Half Year 2024 Samsonite International SA Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Carlton Lai - Daiwa Capital Markets Hong Kong Limited - Analyst : So I'll take it off with my first question on gross margins. I'm very happy to see continued record gross margins first half and appreciate that we've been very disciplined with the promotional strategies in the past. But as we're seeing much more promotional activity, I think, in the second half and also just overall weaker macroenvironment, I mean, what are the trends there in terms of are we gonna give in to potentially more promotions? And from a gross margin perspective, do we still have room for that to increase given that we're trying to increase our DTC exchange? I'll start with that.

Question: Carlton Lai - Daiwa Capital Markets Hong Kong Limited - Analyst : And my second question is, just want to come back to one of your pages in your deck where you highlight kind of the two pressure areas that we're seeing, specifically China and India. And it does look like, I think, some of the industry trends that we're seeing, China being poor sentiment, India very promotional. These two does seem like -- or at least if we assume that these two trends continue for the foreseeable future, say in the next one or two years, what are some of the things that we're doing to kind of counter those effects and so that we don't just wait for the market to turn?

Question: Carlton Lai - Daiwa Capital Markets Hong Kong Limited - Analyst : Right. And just last question before I jump back in the queue is that, can we just hear your thoughts on 2025 growth expectations broken up by perhaps markets?

Question: Chris Gao - CLSA - Analyst : I have three. So the first one is related to your full year guidance. I remember last time in the first quarter, Reza mentioned about some high single-digit percent constant currency YoY revenue growth this year. So we're wondering if there's any change on this guidance and maybe if there's any more detailed guidance of growth by brand and by region. So this is my first question. And my second question is related to the competitive landscape. So currently, we're still glad to see that your GP margins continue to improve, thanks to the D2C channel strength. And currently, because we have observed the discount environment has been becoming more and more intense. So looking forward, how would you come into a possible discount level by brand, especially for Samsonite and American Tourister? Do you expect the discount level to remain stable while YoY, QoQ? Or do you see higher possibility for more discounts in the future? And the last thing is about your D2C channel. So just wondering how much of your D2C growth is coming from high-quality new openings and how much is from single-store sales? Because single store sales trends showed very diverse trends across different regions. So this is the third question about the breakdown of D2C growth. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 12:30PM, 1910.HK - Half Year 2024 Samsonite International SA Earnings Call

Question: Chris Gao - CLSA - Analyst : So I have a one follow-up question. So for third quarter, if it is slightly negative, which brand and which region could be the key driver? And for full year, if the full year constant currency revenue growth will be in the low single digit positive territory, do you still expect positive operating leverage at adjusted EBITDA margin level? So any comment at this front?

Question: Chris Gao - CLSA - Analyst : Perfect. This is where I have --

Question: Anne Ling - Jefferies - Analyst : I have a couple of questions here. First, regarding the wholesale business, we still have -- a good portion of the business is still the wholesale. So just wonder, based on your knowledge, is there any channel inventory issues maybe in the US? Or you're seeing your operators are actually discount -- or your distributor are discounted a bit more than you have wanted. So the first question is the operating environment in terms of your distributor and the channel inventory. Secondly is on the balance sheet side. We have done a very good job in terms of bringing down the debt. Now it's actually like, our net debt level is below. that of the period when we acquired Tumi. So what is our ultimate net debt ratio is like? And if we continue to generate decent cash flow, will we be considering a higher dividend payout ratio moving forward?

Question: Dustin Wei - Morgan Stanley - Analyst : First question is relating to margin. I think the second quarter, regarding the sales weakness, you still delivered close to 19% EBITDA margin. That's tremendous. So wondering what's the sustainability for such high margin in a softer environment, especially like third quarter, potentially to see some of the constant currency sales decline. I noticed that in North America in the first half, the EBITDA margin up to 20% and that was up from like 16% last year. So what kind of sustainability that we can see here and how to avoid the operating de-leverage? So that's the first question. The second question in terms of how to cope with this sort of larger, shorter term headwinds. So on the AMP side, before COVID, the company used to have 5% to 6% AMP, and that's the variable kind of number. So I would think in the current softer environment, the company would like to reduce the AMP back down to that kind of range instead of like stick to that 7%, especially considering the first half, the company actually underspent 7%. So it seems to suggest that the AMP ratio could go above 7% in the second half, which the retail environment could be further soft. So what's the thought on it? And I think I also heard about you like to open more Tumi stores into the second half. Again, under this kind of softer environment, do you have a plan to adjust the pace to position for longer-term growth? But you maybe can delay that a little bit. So second question is related to how to cope with that environment better. And the third is related to, you put out an announcement regarding the dual listing, regarding your $200 million buyback, sounds like it's gonna happen from tomorrow onward. So in addition to those comments, do you have anything to add? For instance, for the buyback plan, what kind of timeframe we are looking for. Is it potential to top up on more than like $200 million? Any more comments that you can share? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 12:30PM, 1910.HK - Half Year 2024 Samsonite International SA Earnings Call

Question: Dustin Wei - Morgan Stanley - Analyst : The pace of the store opening.