will be a natural help also for the dark consumers but in terms of the back end we have already for years been servicing smaller retailers with that pick and pack type of setup and so that's why we are so comfortable in now rolling out more markets and planning to take greater share because we know we can handle the whole customer service logistics payment provider solutions really well

all right and these european markets that you're not currently in when it comes to d2c will they be added this year and could you name they will come

both yeah they will come throughout 23 and 24 but i think as we have a true online d2c expert coming on as a co i'll leave it to him to drop some of those fun news when he comes in

thank you

thank

you we currently have no further questions i would like to hand back the floor to magnus please

thank you bruno then i want to thank everybody for listening in to the q1 report and look forward to tell you a lot more about how the things have developed during the spring in our q2 report in july thank you very much bye