Samsonite Group S.a. · HKEX:1910
Samsonite — Samsonite International — FY2019 Earnings Presentation
49 slides from Samsonite's earnings presentation, Mar 18, 2020
Slide 1: Annual Results 2019
Sams@nite WE CARRY THE WORLD ANNUAL RESULTS 2019 MARCH 18, 2020 Samsonite International S.A. Stock Code 1910
Slide 2: Disclosure Statement
Disclosure Statement This presentation and the accompanying slides (the “Presentation”) which have been prepared by Samsonite International S.A. (“Samsonite” or the “Company”) do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or b
Slide 3: Agenda
Agenda Executive Summary Business Overview Financial Highlights Outlook and Strategy Q&A Page 3
Slide 4: 2019 Results Highlights
2019 Results Highlights Net sales were down 1.8%(1) due to headwinds from market challenges in the U.S., Hong Kong(2), South Korea and Chile as well as a planned reduction in China B2B net sales in 1H 2019. Adjusted EBITDA as compared to 2018(3) decreased by US$100.2 million. Adjusted Net Income dec
Slide 5: Initial assessment of COVID-19
Initial assessment of COVID‐19 The health and safety of our employees and their families, as well as our customers and business partners continues to be our top priority. We have proactively implemented preventative health measures recommended by local health authorities and we continue to monitor t
Slide 6: We have seen the business rebound from prior disruptions to travel
We have seen the business rebound from prior disruptions to travel Sales tended to recover within 3-6 months Group Sales Impact of SARS Geographic diversification cushioned Group Q1 2003 vs Q4 2002: -16% from sales impact in North America of 9/11 Q2 2003 vs Q1 2003: +18% (Full Year 2001: Group down
Slide 7: Track record of navigating previous health related crises
The Company has a track record of successfully navigating previous health related crises While the extent and duration of the COVID-19 outbreak remains uncertain, we are reassured by the actions taken by governments and health authorities around the world. Nonetheless, the outbreak will have a negat
Slide 8: Agenda
Agenda Executive Summary Business Overview Financial Highlights Outlook and Strategy Q&A Page 8
Slide 9: Actively managed through challenging trading conditions in a few key markets
Actively managed through challenging trading conditions in a few key markets Generated strong operating cash flow of US$406.1(3) million in 2019 (+32% from (1) Resilient sales (-1.8% ) despite 2018) mainly through tight working capital headwinds from market management and lower income tax paid. Stro
Slide 10: All regions delivered constant currency net sales growth, except North America
All regions delivered constant currency net sales growth, except North America Constant Currency -8.0% 1.5% 3.2% 2.8% Growth -4.7%(1), +6.8%(1), excluding +10.3%(1), excluding eBags South Korea, China excluding Chile and Speck brand B2B and Hong Kong(2) (1) Stated on a constant currency basis. Page
Slide 11: Net sales growth excluding headwinds was 4.9% in 2019
Excluding the headwinds in challenged markets and reduced China B2B, net sales growth was 4.9%(1) in 2019 = Indicates constant currency growth over prior year -8.9% Of the US$158.2 million net US$m sales decline, US$113.0 million relates to the U.S. and US$14.7million to Hong Kong(2). +4.9% (1) Stat
Slide 12: U.S. business impacted by tariffs and reduced Chinese tourist traffic
The U.S. business was impacted by increased tariffs and reduced Chinese tourist traffic 2019 U.S. sales were down 8.0% largely due to the impact of higher tariffs and reduced Chinese tourist traffic. Arrivals of Chinese citizens (excluding Hong Kong) declined by 6.6% in 2019 compared to 2018(1). 201
Slide 13: Actions in the U.S. to mitigate gross margin impact of tariff increases
Management is taking significant ongoing actions in the U.S. to mitigate the gross margin impact of tariff increases U.S. Product Sourcing Actions to mitigate tariff increases Accelerated sourcing of product outside of China that will continue into 2020. Re-engineering product to reduce costs, while
Slide 14: Political unrest impacted Hong Kong and Chile; South Korea challenged
Political unrest impacted Hong Kong and Chile and South Korea continued to be a challenged market Hong Kong(3) Chile South Korea 2019 net sales were down 8.9%(1), due to weak domestic consumer sentiment leading to lower retail traffic. Political unrest further impacted the retail environment in Q4 2
Slide 15: Underlying growth in all key brands excluding challenged markets
Underlying growth in all key brands excluding challenged markets(1)(2) Net Sales Growth by Brand Samsonite net sales decreased 0.5%(1), mainly due to the market challenges in the U.S., South Korea and Hong Kong(3). Tumi net sales growth of 1.8%(1) was driven by expansion in Asia +8.7%(1) (+15.1%(1)
Slide 16: Tumi continued to penetrate international markets
Tumi continued to penetrate into international (1) markets (+10.7% outside North America) Constant Currency net sales growth of Tumi North America Asia Europe Latin America Total Group -4.9% +8.7% +15.0% +42.4% +1.8% +15.1% excluding South Korea and Hong Kong(2) (1) Stated on a constant currency bas
Slide 17: Tumi brand net sales growth of 1.8% led by international expansion
Tumi brand net sales growth of 1.8% led (1) by international expansion (2) Almost half of Tumi brand sales in 2019 came from outside North America Direct-to-consumer channel -2.0%(1), with: Direct-to-consumer channel +18.4%(1), with: Direct-to-consumer channel +16.2%(1), with: DTC e-commerce +8.5%(1
Slide 18: Continued progress in driving direct-to-consumer net sales growth
Continued progress in driving direct-to-consumer net sales growth(1), with e-commerce driving much of the change Direct-to-consumer (“DTC”) Net Sales DTC net sales growth of 1.1%(1) (3.9%(1) excluding eBags). Net sales growth of 16.2%(1)(2) in DTC e-commerce, excluding eBags, where net sales of cert
Slide 19: Strong growth in DTC e-commerce net sales across all regions
Strong growth in DTC e-commerce net sales across all regions(1) Constant Currency net sales growth of DTC e-commerce(1) North America Asia Europe Latin America Total Group +13.1%(1) +18.5% +15.5% +76.0% +16.2%(1) Overall, average order value on our e-commerce websites was up 7.2% over last year. The
Slide 20: SG&A reductions implemented to mitigate lower gross margin impact
SG&A reductions were implemented to mitigate the impact of lower gross margin on Adjusted EBITDA (2) Excluding U.S., South Korea, Gross margin was down by Excluding the negative impact of Hong Kong(3), Chile and the 106bp from prior year, largely IFRS 16(2), Adjusted EBITDA planned decrease in China
Slide 21: Management actions to reduce non-advertising SG&A expenses
Management actions to aggressively reduce non-advertising SG&A expenses Management initiated several actions during 2019 that resulted in headcount reductions and SG&A savings: These actions taken in 2019 are expected to generate Reorganized the retail management and Lipault HQ teams in Europe. appr
Slide 22: Advertising spend as a percentage of sales slightly reduced
Advertising spend as a percentage of sales was slightly reduced, helping to offset the reduced gross margin (1) Advertising was reduced by US$26.4 million on a constant currency basis. (1) In addition to the regional advertising expenses, corporate also had advertising expense of US$4.0 million in 2
Slide 23: Significant progress on our ESG journey
Significant progress on our ESG journey Samsonite has led the Our Responsible Journey industry in innovation, quality and durability for 110 years, you should expect Samsonite to also lead in sustainability. Key areas of focus Page 23
Slide 24: Our Responsible Journey - key focus areas
Our Responsible Journey - key focus areas People Focused Innovative Products Providing an inclusive culture Creating the best products with the best opportunities in a using the most sustainable supportive environment. and innovative materials, methods and models. Thriving Supply Chain Carbon Action
Slide 25: NeoKnit and S'Cure Eco
NeoKnit and S’Cure Eco NeoKnit was introduced by Samsonite Europe in June 2019 Made with knitted material technology using rPET yarn. S’Cure Eco was introduced by Samsonite Designed to minimize the cuts of the knitted panel, Europe on Earth Day 2019 helping to reduce the amount of waste during First
Slide 26: Theorym and Merge
Theorym and Merge Theorym will be introduced by Samsonite North America in Summer 2020 The new Theorym soft-side extends the sustainability story beyond just fabrics by leveraging better manufacturing Merge was introduced by Tumi in January 2020 processes and repairable hardware that extend the life
Slide 27: American Tourister Asia and Gregory Resin
American Tourister Asia and Gregory Resin Scholar Limo Hygge Hypebeat Lines introduced by American Tourister Asia Resin will be introduced by Gregory in fall 2020 transitioning to 100% rPET lining Using a lifecycle assessment tool, Gregory measured the Initiated switching more than 25 travel Lines t
Slide 28: New processes and repairability; increased use of Recyclex
New processes and repairability; increased use of RecyclexTM Rapid Fix™ Repair Kit Featuring Fuzion™ Zipper by YKK RapidFix™ repair kit enables easy zipper puller replacement by the consumer. Significantly increasing the number of products that feature RecyclexTM Clean Chroma™ interior and/or exteri
Slide 29: Samsonite is celebrating 110 Years of heritage and innovation
Samsonite is celebrating 110 Years of heritage and innovation Our powerful decentralized structure The travel industry is allows us to quickly respond to changing typically strong and local market needs while leveraging our Our expansive portfolio of growing, with people global scale for design and
Slide 30: Agenda
Agenda Executive Summary Business Overview Financial Highlights Outlook and Strategy Q&A Page 30
Slide 31: 2019 Results Summary
2019 Results Summary (2) (2) Constant currency net sales Gross margin was down 106bp Excluding the negative impact of Excluding the negative impact decrease of 1.8% was due to from prior year largely reflecting IFRS 16(2), Adjusted EBITDA of IFRS 16(2), Adjusted Net additional tariffs and lower Chin
Slide 32: IFRS 16 significantly increases Adjusted EBITDA as traditionally reported
IFRS 16 significantly increases Adjusted EBITDA as traditionally reported (which excludes lease-related amortization and interest expense) Indicates % of net sales (1) (1) For comparative purposes, Management believes Adjusted EBITDA including lease amortization and lease interest expense, is a more
Slide 33: Financial Highlights
Financial Highlights Net sales decreased 1.8%(1) from the prior year due to the challenges described in specific markets. Excluding these four markets and the planned reduction in China B2B during 1H 2019, net sales growth was 4.9%(1). Adjusted Net Income decreased by US$63.2 million, or 22.7%, as c
Slide 34: Financial Highlights (cont.)
Financial Highlights (cont.) Operating cash flow of US$406.1(1) million in 2019 was up 32% compared to US$307.4 million in 2018. The increase reflects lower year over year cash outflow for working capital and other operating assets/liabilities as well as lower income tax paid. Net working capital ef
Slide 35: Financial Highlights (cont.)
Financial Highlights (cont.) On March 16, 2020, the Company completed the refinancing of its Senior Secured Term Loan A (TLA) and Revolving Credit Facilities (RCF), increasing the size of the RCF to US$850 million. This refinancing extended the maturity of the TLA and RCF by approximately 2 years, r
Slide 36: Non-operating expenses and non-cash impairment charges
The Company incurred non-operating expenses related to profit improvement initiatives and non-cash impairment charges related to our store portfolio and eBags business Non-operating expenses of US$16.0 million related to headcount reductions and other profit improvement initiatives that are expected
Slide 37: Almost 90% of Adjusted EBITDA decrease due to U.S. tariffs and lower tourism
Almost 90% of the decrease in Adjusted EBITDA(3) is due to additional U.S. tariffs and lower Chinese tourism reducing U.S. gross margin Adjusted EBITDA(3) Bridge 2019 Largely due to Total year over year rapid retail constant currency expansion in gross margin reduction Europe in 2018 of US$77.7milli
Slide 38: Decreased Adjusted Net Income driven by lower Adjusted EBITDA
Decreased Adjusted Net Income(3) driven mainly by lower Adjusted EBITDA, partly offset by lower interest expense Adjusted Net Income Bridge 2019 (2) (1) (1) Excludes lease interest expense. (2) “2018 (IFRS 16)” presents the Group's financial performance for the twelve months ended December 31, 2018
Slide 39: North America – Gross margin decrease offset by lower SG&A
North America – Gross margin decrease of US$92 million offset by US$22 million lower SG&A U.S./China trade tensions led to lower tourism traffic in U.S. gateway markets and lower wholesale customer purchasing, with our own gateway market store traffic down 15-20% Gross Margin -$91.7m from the same p
Slide 40: Asia – Increase in net sales driven by Tumi growth
Asia – Increase in net sales was driven by Tumi growth of (1) (1) 8.7% as well as overall DTC e-commerce growth of 18.5% while maintaining strong Adjusted EBITDA margin Excluding China B2B, Hong Kong(3) and South Korea, net sales for the Asia region grew by 6.8%(1) led by India +10.4%(1) Japan +5.2%
Slide 41: Europe – Net sales growth of 3.2%
Europe – Net sales growth of 3.2%(1) against a strong 2018. Tumi sales increased by 15.0%(1) as the brand continues to gain traction throughout the Europe region. Samsonite brand also grew 0.8%(1) and American Tourister grew 4.3%(1) following exceptional 39.2%(1) growth of that brand in 2018. Strong
Slide 42: Latin America – Net sales growth of 2.8% constrained by Chile
Latin America – Net sales growth of 2.8%(1) constrained by headwinds in Chile. Excluding Chile, net sales for Latin America grew by 10.3%(1) Mexico +9.3%(1), Argentina +137.5%(1), Peru +22.9%(1), Colombia +8.7%(1), and Brazil +2.8%(1). 87% of Latin Chile continued to be challenged by weak America Ad
Slide 43: Balance Sheet
Balance Sheet US$m December 31, December 31, $ Chg Dec‐19 % Chg Dec‐19 Net debt reduced by US$202.8 2018 2019 vs. Dec‐18 vs. Dec‐18 million since December 31, 2018. Cash and cash equivalents 427.7 462.6 35.0 8.2% Compared to the prior year, cash flows Trade and other receivables, net 420.9 396.0 (24
Slide 44: Working Capital
Working Capital Net working capital efficiency of 13.3% as of December 31, 2019 was 30bp favourable to US$m December 31, December 31, $ Chg Dec‐19 % Chg Dec‐19 2018 2019 vs. Dec‐18 vs. Dec‐18 the prior year. Working Capital Items 2018 2019 Variance Inventories $ 622.6 $ 587.3 $ (35.3) ‐5.7% Q1 14.5%
Slide 45: Managing discretionary capital expenditures
Managing discretionary capital expenditures Capital Expenditure by project type Lower capital expenditure in 2019 was due to US$m 2018 2019 the slower pace of new retail store openings as well as one-time investments in 2018 in Europe Retail 50.5 41.0 warehouse/manufacturing and Tumi North America o
Slide 46: Agenda
Agenda Executive Summary Business Overview Financial Highlights Outlook and Strategy Q&A Page 46
Slide 47: Company's long-term strategy remains strong
Company’s long-term strategy remains strong The Company aims to increase shareholder value through sustainable revenue and earnings growth and free cash flow generation. In order to achieve this objective, the Company has adopted the following principal strategies: Ensure the Company’s well-diversif
Slide 48: Near-term focus
Near-term focus Navigate the business through the challenges created by COVID-19 by keeping employees safe, managing the cost structure and working through sourcing impacts. The Company is pulling on several levers to mitigate the impact, including: Significantly reducing advertising spend; Halting
Slide 49: Agenda
Agenda Executive Summary Business Overview Financial Highlights Outlook and Strategy Q&A Page 49
Samsonite International — FY2019 Earnings Presentation on 6ix