Thule Group reported a strong recovery in earnings in the third quarter as sales rose 8.0 percent. Sales in the North American region decreased 15 percent on a currency-neutral basis.
The Sweden-based maker of outdoor and transportation products reported net sales for the quarter amounted to SEK 2,311 million ($205.8 mm) against SEK 2,139 million a year ago. Adjusted for exchange rate fluctuations, sales rose 0.8 percent.
Operating income amounted to SEK 359 million ($32 mm), up 86.0 percent against SEK 193 million a year ago, corresponding to a margin of 15.5 percent against 9.0 percent a year ago. Adjusted for exchange rate fluctuations, the operating margin increased 5.2 percentage points.
Net income amounted to SEK 262 million ($23 mm), up 91.2 percent from SEK 137 million a year ago.
Cash flow from operating activities totaled SEK 838 million against SEK 543 million a year ago
By region, sales in Region Americas reached SEK 622 million against SEK 721 million, down 13.7 percent on a reported basis and 14.7 percent on a currency-neutral basis.
Thule said, “By region, sales in the North America region decreased 15 percent (in constant currency). Bike-related sales returned to growth, albeit at a lower rate than in Europe. Retailers’ ambitions to reduce their inventory, after previous, excessively large orders, continued to have results. Inventory levels at the major companies approached healthier, more typical levels, while inventory levels at smaller companies often remained high. In North America, the overall market climate was affected by cautious consumption and a high share of sales during sales campaigns. We noted general caution among retailers in what turned out to be a challenging period for the North American sports and outdoor industry. In South America, Brazil posted sales growth while sales in other countries decreased year-on-year. Our sales directly to consumers (DTC) also continued to grow in the Americas region, and sales growth amounted to 7 percent (in constant currency). In total, DTC accounted for 15 percent of sales in the region during the quarter.”
In the “Region Europe & RoW” segment, sales were SEK 1 689 million, up 19.1 percent on a reported basis and 8.1 percent on a currency-neutral basis.
Thule said, “During the third quarter, sales in the region increased 8 percent (in constant currency). The increase was driven primarily by strong growth in bike-related products. During the year-earlier period, many bike retailers suspended placing orders in order to manage surplus inventory levels. With inventories now at healthy levels, sales have once again increased. Thule Epos, our premium, award-winning tow bar-mounted bike carrier that launched in the spring, contributed significantly to sales growth. The RV segment posted a double-digit decrease in sales, percentage-wise (in constant currency). Sales to RV manufacturers continued to increase, due to their production to meet back orders placed in previous periods. However, this was insufficient to compensate for sales declines within the aftermarket. The RV segment is Thule Group’s sole exposure to a historically cyclical market segment and we expect that this market will remain challenging throughout the coming year. In Europe, growth continued for sales directly to consumers (DTC) in all of the seven markets where this channel is available. Sales increased in all product categories. In total, DTC accounted for 4 percent of sales in the region during the quarter.”
In the nine months, sales fell 10.9 percent to SEK 7,566 million. Operating income declined 14.8 percent to SEK 1,451 million while net earnings were off 16.7 percent to SEK 1,703 million.
Commentary from Mattias Ankarberg, Thule’s CEO and president, are below:
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Good profitability in a tough market
During my first quarter as President and CEO of Thule Group, I’ve had the chance to more closely experience many of the strengths I previously observed as a board member. We help consumers live active lives, we make the world’s best products in several categories with long-term tailwinds and we invest for long-term profitable organic growth. During some intense first months, I’ve also had the chance to experience more of the Thule spirit, and I am therefore – if possible – even more convinced that our market-leading positions in several product categories will be joined by more.
Sales in the third quarter increased 1 percent (in constant currency) compared with the year-earlier period. As expected, sales increased markedly for bike-related products, especially in Europe. This growth should be considered within the context of bike retailers drastically reducing their orders in the year-earlier period in order to manage excessively high inventory levels. At the same time, I would like to highlight that Thule Epos, our most recent and most premium bike carrier that was launched in spring, significantly contributed to sales growth. However, sales decreased in the RV Products (”recreational vehicle”) category and in Region Americas during the quarter. The RV segment is Thule Group’s only exposure to a historically cyclical market segment and North American consumers turned less optimistic during the autumn.
The gross margin increased to 39.7 percent (33.9). As in the second quarter, the gross margin was strong compared to the same period before the pandemic, with a positive impact from product and channel mix, and a negative impact from an underutilized production capacity. The EBIT margin for the quarter amounted to 15.5 percent (9.0), a strong increase compared with the previous year.
We are in the most ambitious product development phase in the history of Thule Group. During the last twelve months, we have invested 6.9 percent of sales in product development. Despite high development costs, the EBIT margin for the quarter was in line with pre-pandemic levels.
Cash flow from operations was the strongest ever for a single quarter, amounting to SEK 838m (543). Our inventory levels continued to decline at a rapid pace during the quarter.
Continue to build on our strengths
I am a strong proponent of the “build on your strengths” principle. In recent months, we’ve started working on identifying our biggest strengths. We will preserve what has made us strong and be precise in what we continue to build on and what we will adjust.
I experienced a telling example when I visited the world’s largest RV trade fair in the German city of Düsseldorf after the summer. In one of Europe’s largest exhibition centers, an industry currently facing challenges displayed an impressive optimism (17 fully-booked exhibition halls!). Thule’s booth was one of the most visited and industry colleagues were impressed that we launched no fewer than five entirely new products. These products were introduced by enthusiastic Thule colleagues from several countries, who spent their coffee breaks already now discussing what we could do even better next year. The largest public draw was the world’s first tow bar mounted tent, the Thule Outset. We took the idea and concept from our rooftop tents and created a tent that, in a few minutes, folds up and is fastened on the tow bar. It received a great deal of attention – one journalist’s post on social media had over 20 million views a few days later!
This anecdote illustrates several of Thule’s strengths. We are global market leaders in several of our product categories and we have a unique ability to develop world-leading products. We are positioned in product categories with long-term tailwinds and we are investing over the long term for profitable growth, even if the industry suffers occasional headwinds. The best way to experience Thule’s brand is to experience our products, which is illustrated by the lines to our Thule Outset demonstration and the aforementioned journalist’s digital post. And last but by no means least, we have many enthusiastic employees with an incredible knowledge of our products!
Continued focus on product development, and more focus on consumers
Product development – our ability to create growth ourselves through innovation and improved products – will remain the basis of our strategy. We will also build on our strong brand, premium position, high sustainability ambitions and culture of always striving to be better.
Our product-driven strategy will really become apparent next year. As already announced, we will soon enter two exciting new product categories. Our first two dog transport products – the collision-proof dog crate Thule Allax and our bike trailer Thule Bexey – will be launched online and in stores during the first quarter and summer, respectively. Our innovative and user-friendly car seats will be launched in Europe during the summer, and in addition to several new products for RVs, consumers will meet the next generations of best-selling products such as the world’s leading premium bike trailer, Thule Chariot.
Our first additional priority will be focusing on moving closer to consumers. We are primarily a product company and sell largely through competent retailers. Selling – and maybe more importantly, communicating – directly to consumers will, however, help us succeed in new product categories and increase our growth. The launch of Thule Outset is a good first example. For the first time, we’ve allowed consumers to register their interest on thule.com, and that list is already far longer than what we can produce next year.
Another adjustment is reducing excess capacity in our supply chain. Our own production capacity is proven flexible and the utilization will increase as we continue to grow.
However, there is room for further streamlining in our operations by e.g., reducing external warehouse services during the coming year.
The future is bright
Thule is in a good place and our future is bright. More consumers in more parts of the world want to live active lives, which gives us a tailwind, and we are ourselves creating more products that support an active lifestyle. I’m full of energy from having joined “Team Thule” full-time and look forward to continuing to build on – and add to – our strengths!\
Photo courtesy Thule
