Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Samsonite International SA (SMSEY, Financial) maintained a strong gross margin of 59.3% despite a challenging sales environment.
- The company reported a robust free cash flow of $94 million, an increase of $5 million from Q3 of last year.
- Samsonite's brand showed resilience, particularly in North America, with a 3.5% increase in sales during Q3.
- The company continues to expand its direct-to-consumer strategy, with e-commerce sales up 7.3% year-to-date.
- Samsonite International SA (SMSEY) has made significant progress in its sustainability initiatives, aiming to reduce Scope 3 emissions by 52% by 2030.
Negative Points
- Net sales decreased by 6.8% compared to the exceptionally strong Q3 of the previous year.
- The Tumi brand faced significant challenges, particularly in North America and Asia, with a decline in sales.
- The company experienced a 270 basis point drop in adjusted EBITDA margin due to increased SG&A expenses and competitive pressures.
- Sales in China decreased by 14% due to softened consumer sentiment and macroeconomic challenges.
- The Indian market faced intense competitive pressures, leading to a 24% decline in sales for the quarter.
Q & A Highlights
Q: For 2024, you expect sales for the full year to be flat. Does this imply slightly higher than mid-single-digit growth for Q4? Can you provide insights on market performance, particularly in China?
A: Yes, your math is correct. We expect single-digit growth for Q4, which is an improvement over Q3. All regions are performing better, with China showing improvement due to economic stimulus. However, India remains under pressure. In China, we observed a trading down in consumer preferences, but Tumi is still performing relatively well.
Q: Regarding potential trade tariffs, how is Samsonite positioned, and what strategies are in place to mitigate impacts?
A: We have significantly reduced our sourcing from China for the US to about 10% of sales. If tariffs extend beyond China, it will impact the entire industry. However, our strong supplier relationships and ability to engineer products for price positioning give us an advantage. We can manage tariffs better than competitors and maintain our price positioning.
Q: What are the growth drivers for Tumi, especially given the pressure in the US market? Will you continue expanding in APAC and Europe?
A: Tumi faced strong comps and pressure in the US luxury segment, but trends are improving. We expect Tumi to be a major growth driver, with double-digit growth in the medium term. We will continue expanding in Europe and Asia, with new product launches like lightweight hardside collections. We will also invest in advertising to drive growth.
Q: Can you comment on the competitive pressure in the Indian market and any signs of stabilization?
A: Q3 and Q4 will be similar for India, with ongoing competitive pressures. However, the current discounting levels are unsustainable for competitors. We are managing margins carefully and expect sequential improvement next year, driven by new product initiatives and strategic brand positioning.
Q: With strong free cash flow, will Samsonite consider scaling up the buyback program?
A: While we aim to increase our share price, buybacks are part of our capital allocation strategy. We will continue with the current program and assess opportunities for increasing shareholder returns, including potential adjustments to payout ratios. However, any expansion of the buyback program will be considered carefully.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
