Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Samsonite International SA (SMSEY, Financial) achieved net sales growth of 2.8% in the first half of 2024, reaching $1.769 billion.
- The company maintained a record gross margin of 60.2%, up 140 basis points from the previous year.
- First-half adjusted EBITDA was $333 million, with a record adjusted EBITDA margin of 18.9%.
- Free cash flow increased significantly from $18 million to $82 million year-over-year.
- The company is pursuing a dual listing in the United States to enhance value creation and improve liquidity.
Negative Points
- Consumer sentiment softened in the second quarter, contributing to a slower sales trend.
- The Tumi brand experienced only 0.3% growth, indicating pressure in the premium and luxury segments.
- Sales in India were down 10.6% year-over-year due to increased competitive discounting.
- North America saw moderating consumer traffic, impacting overall sales growth.
- The company faces ongoing exchange rate pressures affecting reported topline numbers and profitability.
Q & A Highlights
Q: What are the trends in gross margins given the increased promotional activity and weaker macroenvironment?
A: Kyle Gendreau, CEO: We are not heavily discounting. We are managing promotions tactically to maintain profitability. Our scale allows us to refresh products and hit competitive price points without sacrificing margins. The mix of higher-margin DTC channels and brands like Tumi will continue to support gross margins.
Q: How is Samsonite addressing the challenges in China and India?
A: Reza Taleghani, CFO: In China, we are focusing on expanding mid-tier brands like American Tourister and optimizing the price positioning of Samsonite. We are also taking advantage of real estate opportunities for Tumi. In India, we are maintaining brand positioning and managing margins carefully despite competitive discounting.
Q: What are your growth expectations for 2025?
A: Kyle Gendreau, CEO: We are hopeful for mid to upper single-digit growth next year, driven by resilient travel demand and recovery in Asian travel. However, we are cautious due to current consumer sentiment and will reassess in the coming months.
Q: Is there any change in the full-year guidance for 2024?
A: Kyle Gendreau, CEO: We expect full-year growth to be in the low single digits, around 1-2%, despite softer consumer sentiment. We are managing promotions and product positioning to maintain profitability.
Q: How are you managing the competitive landscape and discounting?
A: Kyle Gendreau, CEO: We are tactically managing promotions and developing products to hit competitive price points while maintaining margins. Our scale allows us to respond quickly to market changes.
Q: What is the breakdown of DTC growth between new store openings and same-store sales?
A: Kyle Gendreau, CEO: Our DTC growth is driven by a mix of new store openings and strong e-commerce performance. Same-store sales were down 1.4%, but new stores and e-commerce are performing well.
Q: Are there any channel inventory issues in the wholesale business?
A: Reza Taleghani, CFO: Overall, the wholesale channel remains healthy. We are managing inventory levels carefully and ensuring we can fulfill demand for the holiday season.
Q: What are your plans for the balance sheet and dividend payout?
A: Reza Taleghani, CFO: We are focused on returning cash to shareholders through dividends and share buybacks while maintaining a strong balance sheet. We will continue to assess the appropriate levels of leverage and cash distribution.
Q: How sustainable is the current EBITDA margin in a softer environment?
A: Reza Taleghani, CFO: We expect to maintain around 19% EBITDA margin for the full year, driven by strong gross margins and disciplined cost management. We are also investing in advertising and new stores to support future growth.
Q: What are your plans for advertising and store openings in the current environment?
A: Kyle Gendreau, CEO: We are managing advertising spend carefully, aiming for around 7% of net sales. We are also continuing with disciplined store openings, particularly for Tumi, to take advantage of real estate opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
