Thule Group reported sales for the third quarter amounted to SEK 1.56 billion corresponding to a year-over-year increase of 12.7 percent. Adjusted for exchange rate fluctuations, sales rose 3.8 percent.
In Region Europe & ROW, net sales totaled SEK 1,090 million, up 16.6 percent, and 7.8 percent after currency adjustments. In Region Americas, after currency adjustment, sales declined 4.4 percent compared with the third quarter of 2017, which was largely attributable to a planned phase-out of certain low-margin products but also to lower sales in certain markets in Latin America.
Operating income totaled SEK 267 million corresponding to an increase of 3.4 percent. Adjusted for exchange rate fluctuations, operating income decreased 3.0 percent.
Gross margin eroded to 39.2 percent from 41.1 precent After currency adjustment, the margin decrease totaled 1.0 percentage point. The lower margin in the quarter stemmed mainly from continued higher purchase prices for the company’s major material categories and the product mix during the quarter. In addition to the above, results were impacted marginally by certain start-up costs for building volume ahead of the major launches that were presented to the market during the quarter.
Net income was SEK 189 million, up 1.9 percent year-over-year.
A Stable Quarter with Major Launch Efforts
Magnus Welander, CEO and president, said in his comments:
“Third quarter sales rose to SEK 1,561m (1,385), up 12.7 percent (3.8 percent after currency adjustment). Accordingly, sales increased SEK 461m (up 5.6 percent after currency adjustm ent) in the first three quarters of the year.
“During the quarter, EBIT increased 3.4 percent, and for the first three quarters operating income has grown by SEK 97m (up 9.6 percent).
“The third quarter was dominated by major launches for the future which led to increased development and launch costs of approximately SEK 25m year-on-year. Thule’s longstanding, market-leading position in Sport&Cargo Carriers was strengthened further with the introduction of an entirely new generation of roof racks setting a completely new standard for user-friendliness and two roof box models (the first will be in stores by winter 2018 and the second in autumn 2019). In parallel, the Thule Sleek stroller sales started in store in the quarter which opens great opportunities in the stroller category going forward. Due to these launches, stock levels were also purposely built up in the quarter and will remain relatively high over the next six months to ensure that we can efficiently capture the expected increase in sales over the peak early spring period next year.
Region Europe & ROW Remains Strong
“In the third quarter, sales increased 7.8 percent (after currency adjustment) in Region Europe & ROW, which means that currency-adjusted growth after the third quarter was 9.8 percent. In Sport&Cargo Carriers, sales of roof boxes and bike racks continued to trend favorably, at the same time as we noted an expected slowdown among major customers for certain roof rack models ahead of the introduction of the recently launched new generation of roof racks.
“RV Products continued to develop well in a healthy market, primarily in the German and French markets. Sales of our new stroller, Thule Sleek, contributed to strong growth in Active with Kids. Generally, we are very pleased with the response from customers, media and consumers to the product. Packs, Bags & Luggage continued the stable growth trend in our focus categories, while for our legacy products, sales declined in line with our expectations.
Challenging Market in Region Americas
“In Region Americas, sales declined by 4.4 percent after currency adjustment in the third quarter which was in line with the trend posted earlier in the year. The planned phase-out of lower margin products linked to certain OE contracts in Packs, Bags & Luggage reduced sales by around SEK 10m. Other categories posted corresponding decline due largely to lower order volumes in Argentina and Colombia. Weaker local currencies in these countries resulted in our distributors being cautious about placing new orders during the quarter. In the Sport&Cargo Carriers category, sales was in line with last year and as with Region Europe & ROW, we drove strong growth in Active with Kids.
“The U.S. market remains challenging, and we have another half year ahead of us with negative effects due to the already communicated phase-out of certain OE contracts corresponding to lower sales of around SEK 60m. However, the exciting launches in key categories combined with implemented organizational changes mean we have a more optimistic outlook from spring 2019.
Import Duties and Phase-Outs Impact the US
“It is well-known that the U.S. government has introduced import duties on a number of components and goods imported from China. An initial tariff of 10 percent was implemented with immediate effect at the end of September. From January 1 next year, these goods will be subject to an additional import duty of 15 percent.
“We have informed our customers that we will pass on the effects of these duties, which we estimate at around SEK 50m. In general, we do not consider that this will affect us noticeably in terms of competition. At present, the potential effect on demand is difficult to speculate on.
Focus on Key Launches in the Near Future
“Currently we focus big efforts on the broader roll-out of our new city-stroller, Thule Sleek, in more stores as well as on the sales start for our new roof rack program and the new roof box Thule Force XT which have just been launched. We are also starting preparations for a very exciting spring with a broader product range and a stronger market position in all of our key categories.”
The full report is here.
Image courtesy Thule
