Thule Group reported earnings slipped 6.8 percent in the second quarter ended June 30 as sales grew 2.6 percent.

In the second quarter of 2022, net sales amounted to SEK 3,314m (3,229), representing an increase of 2.6 percent. Adjusted for exchange rate fluctuations, net sales for the Group decreased 3.4 percent.

In Region Europe and RoW, net sales totaled SEK 2,412m (2,446), down 1.4 percent and 4.5 percent after currency adjustment. Net sales in Region Americas amounted to SEK 902m (783), up 15.2 percent. After currency adjustment, this is the same level compared with the second quarter of 2021.

Gross income for the quarter totaled SEK 1,400m (1,364), corresponding to a gross margin of 42.2 percent (42.2). After currency adjustment, the margin improved 0.5 percentage points. The price increases passed on to customers offset higher costs for raw materials and higher freight prices.

Operating income amounted to SEK 817m (886), corresponding to an operating margin of 24.7 percent (27.4). The operating margin after currency adjustment was 2.2 percentage points down on the previous year. The cost increases consisted primarily of increased development costs and increased costs for managing higher inventory levels. 

Additionally, the second quarter of last year was affected by revenue recognized from the release of the provision related to a Tepui Outdoors, Inc. earn-out payment of SEK 15m.

Net financial items for the quarter amounted to an expense of SEK 11m (expense: 6). Exchange rate differences on loans and cash and cash equivalents amounted to SEK 3m. The interest expense for borrowings was SEK 13m (expense: 8). Increased use of the credit facility and growing interest rates account for the change in interest expense.

In the second quarter, net income was SEK 626m, corresponding to earnings per share of SEK 5.99 before dilution and SEK 5.95 after dilution. For the year-earlier period, net income totaled SEK 672m, corresponding to earnings per share of SEK 6.43 before dilution and SEK 6.37 after dilution.

Magnus Welander, CEO and president, Thule Group, commented as follows: 

Continued good growth with high margins 
“The second quarter was the largest in the company’s history, despite the dramatic challenges in the business environment throughout spring 2022. Thanks to our efforts to introduce price increases and efficiency measures, we could successfully offset the effects of more expensive raw materials, higher freight prices and unfavorable exchange rates. We, therefore, managed to keep our gross margin of 42.2 percent (42.2) for the quarter. 

“The impact of Russia’s invasion of Ukraine, continued challenges in global supply chains and drastic price increases continue to affect operations.

 “During the quarter, sales increased 3 percent, but decreased 3 percent after currency adjustment, compared with the second quarter previous year. 

“We maintained a high EBIT margin of 24.7 percent in the quarter, which is above what we historically have reported during the second quarter. Compared with the exceptionally strong second quarter 2021, we reported a currency-adjusted decline of 2.2 percentage points. Operating expenses increased primarily due to the significant investments in product development, related to both our current and new product categories, as well as costs for managing higher inventories. 

Stability in Region Europe and RoW 
“During the second quarter, sales in the region decreased 4.5 percent after currency adjustment, compared with the exceptionally strong second quarter 2021. 

“Sales of bike-related products decreased compared with the historically strong second quarter last year; this held for bike carriers in the Sport&Cargo Carriers and RV Products categories and bike trailers and child bike seats in the Juvenile & Pet Products category.

“Other categories performed well, with a particularly positive trend in the Packs, Bags & Luggage category. 

“The UK had notably weaker sales during the quarter; this is also the market, out of our larger markets, with the lowest growth compared with before the pandemic. The Nordic markets also had a weaker quarter compared with the previous year. But compared with 2019, performance in the Nordics is overall very positive. 

Strong local currency drove growth in Region Americas
“Currency-adjusted sales in the region during the second quarter were in line with the previous year. However, strong local currencies increased reported sales in the quarter by 15 percent.

“In this region, too, we noted lower sales in bike-related products compared with the exceptionally strong quarter last year. 

Geographically, the Canadian market was the strongest, while we noted decreased sales in Brazil. 

Improved delivery capacity 
“Increased demand and successful product launches have organically grown Thule to a level much higher than before the pandemic. As previously communicated, we have carried out several measures to meet the significantly higher levels of demand with high delivery performance. 

“This includes significant investments in several of our assembly plants. Both to increase the level of automation and to increase production capacity. We have also decided to increase inventory levels until we see stabilization in global supply chains. This way, we can ensure our continued ability to manage significantly longer lead times. The inventory build-up consists of components and high-volume products.

Short-term challenges in uncertain markets, but positive long-term trends and exciting new product areas
“Given the generally prevailing uncertainty in the near future, when comparing with the strong second half year, it is pleasing to note that the strong underlying market trends continue. The trend among consumers to seek to live active lives close to home remains stable and positive. In addition, we will, in 2023, embark on a journey of growth in another two very attractive product areas, car seats and dog transport products. 

“We are looking forward to an exciting autumn when we will be showcasing a record number of new products in all product categories to our retailers around the world, before the broader consumer launch and in-store sales start in spring 2023.“

Photo courtesy Thule