Gregory Sales Slip At Samsonite

Samsonite International S.A. reported sales of the Gregory backpack brand were down 2.7 percent on a currency-neutral basis in the third quarter.

Sales on a reported basis were down 14.4 percent to $14.2 million from $16.6 million a year ago.

In the nine months, Gregory’s sales were up 7.6 percent on a currency-neutral basis. Reported sales were down 0.5 percent to 49.1 million from 49.3 million a year ago.

Samsonite also makes luggage and other bags under the Samsonite, Tumi, American Tourister, High Sierra, Kamiliant, ebags, Lipault, and Hartmann brands as well as other owned and licensed brands.

Overview
Commenting on the results, Kyle Gendreau, CEO, said, “We are very pleased with our performance during the three months ended September 30, 2022, when our net sales increased by US$233.8 million, or 54.7 percent, to US$790.9 million versus the US$557.1 million recorded for the same period in 2021.

“Excluding Russia and Speck, third quarter 2022 net sales increased by 59.5 percent year-on-year, driven by growing product demand due to the continued recovery in travel. Further excluding our net sales in China, where continued lockdowns have hampered our net sales recovery, third quarter 2022 net sales increased by 67.8 percent year-on-year. We made good progress across all regions during the third quarter, with net sales rising by 36.4 percent (+39.2 percent excluding Speck) in North America, 66.0 percent (+104.7 percent excluding China) in Asia, 68.7 percent (+85.4 percent excluding Russia) in Europe, and 56.7 percent in Latin America, year-on-year. The robust year-on-year sales gains in Asia outside China clearly demonstrate strong consumer demand as travel and other restrictions are lifted, driving sustained improvement in our performance.

“More importantly, our constant-currency net sales returned to pre-COVID levels during the third quarter of 2022, improving to 0.6 percent above the same period in 2019 on a comparable basis when excluding Russia and Speck. This represents considerable progress compared to the second and first quarters of 2022 when net sales were lower than the corresponding periods in 2019 by 16.1 percent, excluding Russia and Speck, and 25.2 percent, excluding Speck, respectively. Further excluding our net sales in China, the third quarter 2022 net sales increased by 4.2 percent when compared to the same period in 2019. This underscores not only consumers’ enduring enthusiasm for travel but also the potential upside for the business as the world continues to reopen.

“Samsonite’s gross margin was 55.0 percent for the three months ended September 30, 2022, about in line with the 55.5 percent gross margin during the same period in 2021 and the 55.7 percent gross margin for the third quarter of 2019. We increased investment in marketing to drive net sales growth while remaining vigilant in managing our fixed selling, general and administrative (“SG&A”) expenses. Marketing expenses comprised 5.7 percent of net sales in the third quarter of 2022, 180 basis points higher than 3.9 percent during the same period in 2021 and 80 basis points higher than 4.9 percent during the third quarter of 2019. Meanwhile, fixed SG&A expenses as a percentage of net sales were 22.6 percent for the third quarter of 2022 compared to 28.6 percent and 27.3 percent for the third quarters of 2021 and 2019, respectively.

“As a result, for the three months ended September 30, 2022, the Group’s Adjusted EBITDA grew to US$134.1 million from US$72.2 million for the third quarter of 2021, an increase of US$61.8 million year-on-year, and slightly above the US$133.9 million recorded in the third quarter of 2019. Our Adjusted EBITDA margin expanded to 17.0 percent during the third quarter of 2022, an increase of 400 basis points from the 13.0 percent recorded in the same period in 2021, and 250 basis points higher than the 14.5 percent recorded during the third quarter of 2019, despite the increase in marketing expenses as a percentage of net sales compared to the same periods in 2021 and 2019. During the three months ended September 30, 2022, the Group recorded an Adjusted Net Income of US$64.9 million, up by US$56.2 million from US$8.7 million for the same period in 2021, and US$2.9 million higher than the US$62.0 million in the third quarter of 2019.”

Overall, for the nine months ended September 30, 2022, Samsonite recorded net sales of US$2,061.1 million, an increase of 68.7 percent year-on-year when excluding the net sales of Russia and Speck, or 61.9 percent year-on-year when such sales are included. Further excluding the Group’s net sales in China, consolidated net sales for the nine months ended September 30, 2022 increased by 78.5 percent compared to the same period in 2021. Compared to the same period in 2019, the Group’s net sales for the first nine months of 2022 decreased by 13.3 percent when excluding the net sales of Russia and Speck, or 17.5 percent when such sales are included. Further excluding the Group’s net sales in China, consolidated net sales for the nine months ended September 30, 2022 decreased by 11.0 percent compared to the same period in 2019.

During the nine months ended September 30, 2022, the Group’s net sales registered year-on-year gains of 45.4 percent (+54.9 percent when excluding Speck) in North America, 45.6 percent (+69.8 percent when excluding China) in Asia, 112.7 percent (+131.6 percent when excluding Russia) in Europe, and 109.7 percent in Latin America. Compared to the same period in 2019, net sales for the first nine months of 2022 decreased by 21.4 percent (-13.1 percent when excluding Speck) in North America, 28.8 percent (-25.1 percent when excluding China) in Asia and 2.7 percent (+3.6 percent when excluding Russia) in Europe. Net sales in Latin America for the first nine months of 2022 increased by 33.4 percent when compared to the same period in 2019.

The Group’s gross margin expanded by 270 basis points year-on-year to 55.4 percent for the first nine months of 2022 from 52.7 percent for the same period in 2021, and about in line with the 55.9 percent recorded for the same period in 2019. Driven by increased net sales and gross profit, along with the benefits from the actions taken in 2020 and the first half of 2021 to reduce our fixed and variable cost structure, the Group recorded Adjusted EBITDA of US$329.7 million for the nine months ended September 30, 2022, an increase of US$274.5 million from the US$55.3 million recorded for the same period in 2021, and just US$17.7 million lower than the US$347.4 million recorded for the same period in 2019.

Consequently, Samsonite’s Adjusted EBITDA margin expanded to 16.0 percent for the nine months ended September 30, 2022, a significant improvement not only compared to Adjusted EBITDA margin6 of 4.1 percent for the same period in 2021, but also 300 basis points higher than the 13.0 percent recorded for the first nine months of 2019. Adjusted Net Income7 was US$148.2 million for the nine months ended September 30, 2022, an improvement of US$243.2 million from the Adjusted Net Loss of US$95.0 million for the first nine months of 2021, and just US$10.8 million lower than the US$159.0 million recorded for the same period in 2019.

Gendreau continued, “We continued to invest in working capital, primarily inventories, to support net sales growth driven by increased consumer demand from the recovery in travel. As of September 30, 2022, inventories were US$556.7 million, an increase of US$224.0 million compared to US$332.6 million as of September 30, 2021. Nevertheless, the sustained improvement in Adjusted EBITDA, along with our consistent attention to cash flow management, enabled Samsonite to generate total cash of US$63.9 million during the three months ended September 30, 2022, a considerable improvement compared to total cash generation8 of US$31.9 million in the second quarter of 2022.

“We remain focused on reducing our debt, repaying an additional US$314.2 million of outstanding borrowings under Samsonite’s senior credit facilities during the third quarter following debt repayments totaling US$220 million during the first half of 2022, bringing total debt repayments to US$535.0 million for the first nine months of 2022. As a result, we had net debt of US$1,397.9 million as of September 30, 2022, just US$92.5 million higher than at the end of 2019 pre-COVID.

“All our regions and business units are focused on driving profitable net sales growth as travel and demand for our products continue to recover, leveraging our commitment to innovation and sustainability to offer new bags and luggage to customers eager to travel again. We also plan to continue investing in marketing during the fourth quarter of 2022 and into 2023 to capitalize on the continued recovery in travel and drive net sales growth. In addition, we remain focused on maintaining our gross margin through continued discipline on discounting and with our suppliers to manage rising costs. We also will continue to maintain discipline in controlling expenses to deliver positive operating leverage and enhanced profitability.

“Our positive momentum has continued, with Samsonite’s net sales for October 2022 increasing by 2.3 percent compared to October 2019 when excluding the net sales of Russia and Speck, and by 6.5 percent when further excluding the Group’s net sales in China.”

Gendreau concluded, “While concerns about inflation and economic slowdowns may impact consumer sentiment in the near term, we expect consumers’ enthusiasm for travel coming out of the pandemic to continue to drive the recovery in travel, and we believe long-term growth prospects for travel remain strong. While the recovery in China will likely remain gradual given the country’s strict zero-COVID policy, our net sales performance in China has improved from the lows experienced in the second quarter of 2022, and the pace of recovery in the rest of Asia has accelerated as more governments relaxed travel and other restrictions. With approximately US$1.4 billion in liquidity as of September 30, 2022, we are confident that we have the capacity to navigate the business through these challenges while continuing to grow our net sales at a fundamentally higher margin profile as we demonstrated during the first nine months of 2022.”

Photo courtesy Gregory