Thule Expects Lagging U.S. to Rebound in Back Half

Thule Group AB turned in strong growth in the first quarter, albeit with little help from the United States, where executives expect new products to ignite growth this month.

The Swedish manufacturer reported first quarter sales reached SEK1.37 billion ($165 mm), up 27.1 percent, or 11.5 percent in currency-neutral (c-n) terms. Strong growth in Europe and the Rest of the World (ROW) greatly outpaced growth in the Americas.

In currency-neutral terms, sales grew 9.0 percent at its core Outdoor&Bags business, which makes car racks, car-top boxes, car sets, strollers and other carrying systems sports enthusiasts use to carry their sports gear and kids. Sales at its Specialty segment, which sells snow tire chains and work gear, rose 33.4 c-n.

Consolidated gross margin slipped 60 basis points to 39.3 percent as a 190 basis point negative impact from currency translation on the cost of goods sold easily offset its positive effect on top line sales as well as price increases and efficiency gains.  Like many European consumer product companies, Thule purchases the bulk of its finished goods from Asia using U.S. dollars and makes the bulk of its sales in Europe in euros and other currencies.

SG&A rose 19.3 percent to SEK334.0 million, or 24.5 percent of sales, compared with 26.0 percent in the year earlier quarter.

EBIT increased 34.6 percent to SEK210 million ($25 mm), or 15.4 percent of sales, up 90 basis points compared with a year earlier. Adjusted for exchange rate fluctuations, EBIT rose 35.4 percent. Net income for the period grew 184.4 percent to SEK142 million ($17 mm), while earnings per diluted share reached SEK1.41, up 53.2 percent a year earlier. Cash flow from operations was a negative SEK151 million (-$18 mm), up from negative SEK125  in the first quarter of 2014.

In the Outdoor & Bags segment, sales increased 23.2 percent (9.0 percent c-n) to SEK1.20 billion ($144 mm) thanks to strong European demand for Sport & Cargo Carriers as well as multifunctional child carriers, child bike seats and bicycle trailers. Sales to Europe & ROW reached SEK828 million ($99 mm), up 21.1 percent (12.8 percent c-n). In the Americas, demand for winter sports and bicycling products was soft, resulting in sales of SEK371 million ($45 mm), up 28.1 percent (1.3 percent c-n).

Sales in the Bags for Electronic Devices category, which includes results from Colorado-based Case Logic, remained weak in both regions. 

“In the Americas region, the trend in the sport and outdoor market was slightly weaker,” said Thule Group President and CEO Magnus Welander, who noted the Americas also derive a higher percentage of sales from the electronics cases business.

While Thule did have to reroute some products around West Coast ports in January and February due to work slowdowns related to contract negotiations between port employers and dockworkers,  Welander said those costs and delays did not materially affect results.

“Most of bigger companies like ourselves muscled through it by redirecting traffic and added freight charges to meet market demand,” Welander said, adding that Thule's new spring products were not scheduled to launch at retail  until April.

Thule reported sales at its Specialty segment, which sells snow tire chains and work gear, increased by 33.4 percent c-n to SEK166 million ($20 mm) as a return to more normal snow falls in Central Europe boosted sales of snow chains. Segment operating margin slipped 40 basis points to 18.4 percent due largely to the strengthening dollar. Underlying EBIT margin slipped 40 basis points to 18.7 percent compared with the first quarter of 2014.

Welander said Thule remains confident the Americas can hit the company's organic growth target of at least 5 percent this year. He attributed his optimism to the fact that the quarter ended stronger than it started and that several new products hit retail shelves this month. Among them are a front-mounted child bicycle seat and Thule's first line of large hiking backpacks.

“It's important to know we have improved versus first quarter last year and are now at least on a growth number,” said Welander. “Our ambition for 2015 is that this region should also be able to contribute to organic growth of more than 5 [percent].”

said Welander, adding that the quarter had finished strong than it had started.