Samsonite International SA
HKEX:1910
Earnings Call Analysis
Q4-2023 Analysis
Samsonite International SA
The company delivered impressive results in 2023, signaling exceptional performance with sales nearing $3.7 billion, which represents an outstanding 30.4% growth compared to the previous year. This remarkable surge was experienced across all brands and regions, indicating a universally positive trajectory for the company. Particularly significant was the accelerated progress in higher margin brands and regions, like Asia, which saw notable recovery, with Tumi and Samsonite leading the charge. The ripple effect of this robust sales performance was a strengthened margin across the board.
Operational efficiency was reflected in an EBITDA of approximately $710 million, translating to a margin of 19.3%. The push to increase advertising spend to $242 million (up by 120 basis points from the previous year) did not hamper margins but propelled them, showcasing the company's ability to scale its investment in growth without sacrificing profitability. The gross margin stood strong at 59.3%, and indications suggest an even stronger performance in Q1 of the next period. Achieving a 580 basis points increase from 2019, the company shows a long-term commitment to maintaining and boosting profit margins alongside investments in advertising and brand elevation.
The company continued its tradition of robust cash generation, reporting $284 million in cash. These results have enabled the reinstatement of the dividend program, demonstrating confidence in the company's financial health. Furthermore, the company has deleveraged significantly with a debt ratio now at 1.53x, underlining the execution of a sound financial strategy that surpasses their own conservative targets. Liquidity has also been bolstered, reaching $1.6 billion — a $100 million increase from the previous year, providing considerable flexibility for strategic maneuvers.
Looking ahead, the company's prospects appear bright, with a projected continuation of margin expansion. While advertising spend is set to rise to about 7%, the EBITDA margin is expected to simultaneously climb, and gross margin is forecasted to remain robust. This anticipated balance between growth investment and profitability underscores the company's strategic acumen. The fixed SG&A, having already improved by approximately 460 basis points from 2019, is on track to further improve as the company remains steadfast in managing its cost structure, even as it forges ahead with store openings and expansion efforts.
The company's growth is not just a spike but appears to be sustainable as the business is now performing 17.5% above 2019 levels, or closer to 20% when adjusted for the ebags third-party business. The adjusted net income has seen an enormous leap of 81% compared to the 2019 figure, lending further credibility to the solidity and upward momentum of the company's financial performance.
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Hi. Hello. Hi. Good morning, everyone. Thank you very much for taking the time to join our 2023 Annual Results Presentation. I'm William, Head of Investor Relations for Samsonite. And today, we have our CEO, Kyle Gendreau; and CFO, Reza Taleghani, to present our results. And our CEO, Kyle will begin with a few remarks. Thank you.
Okay. Thanks, everyone. You can hear me all right? Yes. Good. Thanks for coming. We're pretty excited to be here. It's been a little while since we've done actually an earnings release here in Hong Kong, but what a wonderful set of results to talk about. So I'm going to give you a business update. Reza will give you a financial update like we normally do. I will give you an outlook because everyone's here for outlook. I was reading a lot of the reports this morning. Everybody wants to understand where we are and what's cooking. We will talk about that and then very happy to take questions at the end.So ready to roll, William? Ready?
Yes.
Okay. 2023 was amazing is the way I would describe it. I think everybody -- and I was reading a lot of the reports this morning, in line with what people were expecting, but let's not underestimate how strong these results are. Our sales approaching $3.7 billion, up 30.4% to last year, tremendously strong across all brands, all regions. Everything that we're touching is moving in a really positive way. And I might say in our higher margin brands or higher margin regions, moving faster as Asia recovered. Tumi really is kicking in and Samsonite, very strong. All of that is giving the effect that we expected on margin, both gross margin and bottom line. But I would tell you the entire business is delivering on all fronts -- on that front.EBITDA, $709 million, let's call it $710 million. I would have rounded it to $710 million. Super strong numbers, 19.3% with advertising stepping up. So this is moving margins as we lean in to push the business. Very strong gross margin, 59.3%, I would tell you, and I think we have Q4 in here as well, 59.9% in Q4. Q1 is looking even a little bit stronger. So the gross margin metrics and everything that we've been guiding and elevating on all of our brands is delivering. That's up 580 basis points from 2019, just for scale. We continue to invest in our business, right? So as we come out of pandemic and we're on strong footing, these results on EBITDA are on the back of us really leaning into the business. So we move the advertising spend, $242 million, 6.6%. You'll see us bring that up next year. I guess, we're in this year, '24, I have ambitions to bring that up closer to 7%, and it's up meaningfully from 2019. So when you see that margin expansion -- I mean, not '19, but '22, when you see that margin expansion, it's with advertising up 120 basis points to what we did a year ago. So really very, very strong.I think one of the pieces that I've known for a long time, and I think people generally understand, but this business generates cash. Not only do we generate cash when things are going well, like you're seeing in these numbers, but even during pandemic, if you were watching what we were able to do to manage this business and generate cash, almost the entire time has been tremendous. So we generate $284 million of cash. We've put back in our dividend program as much of you have read already last night. I think that's important. And importantly, we've delevered the business even ahead of my own expectations. We're now 1.53x debt. Many people asked for the last 3, 4, 5 years, what's your target debt levels. We typically say 2% or -- 2x or below. We're well below that and continuing to delever as we move into next year. And with that, we've also increased our financial flexibility. When you look at our overall liquidity, up $100 million from last year, $1.6 billion, gives us tremendous flexibility in managing the business and just continues to be on a footing of all strength.So we're excited about the results. We'll go through a lot more details here as well, but this is kind of capturing the highlights, which, on the next page, again, I always try to capture fun things and Reza gets into the details. But on this page, this is really telling a story of tremendous result on -- everywhere you can look within our results. So you can see we're up 30%, up 17.5% to 2019. If I adjust for ebags third-party, which we're all aware that we had called that business during the pandemic, and it's not reflected here, but if I adjust for that, we're closer to 20% up to 2019. So really a tremendous result. Reza will go through that.EBITDA margin, up 290 basis points to last year, and as I said, up almost 600 basis points to 2019, off the back of many of the initiatives we've been driving. And I might say that's with advertising, as I said earlier, up meaningfully, 6.6%. So to deliver almost 300 basis points of EBITDA margin expansion while we're moving advertising up is really a tremendous story. You'll see the same thing next year. You'll see EBITDA margin creep up. You'll see us bring advertising up, you'll see gross margin hang on in a really meaningful way. So it's super positive.Adjusted net income, very strong. I'll cover Q4 in a second because we had some one-offs last year that kind of throw that off, but the full year, I think what's impressive in this adjusted net income, up 81% in 2019 on adjusted net income, really tremendous number.Gross margin, 59.3%. Q4 even better, closer to almost 60%. I whispered to some people, as I was walking in, Q1 is looking like 60%. So this is hanging on, maintaining, if not giving some upsides as -- again, Tumi grows in Asia, comes back into the mix in a big way, moving the gross margin.And the fixed SG&A which was a huge task during pandemic and really what we get a lot of questions that are moving around is, are you going to maintain your fixed cost structure. And I think you can see clearly here full year 2023, the full effect of what we've done, almost 400 and -- I'm sorry, my eyes are bad, 460 basis points up from 2019, meaningful improvement even from last year. And I would tell you this will continue. We'll continue to be able to manage this fixed cost structure, probably continue to deliver a little bit of leverage here.And particularly if you look at Q4, which is next page, I might start there, which is, even in Q4, our fixed SG&A even down like a couple of more -- around 20 basis points more, 22.5%, flat to last year. We had achieved a lot in '24. We started opening stores. So a lot of these accomplishments with opening stores. I think in Q4 alone, we opened over 30 stores and still delivering this fixed cost leverage or benefit in the business. The sales for Q4 up 15.8% to last year, up 15.1% to 2019. I don't have the equation for adjusting for ebags, but it's even higher if we adjust for ebags. EBITDA margin, very strong, 19.1%. I read a few reports last night or this morning saying, oh, the EBITDA margin dipped a little bit. Look at our advertising number. Look just below that, that's advertising at 7.2%. We leaned into Q4, as business was moving. So if you really adjust it for where we were running, this is even a more tremendous movement in EBITDA margin in Q4, very, very strong. I covered fixed SG&A, and again, the gross margin continues to be very strong. The mix effects of the business moving in the right direction are higher margin brands growing faster. Asia really coming back in '23 as we saw meaningful recovery more to come for Asia, delivering on a margin story that's really quite tremendous.We've shown this page a few times. I think it's just one more. We'll probably stop showing this page after this meeting, but I think it's important to look at the transformation and profit profile of the business. This is really what you see in this page. We have substantially transformed this business from a profit perspective. On the surface, reported numbers were up $44 million in sales for 2019. I'm going to give you a few numbers on that in a second, but then you go to the profit profile, and again, just as reported, up $217 million on EBITDA. That's transformation. If we peel that apart a little bit, you'd look at the margins, which is really important, 13.5% 2019 to 19.3%. It clearly shows the transformation on all the things that I covered in the summary.If you look at our 2023 sales numbers and constant currency growth is -- to '19 is 17.5%, even without adjusting for ebags. If I just adjusted that to constant currency '19, it's north of $4 billion in sales. So you don't get the full effect on the reported, but when we talk about constant currency, and you really look at where we've moved this business to, this is a business that's gone from, and I might take out Speck and ebags, things we've called. We've gone from $3.4 billion in sales on a currency-adjusted basis over $4 billion in sales in this time period, really quite tremendous. So -- and Reza will cover some of that in his section as well. So we're quite excited about this. And what you should expect is, this kind of profile continuing on the margin side of the business as we move into 2024.All brands are delivering. Every single thing we're touching is delivering. What I would say is, our more profitable brands, more premium brands are moving even at a faster clip. So Tumi in the middle, up close to 37%, very, very strong and continuing. This is a business that we think has tremendous potential. I think I've said somewhere along earnings, this is the business run rate, $1 billion in sales today, going to $2 billion in 6, 7 years. That's the kind of scale that we have for growing Tumi, and we've said that before. And you clearly see in '24 -- I mean to '23, this coming back. This was also a very strong mover in '23 because we were out of inventory as we started the year '23. And so, we had a really robust Q1, Q2 as this started to really get back on all footing. But super result, 30% growth in Samsonite, almost 31% growth in Samsonite. This is our core brand. This is a brand that's doing $1.5 billion in sales, delivering 30% growth and growth across all regions. I'll show you that. Even American Tourister, which I would argue that consumer may be moving a little bit differently than more premium consumers, but still delivering close to 30% growth, really tremendously strong. All of these brands with amazing product offerings, fully supported with advertising, really executing the strategy perfectly across what I'd call our 3 core brands, which drives most of our business.We have other brands all doing the same thing, Gregory and Lipault, I'd call it, because I think these 2 brands have meaningful upside within our portfolio, both delivering north of 20% growth, and we have other brands in the mix delivering 30% growth, just to give you some sense for, everybody's delivering to the story.Samsonite, our premium brand, clearly delivering growth. Asia outsized as Asia turned on, but every single region delivering growth. Look at North America and Europe. These had largely recovered in '22. As we were stepping into '23, there was a bit of recovery happening. Q1, particularly in '23, if you remember, was tremendously strong as this brand really started to get into full swing, and we'll talk about Q1 and Q1 outlooks for this year. But I think importantly is, you can see that this brand across every region continuing to significantly deliver. North America, 12%. My guess is that's probably ahead of everybody's expectations for North America, off of a very strong recovery in '22, stepping into '23, still delivering amazing results. Asia turned on. We all know that. We're watching Asia and look at the growth through, the 72% growth. This is a story of Asia and all markets really kind of delivering and delivering numbers. Europe, almost 20%. Europe, tremendous result for brand Samsonite. Store openings, new products, really amazing advertising, moving the needle for Europe. And Latin America, which has been tremendously strong for the last 2 years, still delivering 25% growth for Samsonite. If you blend it all together, 31% growth, really a powerful, powerful story for brand Samsonite.Just some call outs because I try to keep my pages interesting. Recently, in February, we just launched or just announced our -- becoming the official luggage partner for the U.S. national team, U.S. gymnastics team, which is very exciting as we head into an Olympic year. We're really sponsoring this team. We'll sponsor them through their trainings and their regional competitions, including the Olympics, when we get to the Olympics in the end of this year or the middle of this year. So very excited about this. We're using Proxis. The color of this bag's perfect. The strength of this bag, the feature of this bag, in my view, matches U.S. gymnastics, and we're quite excited about this partnership with them.Tumi growing across all regions in a meaningful way. Okay, North America Tumi, up 22%. This is really a well founded, fairly mature business in the U.S., delivering almost 25% growth, really very, very strong across retail, really product-driven. We're going to talk about Tumi Golf in a second. That isn't even in these numbers yet. And again, Tumi Golf won't transform Tumi, but it tells you about the transformation of this business into a real performance luxury lifestyle brand. And I think that's just a testament to that. So very strong growth in U.S. As you'd expect, in Asia, really as it's turning on, but as the brand really has tremendous future, long-term runway for growth, up 67%, maybe I might round that to 68%. 35% growth in Europe. Tumi, in my view, has a long runway in Europe as well, and we started reopening stores in Europe. We had done a lot of restructuring for Tumi in Europe during the pandemic, but now we're back on the gas pedal, delivering 34% growth. In Latin America, the numbers aren't big, but the growth is tremendous. And everywhere we open a store in Latin America, largely with partners or distributors, but they look and feel just like we're running these stores. Every time we open them, they're tremendous successes, and so there's lots of opportunity for Tumi in Latin America as well. And the blended is 36% up versus 2022 and run rate, $1 billion. I look at this number, in my mind, I'm already at $1 billion. This was a brand, when we acquired it, it was doing $500 million. Throw in 3 years of pandemic, and it's really an amazing story. And I do think we have the ability to double from where we are today over the next 6, 7 years, this business.As I said, Tumi Golf, it looks very nice in the room. We're quite excited about this. This won't change our fortunes on sales, but what it does is, it engages our existing customers in a new and meaningful way, but it also attracts new customers that maybe haven't touched this brand. And I think these types of products and the partnerships we have with the LPGA and the PGA TOUR are very, very strong. So we're the official luggage of both of these. We're quite excited. Not everybody's in the room if you're dialing in, but we have the products in the room and you can see them online. This is tremendously successful. As I show these products, as I'm moving around with friends or colleagues, people immediately react to it because it's really quite tremendous. We even have a pickleball bag just as a call out to my Tumi team in New York, but we created a pickleball bag and I'm using it -- well, my wife's using it, but it's quite an amazing little pickleball bag. I don't know if that's happening in Asia, but in U.S., it is. And this just speaks to the power of this brand, the ability to collaborate with meaningful organizations to push this story, very, very excited, and it will just continue. And so, we have collaborations with McLaren and we have other sporting venues that we're supporting here. I think it creates an interesting avenue for Tumi. But for sure, I think golf's a big win on the lifestyle side of the business. So have a look at the product.American Tourister, it's strong, strong growth in Asia and Latin America. Really, this is -- if you think about American Tourister, 60 -- almost 62%, 63% of this business is sitting in Asia. And to deliver this meaningful growth, almost 57%, 58% growth as Asia turned back on, tremendous result. U.S. and Europe were, I'd call them flattish. This had to do with, if you remember last year, Europe warehouse management system going in and we consciously throttled back on shipping for American Tourister. You see that in these numbers. We're talking about at the half year, actually when we were doing that. And the U.S., there's some timing of wholesale customers. Amazon has changed the way they're buying, how much inventory they're holding. That factored in here. But what you'll see is all these regions delivering growth on American Tourister. We're quite excited about here. And the blend is amazing, call it 30% growth, very, very strong.We've done a lot on the store front. We're shifting -- Reza will cover the shift in mix of the businesses. Direct-to-consumer continues to grow both with e-commerce, but with retail as well. And I thought this page was interesting to show you from where we were in '19 to where we are today. So we're back to opening stores. We opened a net 67 stores this year. So you see margin expansion this year, while we're opening retail footprint. But we took a significant amount of stores out during the pandemic. This was restructuring that Reza and I had started even before pandemic where we had thought we had over-pushed retail in certain markets in maybe a too fast of a way. So we adjusted this. And so, I think the takeaway from this page is, if you look at the bottom right of the page and you look at our consolidated results, so this is 240 less stores than 2019, delivering 24% growth, almost 25% growth to 2019, up 35% to last year. Equally, and I think even more importantly, when you look at the average sales per store and the elevation that we've had in all of our stores, and that's up 40 -- almost 48% to 2019. So these stores are delivering meaningful growth on a more efficient fleet, and we're back to opening stores in the right places. So you'll see us open stores in Asia. Of the stores we opened this year, 44 of them came from Asia and 10 Tumi and 34 Samsonite. And I have a few pictures of stores. This is tremendous story, and you should anticipate that we'll open 50 to 60 stores a year in the right markets, probably not so different than the mix we just talked about. Asia's got tremendous opportunity, but all regions have opportunity to expand our retail footprint in a smart, careful, and super efficient way, which is part of the transformation we achieved during pandemic.Next page. This is a store that we opened in Tokyo and a tremendous store. We'll call this a flagship store. This is inspired by the 19 Degree collection, which has really been a super important driver of hard side for Tumi. So if you look at this store, if you have a chance to go see it, the outside has the images of 19 Degree, including the inside, and some of the effects that we've added in there. This opened December. It's well ahead of our expectations, received a tremendous media flow. And it's a 2,000 square foot store. In Asia, Tumi stores tend to be a little bit too small. One of the things we'll be working on is expanding the footprint of stores as we move and add stores for Tumi, particularly as our collections expand, particularly as travel becomes a bigger part of the story for Tumi Asia, whereas it's been more historically heavier to non-travel. There's a huge opportunity to expand here. And this store sets some foundation for what we can do with the brand on the retail side in the next 4 and 5 years. And we're really excited about it. And again, this store, launched in a meaningful way, had a lot of PR. My first instinct is how is it performing, and it's performing really well. So ahead of our expectations is the way I would describe. It looks pretty, but it has to deliver too, and it's definitely delivering.So on the next page, just some -- again, we're excited about the store, and call out to my Tumi team, Victor, Head of Design for Tumi, in the middle here. Inside the store, we have this wonderful effect with designer Michael Murphy, which is this custom art installation. When you think about a flagship store, store that has some wow effect when you get there, not only on the outside, but when you get to the inside, there's a wonderful kind of 3D piece of art that really kind of comes to life as you move around the store. So I'd recommend if you're traveling into Tokyo, stop in to see this store. It's on my list.We were opening stores in Asia, as I said. You can see Samsonite stores. Here's one in Shanghai, China. This opened December 28. We were pushing the team to get stores open. So right at the end of the year, boom, opened one. You can see a store in Korea opening and doing really well. And again, there's a pretty good fleet of stores we've opened. We're back to opening stores in Europe. This is an important piece for Europe. And we called a lot of stores in Europe, but there's real opportunity to expand in Europe. And so, this is a store in Paris that's opened and doing very, very well. Opened -- actually just opened, January 10. And then we're doing a lot, and you can see it in our CapEx. You'll see it in our CapEx next year, refreshing and updating stores. During pandemic, as you know, we grabbed the throttle on CapEx. We're back to pushing forward. We were doing that in '23. You'll see it in '24. These elevations that happen in our store, not only on the outside, but the inside, and the way that store presents itself to our customers is super strong. You see it before and after. You don't get the full effect if you're not in the store, but I think you can see the elevation that happens. We typically get a 20 -- a 10% to 20% uplift in our stores when we refresh, and you should see us moving and refreshing a meaningful amount of stores. Over this year, next year, it should be part of our normal routine and we're back to doing that.E-commerce is a huge piece of our story. Direct-to-consumer is driving a mix change in our business. So, not only are we opening retail stores, but [ shared ] growth in direct-to-consumer both in our own websites, and particularly in Asia, in our third-party sites, where much of that business actually happens, really moving the needle. It's 18.2% of our sales. The blend of those 2, it was 16.4% in 2019, all with tremendous growth. I have a page coming up by region, but our direct-to-consumer e-commerce business, up 38% to last year. So if we're up 30% direct-to-consumer, as you'd expect, moving faster. Okay? Our third-party wholesale sites that are true e-retailers, these aren't like the Macy's and the Kohl's that have online sales. These are true e-retail sites. Amazon is probably the best example, up 28%. And here, we're deeply collaborating with them on marketing and positioning. In many ways, we're managing our direct-to-consumer sites with our third-party e-tail sites the same way because if you think about a consumer that shows up to shop, they're showing up in some place, but we want them to have the exact same brand experience, and that's what we're very focused on as a team. So we manage this a bit more collectively together, and so we get the full benefit of content creation, marketing, brand positioning across all 3 of our core brands, both in our own sites and our wholesale sites. You'll continue to see this grow at a faster clip than the rest of our business.And here is a snapshot by region, just to show. There's a lot of noise in the U.S. number. I think what it really shows is, every single region delivering outsized growth. North America, in '19, we had ebags, third-party brands, we've talked about it. I say ebags in general, which has kind of been -- progressively being managed for efficiency, has come down, but if I adjust those out, you can see the tremendous growth in the North America business, and it's important that you adjust them out. And an almost 16% growth, 15.5% growth for 2023. Asia clearly growing as it turned on, but outsized to the overall Asia number, up 75%, really moving in a meaningful way. Europe, very mature. Europe, 23% growth moving in tremendous pace. And I think it will just continue. And Latin America, again, matching kind of the Latin America story, but outsized, markets like Brazil, Chile, Mexico, there's tremendous opportunity to accelerate the D2C growth, and we've been investing on all of these regions and brands across the globe to make sure that we're best-in-class. I think the other thing I'd call out is buried in the words on the side, but if you look at '19, Asia is up 65 -- as I said, 65% to last year. Europe's up 91% to 2019, and Latin America is kind of off the chart at 550% growth to 2019. So again, this will be a story for us for quite a while on delivering growth in our direct-to-consumer e-comm business.Just a few pages on sustainability. I think it's an important part of our story. Probably have 1 more page than I should, but I think it speaks to the passion we have in our business on transforming the industry on the sustainability side. And we're clearly making tremendous progress. So when we think about sustainability management, during this past year, I changed the leadership for sustainability, bringing in Marina Dirks, who's been tremendous in sharpening our view, helping us set our future expectations for targets and growth, bringing on other resources to her team to really make sure that we have the foundation to do this. We conducted a really comprehensive sustainability materiality assessment, which is important to understanding where you are, both internally, externally, third parties coming in and giving us views on what we're doing on sustainability to understand. This allows us to set our goals and really kind of refine and set goals on sustainability, which is required. In many ways, the sustainability initiative has some requirements to deliver, but for a company setting really clear targets for ourselves and sharing and communicating to them, so people can see the progress is important. So we're doing that, and we're building, as I said, this foundation to communicate better. So we've brought in advisors to really carefully think about how we message what we're achieving. Many companies are afraid to talk about where they are for risk of greenwashing and just being careful, but we're making tremendous strides. And so, we're very carefully thinking about how we can start to message that in a bigger way to consumers, obviously, to investors, to our employees, to new employees that come in because new employees are looking for companies that are doing this, and we'll be building some foundation to do that in a really meaningful way.On the product side, we've made tremendous progress. Material products that incorporate some level of sustainability, up to 34% of our sales versus '23 just last year, versus 5% 4 or 5 years ago, really a tremendous stride when you think about 35% of our products incorporate some level of recycled content. You should expect this to grow. There's no reason why at this measure that's not north of 50% as we move the needle. And if we're going to really have an impact on greenhouse gas emissions, this is where it happens. Much of that happens in the materials that we're using in our products and we're very, very focused here. We're focused on recycled content repairability. One of our most, and you've heard me say this, but most sustainable attributes is, we build products that last -- that's super sustainable. And so, we're focused on how do we build more durable products, built-in repairability, repairability, self repairability, meaningful and take back programs that we've been testing where we take back products and get them recycled or repurposed. Well, this year, maybe I'm not supposed to say this, but this year you'll see us launch a product that incorporates some meaningful level of recycled luggage back into the product as a test, but that will happen this year and I think it'll be really exciting to watch what we're doing. And then we're really setting the proper goals on what we're doing. We set a framework in our product portfolio, across our teams, across brands, so we can understand what are the steps that we want to achieve. You can see it in our ESG report that will come out in a few weeks on how do we move the needle in understanding exactly the decisions we make that have impacts on our sustainability journey. So I'm really excited about that.We've made tremendous progress on the planet side. We have these 4 quadrants of how we're managing. On the planet side, we're 100% renewable electricity in our own sites. So you think about our own locations, distribution centers, manufacturing, retail stores, offices, 100% 2 years ahead of our own expectations on what we'd get to, 85% reduction in our greenhouse gas emissions in our own sites compared to 2017 on a normalized basis. And importantly, and this will be in our ESG report for sure, we've committed to setting a near-term science-based target, which is really the next wave of sustainability. If you're serious about having an impact within a business and making a transformation, science-based targets are really important. So our teams are actively working on this. And this year you'll see us launch our first science-based target before the end of 2024.And we're very focused on people, a proper ESG strategy, and we've always been focused on people. I have the marble here on the page, our responsible journey, and our company kind of cultural stamp, but we continue to step up our game here. 37% of our employees, direct and above, are female. We have a very clear target to get that to 45%. Lots of companies are moving on this and we're making progress. That's up a point just from last year. We're really focused on making sure all of our employees have access to meaningful education and the ability to elevate themselves. And we're doing that across our globe with training, mentoring programs, and even on our third-party suppliers, really stepping up our ethical charter and social compliance guidelines for all of our suppliers, not just finished goods suppliers, but getting deeper into the supply base of the business. So again, making tremendous progress there.And lastly, before I hand it to Reza, on our focus for '24, it's around really finalizing these next wave of targets and really developing the roadmap for the next 5 years. And I think you'll see clearly when we come out in '24 some -- where we're focused. Metrics and measurements, these are all going to be subject to audit. This is transforming very quickly. And so, you should expect in a year's time or 2 years' time, we're going to have to have assurance on what we're doing. And so, we're laying all the foundation on the metrics that we're reporting so that we're tracking, we're putting in software, we've added team members to do this so that we'll be well ahead of the curve. A lot of companies are going to get caught short because they don't have the traceability or the tools to actually track this so that it's, I'll say, auditable, but assurance in verification and certification. We're doing all the work that you'd expect on that front.And as I said earlier, increasing the levels of communication. You should expect, as we go through this year and we get into next year, we're talking more about this externally, internally, in a meaningful way, so people can really understand how much tremendous progress we're making on our ESG strategy. And again, our report will come out next month. And I always say, you've heard me say it many times, look at our ESG report. It gives this wonderful lens into what we're doing to transform the industry, and we are doing that.So with that, I'll turn it to Reza, and I'll come back at the end.
Thank you very much. Kyle may have really exciting pictures in a slide, but I have really exciting numbers. So I'm just fine with these. So overall, really, really great year, so delivered 30.4% constant currency growth on sales year-over-year. If you were to adjust for currency, as Kyle noted, if you're looking at constant currency versus 2019, there was about almost $375 million of FX difference between 2019, just so you're aware, and this will probably be the last time that we really start talking about 2019 because it's going on 5 years now. But I think the message is that, the business recovered largely last year, and now we're back to a really normalized clip of growth, which is very, very exciting still. Bless you.Gross margin overall, this was a question early in the year where there was questions around inflation, is it affecting our business, et cetera? The bottom line is, the teams have done a remarkable job in managing gross margin. So these gross margin levels, we've been able to maintain them. As Kyle noted, it's continuing into Q1. We expect that it'll continue this year. You're looking at gross margins that are approaching 60%. And if anything, where you're going to start to see some of that and the reason we have confidence around that number is for 2 reasons. One is, obviously, we've talked about Tumi and Asia disproportionately growing. Those are higher margin regions, higher margin brands, and that helps, but the other point is, we really aren't seeing that much inflation in our cost side either. So I'm sure some of you will have questions around it. You may have questions around shipping, et cetera. We're in a really good inventory position. If you're looking at the cost side of the equation, the supply teams are doing a remarkable job maintaining costs. So we feel really good overall in terms of the overall cost side of the equation as well. So gross margin, I think pretty confident in being able to continue to deliver at these levels. The one area that we continue to monitor is promotion. Obviously, the competitive dynamic evolves, et cetera, but even with that, I think the teams are doing a great job in terms of managing promotion as well.Adjusted EBITDA, as Kyle said, we're looking at record numbers here. So 19.3% adjusted EBITDA margin. That's with significant improvement in advertising as well, so looking at $237 million of adjusted EBITDA increase, or 50% over last year. Again, as we continue to see sales drop to the bottom line, we're maintaining discipline around our cost structure. And combined with even increasing advertising, we expect EBITDA to continue to grow and there to be continued accretion on that EBITDA margin as well even into this year.Adjusted net income, $392 million of adjusted net income. The one point that I'll raise on this one is, this is a number that's after having a normalized tax rate for the year. Over the last few years, we've always guided everybody to an ETR, a tax rate of 25%, but every year that we've said that, it's actually -- there has been one-offs that have brought in a little bit lower. Last year we had a very normal tax rate and still delivered the $392 million. So we're very proud of the net income delivered for the business as well.Just some financial highlights, just to go through them relatively quickly. Fixed SG&A expenses, 22.7% of net sales. That's the metric that we're focused on is as a percentage of sales, where is the fixed cost base performing. We've been very disciplined in terms of the costs that are coming into the business now, but we are making investments. We're making investments in stores, we're making investments in people, but we want to make sure that we continue to drive operating leverage in the business. And we still saw a 460 basis point improvement from 2019 when we restructured the business.Advertising spend, $242 million. We joke about it, but that amount of advertising spend is almost the size of some of the revenues of most of the competitors that we have. So significant investment in advertising, 6.6% of net sales. We do expect to continue to increase that over the course of this year while still improving EBITDA margin, but that was an increase of $85 million over last year where we had done some of these significant improvements already.Net debt position. As we generate cash flow, we're using it to delever the business. So $1.1 billion of net debt as of the end of the year. Our leverage, 1.53%. It's the lowest lever since the acquisition of Tumi. As we continue to generate cash, we continue to delever. We expect to delever even with the dividend that we're announcing as well. So really, really strong cash flow generation and we repaid some additional debt at the end of the year. Basically, our revolving credit facility. We've paid off all of the debt that's under that. So that improves the liquidity position, liquidity of $1.562 billion at the end of the year. And that includes $845 million, which is basically most of the revolving credit facility available to us. Strong free cash flow of $132 million in Q4 alone. So that brings the year-end number to $284 million of free cash flow.Just to get on to some of the revenue broken out on the next slide, on Slide 29, double-digit net sales growth in all regions, so every region delivering. Look at the constant currency growth on the bottom there that's basically boxed, 61.7% in Asia with more recovery coming even this year, 13.7% for North America. That's after North America had been the first to really come out of pandemic and show some good recovery levels. Europe delivering 16.8%, we talked about. That's even with a Q2 where we had a warehouse management system going in, which we knew was going to reduce some of the revenues that quarter, but amazing results again for Europe as well. And a totally transformed business in Latin America, delivering almost 26% constant currency growth as well.And let's get into it just a little bit in detail on each of the subsequent slides. So looking at Asia, we talked about the net sales. Adjusted EBITDA margin has fully recovered at 23.8% for 2023, really great result by the team. That's driven by the fact, obviously, that net sales were up almost 62% from the prior year. That's an improvement of 20% over 2019, by the way. Sales recovery, but really strong gross margins delivered by the team, and that's with advertising increasing as well. So for 2023, advertising spend in Asia was 7.4% compared to 6% in 2022 and 5.4% in 2019. So as you -- again, when you look at these adjusted EBITDA numbers, please be mindful of what we're doing on advertising because we are delivering higher levels of adjusted EBITDA with a significant improvement in advertising as well, which should basically continue to bear fruit as we go into subsequent years.Going to the next slide, looking at North America. North America in aggregate, 20.4% EBITDA margin, really remarkable. If you look at the trend, it's almost double what it was in 2019. And that's largely driven on the back of really good growth both in Tumi and Samsonite. Again, if you think about North America, it's one of the more mature markets when it comes to our presence in terms of -- for Tumi, where it's largely DTC-driven. Obviously, the Samsonite, American Tourister business is largely wholesale-driven, but still delivering excellent results on sales growth for the year and managing gross margin extremely well. So we talked about it during the course of the year, but given the fact that this is a year-end, it bears repeating. The gross margin, the team has been able to manage these gross margin despite issues with shipping that were happening over the course of the year, despite tariffs and moving supply chain around to try to avoid some tariffs. And so, we're really, really happy with these results over.And then on the left -- on the right-hand side of the page, but on the left-hand side bar, we did just highlight ebags and Speck, just so you have it for reference. Obviously, when you look at just the revenue line item, those are 2 brands that we have purposefully been winding down and bringing to lower levels. Obviously, we sold Speck, but ebags, there was a third-party brand, so we've been winding down. So you have to look at that on an adjusted basis and we thought we'd just highlight that for you.Europe on the next slide. Europe net sales, again, if you think about another mature market to try -- delivering these levels of sales growth and especially delivering this level of EBITDA growth, we're really proud of the results of the team. 19% EBITDA margin, approaching $150 million business for the region. Net sales were up 16.8% over the prior year, up 26.3% versus 2019. And this is a very important point. Remember that a lot of the stores that we shut down were in Europe. So we had a net closure of 117 company-owned stores in Europe, and yet we're still delivering 26.3% growth off of that. Extremely proud of what the team's been able to achieve. And the efficiency in terms of these stores is something that we're extremely disciplined on. So as we think about investing in new stores, we're very, very keen on making sure that the profitability of the stores matches what we see here. Higher gross margin, lower fixed SG&A, as you've seen in every region. And again, advertising as net sales, 5.5% increase from 4.3% in 2022 and only 4% in 2019 as well.A completely reformed Latin America business. We've talked about this in terms of certain countries. So Latin America, there's a lot of opportunity for growth as we look forward. Our Latin America business, most of the revenues are coming from a handful of countries, specifically Mexico, Chile and Brazil. There was a completely reworked Brazil structure in terms of how we go to market, both in terms of costs, as well as bringing in some franchisees, so some of the wholesale revenues have gone up in Brazil specifically, but the combination of those efforts have resulted in net sales that are approaching $210 million for the year, a significant improvement year-over-year as well, but importantly, the EBITDA that's delivered. From what was essentially a breakeven business back in 2019 and before that, now it's delivering meaningful EBITDA, so $29.1 million of EBITDA contributed to the company, 13.9% margin, and we expect continued growth for the Latin America business overall as that. And again, the advertising point, really starting to advertise behind the brands right now at 5.5%. Obviously, as we go through these advertising numbers, you'll notice that we purposefully are allocating more to Asia and more to Tumi. That's intentional because those are obviously higher margin and there's greater opportunity for growth in those regions, but all of the regions are getting significant improvement in advertising year-over-year.We covered the DTC channels. I just want to just highlight a couple of points. So 67 net new stores in the year. You should expect us -- Kyle has guided around 50 to 60 stores expected for the course of this year over the medium-term. That is the right amount of store openings that we expect for the business. And again, when they come in, there's obviously a ramp period for the stores. So if you open a store, there's a period of time where you're ramping up. The costs are fully there, but you need the sales to ramp, but over 2023. So even though we had 67 net new stores, we've still delivered significant DTC growth overall. So 28.9% of comp store growth in 2023. And the e-commerce growth, 34.8%, e-commerce growth year-over-year as well. So the size of the pie, obviously, everything is growing. So, obviously, we're growing wholesale as well, but there is a slight improvement and we expect that mix to continue to favor DTC by about 100 to 200 basis points a year as we go forward, as we open stores and disproportionately invest behind e-commerce.Again, another slide, just to give the breakdown. We had some of this information on Kyle's slide, but I thought it'd be helpful to also show you the breakdown between Samsonite and Tumi stores. So we had 44 net additions for Samsonite last year, 23 for Tumi. Obviously, you have to look at the base, so off of a lower base for Tumi, but as we're thinking about 2024 and beyond, you should continue to expect us to invest behind both of these brands. Where specifically, a lot of the Tumi stores will be focused on Asia and Europe, where we think that there's ample room for growth. That's not to say we're not going to be doing select stores in North America as well. We will, and Kyle mentioned Latin America as well, but the majority are going to be basically in Asia and Europe, and you saw that last year as well. So a net addition of 34 stores in Asia for Samsonite and 10 Tumi stores. And Europe had a net addition of 3 Samsonite stores and 5 Tumi stores in 2023. And again, you saw it on a previous slide, but just looking at it overall, this is down from almost 1,300 stores in 2019. So as you think about the revenue generation, it's off a much, much smaller base.Just to give you a sense in terms of travel versus non-travel, obviously, coming out of the pandemic, travel was the main category that was driving a lot of the sales. That is starting to balance somewhat a little bit. And you can see on the slide here just as a percentage, still we're getting around -- roughly around 2/3 of the revenues coming from the travel segment, so luggage. But, obviously, we have a huge focus both on the business and the casual side of the equation as well. We talked about Tumi Golf. So that's just one example of it. But if you think about it, and I'm sure some of you have questions around units. So let me just try to address that now. If you think about units, units have recovered for largely about 85% of the business. The one area where units have not recovered is casual, and that's because if you think about what we've done with ebags and there's some other areas around accessories and things like that that we've narrowed the SKU count. So those units are impacting the total amount. But I think if you're just thinking about it holistically about the business, you should think about it that units are back to where they've been historically, and the continued growth that we see is going to be what we call normalized growth, but you have to think about it as we're going to be very correlated to air travel growth. We're very optimistic about air travel growth over the coming years, and we expect to continue to be able to outpace the industry growth by a couple of points each year globally.On the next slide, just on the cost structure point, again, please focus on this as a percentage of net sales. That's how we're measuring it internally. We're not looking at it in terms of absolute dollar terms anymore. It doesn't make a lot of sense to look at what was a 2019 number 5 years on. So as a percentage of sales, 22.7% in terms of the fixed cost base, very disciplined, but we are making investments and you should expect that from us to drive the sales.Looking at the balance sheet, I couldn't be more happy with what the balance sheet stands. We're very happy with where net leverage is. Obviously, as we generate cash, we are going to continue to repay debt. So that'll continue to trend downwards over the course of the year, but we have ample cash, almost $720 million of cash on the balance sheet. The debt position, we obviously refinanced all the debt last year, so all the maturities have been pushed off with the exception of the bonds that we still have a couple of years left. So I think we feel very good about overall where the balance sheet stands.And we'll talk about inventory on the next slide, or actually, I guess, it's in a couple of slides, but just free cash flow generation on Slide 39. If you're looking on the sales -- the conversion from EBITDA, so you're looking at $709 million of adjusted EBITDA, $285 million of that approximately converted to free cash flow and we use that to delever the business.Net working capital is on the next slide, on Slide 40. What you need to think about as you think about both the net working capital position, as well as where we've come from, everything that we're talking about free cash flow is with having increased inventories significantly. So we have approximately $700 million of inventory at the end of the year. That's even higher than where we ended 2022, which -- at that point, we also told you that these are purposefully increased inventory numbers because we don't want to miss sales. So we're sitting here at the beginning of the year, feeling really, really good about where our inventory levels are globally. So if you think about things you read about in the news, shipping delays, Red Sea, et cetera, we are just fine. We have inventory exactly where we need it to be. All of our facilities, even if there is a week or 2 delay, not that big of a deal. The only area that we monitor is there are certain customers that do pick up in Asia. And so -- and we look at that specifically for our North America business. So if there's a delay there, that could shift from one quarter to another or from one month to another, but other than that -- and we don't expect that sitting here today, but that's the only area that we monitor, but in terms of costs, we're not concerned. In terms of overall inventory levels, we feel really, really good. And we just finished talking about free cash flow. As we continue to drive sales in the business, you can expect that inventory level to come down, which generates even more free cash flow. So we've essentially prepaid for a lot of the excess inventory that's going to be starting to come down as well. So that net working capital efficiency trend should continue over the course of the year as well.CapEx. We're back to normal CapEx levels. So all of the free cash flow that we just highlighted is after having a really solid year of normalized free cash -- of CapEx as well, at $110 million. The reason we're happy with this is, look at the retail number, $56.5 million invested in retail. That is brick-and-mortar retail, and especially important, that also includes significant investment in refurbishing stores. As Kyle noted, when we refurbish a store, you get anywhere between 10% to 20% improvement in sales, and we were really on the teams in terms of how many stores can you get done, and we're continuing to do that in terms of trying to get the teams focused on refurbishing them. We did 33 remodels last year. We're continuing to push to do even more of that this year. So retail CapEx of $56 million, $33 million of that went for store remodels and relocation and $23 million for new stores.Investing in product innovation, we don't spend a lot of time talking about it, but if you're thinking about what we're doing on the e-commerce side, just to give you rough numbers, we have around 160 websites globally because obviously we have a very diverse regional base in every country and we want to address those markets at a country level. We redid 69 of those websites last year alone. So that should continue to help us as we're looking at our e-commerce numbers this year in terms of driving additional growth, additional analytics, and that was also in these CapEx numbers as well.So with that, let me turn it over to Kyle and he can give you a sense in terms of the outlook for this year as well.
Okay. Great. Thanks, Reza. Outlook, first off -- sorry, let me move my mic so you can hear me. First off, I'd like to thank our teams around the globe. A lot of them are in the room here, but a lot dial into this call. And when we think about the results that we've achieved, it's not Reza and Kyle delivering those. We set some direction, but this amazing global team entrusted with these 3 core brands are delivering this. And so, a lot of what we'll talk about on outlook is, what we're off working on today because that's more important than maybe what we just achieved, but it comes from this deep organization of experts running this business. And so, I just want to thank everybody before I jump into outlook. So I know many of you are dialed in or here. Thank you very much.Here we go, outlook. Our '24 outlook is very strong. Global travel and tourism expected to remain strong. We can see it in numbers. We can see it what's happening in airports. We can see TSA numbers in North America. We can see Chinese consumers starting to move. Still more recovery to come for China. International travel still has some recovery coming and we're delivering very strong numbers in China despite recovery coming. So I think that that will continue for, not just Asia, but for other parts of the world. We can see our mature markets getting to historical trends. I think I've used the term normalized before, but that's less exciting. The normalized trends are very good for this business. This is a business in mature markets, like you just saw us talk about for Europe and the U.S., that continue to deliver meaningful growth stories. These are regions that will deliver mid- to upper single-digit growth. We're feeling very confident on that for this year. I'll give you some outlook numbers because everybody likes that. So we're really excited about the prospects for growth across the region still, and the travel numbers would all indicate that. Not just for '24, but as Reza said, forward projections on travel, growth in airlines, growth in number of plane orders, growth in hotels. This is all moving in a direction that matches exactly what correlates to our business and we're really excited about it. And we are well-positioned to outpace this industry. I think you can sense it. You can feel it. 2023 starts to give you a real picture of what we've done to transform the business, but our ability to leverage our leading brands. And we have the 3 leading brands in this space.Unrivaled global sourcing and distribution capabilities. Nobody has come close to what we're able to do across the globe on sourcing and distribution in every single important market of the world. In our real ability, and you can sense it from us, to overinvest in innovation, sustainability, marketing, the transformation that we've had in the business that we can lean forward to drive growth with margins in a different place will allow us to deliver outsized growth in our space. And that's what you're seeing and what you should expect from us in the coming years.We're targeting moving advertising up. As we think about moving Tumi at a faster clip in other parts of the world, that requires more investment. As we think about the D2C transformation, and particularly the e-commerce portion of that, that requires disproportionate spending on advertising. And so, you should expect as we build, and we'll continue to build margin, I'm going to give you my outlook in a second because everybody wants to ask me that, but we'll continue to deliver operating leverage while we move the advertising number up because it's the right thing to do when you're driving a business with growth that outpaces the industry. So expect that, expect that to get closer to 7% this year.We have a fundamentally higher profit profile. I was guiding maybe in the half, like you're just starting to see it. I remember talking about even the end of last year, you're starting to see the transformation. You can clearly see the transformation in the profit profile of this business in '23. And what I will tell you is, you'll see it again in '24, you'll see some leverage. You'll see continuing to move, but really starting to deliver what we've been focused on as a team for the last few years on delivering a fundamentally higher profit, more efficient cost structure, but not that we're not pushing growth now. We're back to growth. 67 stores, you'll see 60 stores this year. You can see e-commerce growing. You can see the investments I just talked about will allow us to push this business. And as our higher margin regions move a little faster, Asia, and as our higher margin brands move just a bit faster, and our D2C mix continues to add, let's say, 100 basis points a year, you could expect margin profile to continue to build for this business.We generate a ton of cash. You saw it this year. We have a long history of generating cash. It's one of the like missed strengths of this business, and I've talked about it for a long time, but you can clearly see our ability to generate cash and delever. This is a business that's on a path to delevering. That's why we put the dividend back in place. We can do both. If you think about pre-pandemic and our margin profile wasn't anywhere near where we are today, we were doing a dividend policy, we're delevering. Now, both of those really start to accelerate, should we have this financial flexibility in our business on the capital structure to invest in pushing the business, invest in deleveraging, and invest in returning cash to shareholders, and we're in exactly the right position to do all 3 of those.And we will transform this industry on the sustainability side, and it's a personal passion for our teams and myself, everybody in our organization. Not 1 employee in this company doesn't understand that. But for me, why that's important is every next generation of consumer will expect it, 0 doubt. Every next generation of employee that we hire is expecting it, and the world's expecting it. It's the right thing to do. And we are very actively going to transform our industry. We'll be 10 steps ahead of it, but the whole industry will come along because we're taking the initiatives to do that. And so, we're super excited about that. That will have benefits to our business. Long and short of it is, we'll be outpacing as consumers are showing up, we'll be well placed to really deliver on this front as well. So I'm really excited about what we're doing there.So that's my outlook, we are -- or high level outlook. I'm going to just give you outlook in general because I know the first question is going to be, what do you think for Q1, maybe right here. What do we think for the full year? And I think it's important that I just maybe throw some high levels. You can still ask the questions, but let me give you some high levels on what we're thinking. First off, for the full year '24. I think this is a business that will deliver double-digit growth. We can feel it now. Q1 is a little lower than that, but I'm going to tell you why, but the full year, we should be 10% to 12% is my instinct. Okay? That's really when we're modeling. That's where we -- with the pulse on Q1 and what we're seeing, that's a terrific result. That's not so far from what I thought even 6 months ago. So it's really a solid result. You should see 20 to 30 basis points in margin expansion. That's my instinct from where we're seeing, maybe a tad better than that, but I would model towards that. If you guys are doing your models, I think that's important. And that's with, as I just said, advertising creeping up a bit, getting closer to 7%. Okay? We will see very strong gross margin. I will tell you, our Q1 gross margin is better than Q4, okay? And Q1 is typically a window where it's not that. Q1 is often like the pause before the summer travel season and the Q4 kind of rush on holiday and travel, and we're seeing a very strong margin, gross margin in Q1 is the way I would describe it.Our Q1 outlook, sales will be up around 5% or 6%. Okay? And so, you might say, oh, gosh, that's off the trend, but that's, I think, important for me to remind you that that's off of a Q1 last year that was up tremendous numbers, 57% growth Q1 last year. That was regions turning on. That was Tumi, particularly Tumi coming back into inventory. So if you go back into your notes, you'll see that Tumi really had some acceleration because we were chasing inventory a bit more at the end of 2023 and as we stepped into end of '22 and stepped into '23. And so, against even that backdrop, we're delivering tremendous growth, growth across all regions. I think importantly, you'd say, well, what's Asia doing? Well, Asia is double-digit growth in Q1, okay, right in line with what I think it's going to do for the full year. Okay? So those are the trends that we're seeing. I don't want you to overreact to Q1. I think when you look at Q1, you should look at what we did last year, which was tremendous, tremendous growth, every single region delivering growth in a meaningful way. I won't go through regions. I'm sure you guys will ask questions, but regions will be kind of in line with what you'd expect, okay, across kind of the levels of growth and maturity of a region, but tremendously strong across every step of the business.Profitability. I think gross margin will approach 60%, could be a tad higher, but I'd model 60% versus 59.3% this year. This is a bit of leverage that we can continue to get in gross margin. And again, we're seeing it in Q1 in a meaningful way. EBITDA margin, I think 20 to 30 bps is what we should expect, fixed cost being managed as a percentage of sale, fixed cost delivering a little bit more leverage. Okay? The mix effect of things growing faster will deliver all of this, right? Not only are we managing the business discipline, every region delivering expansion, but mix effect of Asia delivering higher growth than other regions, Tumi continuing its journey, and the entire business managing its fixed cost structure in a really normalized way from where we are today, from where we were 600 basis points ago in 2019 is tremendous. And we're laser-focused on delivering this margin profile of the business, largely how I'm incentivized if I deliver profit growth in the business, and it's super important. So all of these measures should be the way you're thinking about our business. I'm sure you'll have questions, but I won't go through all the regions, but everybody is delivering in the ZIP code that I would say you would probably all expect, which is very good.We're going to open up to Q&A, but I think I'd like to make a statement because I think when we open up to Q&A, I'm going to get immediate questions on media, okay, as I would expect. And so, I think it's important that I'll make a statement, so you can kind of just understand where we are. But I don't want the Q&A to kind of just be stuck on this. And so, I thought I'd open this, which is, I'd expect everybody to ask because media has been noisy. I think generally the media for Hong Kong is noisy. We're caught up in it. We're one of many brands that are struggling with kind of this value expectation. And so, off the back of these articles, and as I've kind of previously communicated, we're very focused on driving the growth of the business and profit of the business. We're not distracted, I would say. Okay? We're very focused on delivering the results. You can see it in these amazing numbers. You can see it in our -- everything that our teams are delivering.We don't comment on rumors or speculation, and I might argue that much of the media is tied to that in this kind of market. But I would say, and I said this off of Q3 because we had a similar noise in Q3 because everybody's wondering and watching what we're doing is that, we're really focused on making sure we deliver the best for our shareholders. We're evaluating alternatives, but we've said that before. We're not quite sure exactly what the right answer is. We've had plenty of folks say market listing, relist in the U.S., relist in Europe. We are carefully evaluating all of that. And so, I would not let the media distract from what we're doing, which is executing a plan, and you should expect at the Board level and at my level and Reza's level, we're carefully evaluating that. But there's no message or news other than that. Okay? And I think it's important to kind of keep that in mind.You should expect something will change because we're focused on it. Something does need to change, but we're not in a zone where responding to kind of rumors on the media are the right thing for us to do. So I think take that for what it is and that's where we are. I'd hope most of our questioning will be around results and outlooks and not this front because that's really our message. We've been very clear on that. But you shouldn't lose sight of the fact that we're very focused on making sure we deliver value to shareholders.Okay. With that, William, we can open it up to Q&A.
Great. Why don't we begin, and why don't we start with Dustin?
One question in 15 parts, Dustin, let's go.
So first question just to follow up on Kyle's comments. So wondering you have some of the trading updates to support your, I think, pretty bullish outlook for 2024. So that's number one.And then number two, sort of by brand, right? Like it's fantastic that you disclosed the brand by region kind of sales this year. Hope you can continue. And interesting to see that Tumi sales in the mature market still up double-digit in '23. So you talked about the Tumi Golf and all that. Could you just dig in a little bit and what's the expectation? Can Tumi even deliver double-digit in mature market in '24? And if that's the case, what's the driver?On the last exciting note on the brand side, American Tourister, knowing that it's more sort of Asia brand, not quite sort of the America or the Europe brand, but the sales indeed dipped a little bit in '23. And I think you previously also mentioned that, I think, in China, you've also seen the American Tourister underperforming the Samsonite and the Tumi. So how should we think about this brand in '24? Because in '23, I think there's a low base in Asia, but in '24, less of the low base for this brand. So how should we think about this brand in '24? So that's the sort of brand sales question.And then the EBITDA margin, also exciting to hear about your sort of guidance and target, but from a longer-term perspective, we will compare the 2023's EBITDA margin by region versus their respective peaks. We found out that actually for the North America, your EBITDA margin is like 4 percentage points higher and the Asia and the Europe is around like 2 percentage higher versus their respective peaks. So why should we think about it? I know the mix sort of shift story, but on a like-for-like basis, are we also expecting that the EBITDA margin in Asia and Europe can also be sort of 3% to 4% sort of higher versus their previous peaks? That's on EBITDA margin.And just sort of want to dig into a little detail in Asia, is China, India. Can you also share some outlook or recent trend with us?And finally, I know sort of Kyle doesn't want me to ask about sort of the things you want to clarify. So I respect that. But on the sort of the Board or yourself or Reza is driving sort of the dual-listing or secondary listing kind of thing, just wondering if there's any update.
Why don't I jump in and we'll tag team? On the last point, I think I gave my guidance on that, okay, which is we're evaluating. So I'm not going to add more color to that, but it's clearly in the radar of things that we're thinking about. As you can imagine, we're not lost on advice from bankers and we take that all onboard. We're careful executors. You've known me for a long time. We think through things really carefully, and I think that's the way I would answer that last question is, what's clear is the underlying value in this business is tremendously strong. The outlook's tremendously strong. We just have to make sure we navigate to allow that to kind of play out for our shareholders, not just short-term, but long-term. I'm a long-term operator. I'm really passionate about this business, and my expectations is setting it on a course that delivers for many, many years. And the capital market stuff just has to have that in mind as well. So just -- that's how I'd answer it, but I know that's not answering how you want me to answer, but we're careful thinkers at the Board level and at the management level, and that's what we're doing.I'll start jumping through. I was trying to keep notes for your questions. I'll start with Tumi growth, which I think was your first question and what we're seeing. For the mature markets, I might use North America. That was a really tremendous growth for last year, but some of that was us coming back into inventory. So for mature market North America, we're high single-digit growth outlook for Tumi. Okay? That's what you would expect. The overall North America numbers are probably 6% to 7% growth for 2024, and Tumi's slightly outsized from that, okay, as it has expansion in things like golf, which won't tremendously change the revenue profile of business, but the elevation of brand Tumi and what we're doing to drive digital and what we're doing for this kind of next phase of growth for Tumi, you should expect it to be able to have some outsized growth within the region. Europe will be stronger. Europe has penetration still. Europe will get the benefit of Chinese travelers coming back, but there is a foundational kind of footprint for Tumi that can be a bigger growth profile. So I'd expect double-digit growth for Tumi in Europe, but that's because it's not as penetrated as we'd expect. The real outsized growth for Tumi will be in Asia for sure, and that continues. And I think that's where you really see movements as well. So I think that's the Tumi question.American Tourister, much of what happened in '23 was some resets. So I'm not so worried about -- so the sheer growth of American Tourister will be stronger in Asia. It'll feed off of China. We're very focused -- Subrata and I were talking about the real opportunities for American Tourister across the entire region. It's super strong. China definitely has some outsized growth potential for this brand. We're very focused on going to get that. India has been very strong. India is, this awful word, normalizing, but India off of 3 years of growth that's hard to describe, more than doubling the business is now delivering growth that I might say in the kind of normalized single to high double-digit growth with American Tourister being a big part. But as you know, Samsonite's becoming a bigger part of India as well, as that consumer elevates. And if you remember, a year ago, we talked about taking that -- in the pandemic, taking Samsonite back, really executing that directly. And that will deliver strong growth. You'll see retail expansion in India, for example, for brand Samsonite, but you'll also see it for American Tourister, so -- but the blend of that will be very strong. I expect our American Tourister numbers. When you really look at the addressable market that we operate in, and you can see American Tourister in the room, if you're in the room, you're not in the room, you can't see it, but the energy and fun that Tumi -- I mean, that American Tourister brings to a slice of consumer that's growing rapidly every single year, you think about the middle-class growth in Asia alone is tremendous and transforming very rapidly. These consumers are traveling, and their natural step is to move from an unbranded piece of luggage or a local brand into a global brand, and American Tourister plays that perfectly for that younger consumer, adventure-seeking consumer. I expect American Tourister to have very long growth prospects for this business.Tumi, for sure, will outsize growth. And Samsonite, which is a very mature business, I think if you really look at our numbers, people are probably saying, wow, Samsonite's surprising. But let's not lose sight of what we're doing with Samsonite on innovation, material science. Everything that Samsonite has been known for in many ways is accelerating. Just some of the products we have in the room here tell a story of the transformation of Samsonite that continues. North America has real opportunity to elevate the brand Samsonite. We've been doing that. Okay? The American Tourister strategy in North America should expand and allow Samsonite off of the product development to continue to elevate itself up, and that's happening, and I think that will continue to happen. And so, there is a lot to each of these 3 core brands that will feed into this double-digit growth outlook that we have because each one of them is going to contribute in a unique way. And they're all unique. They're all playing in a slice of the market that's quite interesting. A little bit of overlap here and there, but at the end of the day, they're all doing something a little bit different, all with growth prospects that are very strong. So that's how I think about it. They'll all be important, outsized for Tumi. If you think about doubling that business, 6, 7 years, that's a big story, but you should expect American Tourister to deliver tremendous growth. Asia will drive a lot of it because it's well placed, but you shouldn't lose sight of the fact that in Europe and U.S., I think it's got upside as well.And Samsonite, I can't be more excited about as far as what we've done on the product side, innovation side. In many ways, all brands will transform on the sustainability side, but I think you'll feel it off of kind of the heritage of Samsonite as an innovator, leader of the world for luggage, really continuing to push the needle, but every brand's going to move on that front as well. So that's kind of my view. I think that answers it enough for you. Really tremendous outlooks for all of them. And I'm not so worried about what we saw in North America and Europe for American Tourister this past year. Those -- there were clear reasons for that. The brand is very, very strong in each of those markets. So...
And Dustin, you asked about China. So China is performing really well for us. So if you're thinking about the countries, especially sitting in 2024 right now, China, Japan, Korea are probably the top 3 performers right now, not to say that the others aren't, but there's outsized growth that's happening in those 3. India, as Kyle said, it's off of ridiculously high numbers year-over-year. So you're not going to continue to see that sort of level of growth, but it'll continue to grow in line with the industry. So...
I'll give you color, just sort of in Q1, just directional. China is up in Q1 north of 20%, okay, versus Q1 last year. You have to study last year to understand where China was because it was recovering as the year was moving, but tremendously strong. Japan's up almost at the same level as Tumi. Japan has had a moment where it was a slow recovery, but it's turned on, but tremendous growth in Japan that we're seeing in Q1. Korea, which was -- relies a little bit on Chinese travelers, up comfortably mid-teens in Q1. India, which was up 25% last year off of maybe 50% over the last 2 years is going to deliver growth, but in a more modest way because it's kind of -- again, I hate the word normalizing, but it's normalizing because it's off the back of tremendous growth run. And these big markets of Japan, Korea and China are all kicking in, which is why I have a lot of confidence in the full year of this year for Asia.In my sense, there's a bit of uncertainty in how strong China can be. If China accelerates, it'll be higher than what I've guided you, but I think China's got a steady pace of recovery going on that I think is -- we're capturing all of that. I personally think, and Subrata and I were meeting yesterday, the long-term prospects for China are tremendous. Somebody was asking, oh, is China bigger than India, when is that going to happen because China's always been, and it should be bigger than India. The long-term prospects for China is tremendous. China is a business that should double in the next 5, 6, 7 years, 0 doubt in my mind. That's the kind of growth pace that you should see from us. American Tourister will be a big piece of that, but all 3 brands will be a big piece of that for China. And those are the kind of things our teams are thinking about for that market because I think it's got tremendous opportunities for us.What was the question?
The EBITDA margin by regions and what we're seeing there?
Oh, yes, yes. A lot of the outsized growth you're seeing in North America is Tumi really kind of kicking in. So when you look at North America in the mix effect, everybody is delivering EBITDA margin growth, but a lot of that transformation has been the Tumi growth. And if you remember, we had just acquired Tumi in '16. So '17, '18, '19 was getting stride. During pandemic, it just continued stride. We've moved margin -- gross margin for both of those brands. And so, you have this outsized story in North America with a careful execution on advertising that delivers this.When you get to Asia and Europe, you should expect us to lean in a bit more on advertising, for example. If we're going to push the needle for Tumi, we're going to push the needle for China. You'll see some outsized advertising spends in those markets. So it's not like you're seeing that 400 basis point right up, but 200 or 300 basis points step-ups in a margin that's -- a region that's already delivering 24% margin is very strong. I think over time, it will continue to creep up because its positioning is higher in those regions, right? And so, when you look at the gross margin improvements we've had, every region is delivered on gross margin improvement. Okay? And so, you think about in Asia, where maybe we're leaning in heavier on advertising, maybe more of our store openings go in there. So when you think about the mix of stores, and as Reza was saying, the ramping effect of those and still being able to deliver margin, and I would say, ongoing margin expansion is the way to think about it.Europe, I think, should be north of 20% and I think it will get there. Europe is, we did a lot of correcting in Europe. It's delivering an amazing number. We've really stepped on the pedal for advertising. It was significantly under-advertising while we were fixing that business. And so, when you see Europe's advertising shift into 6%, 6.5% and the benefits of that as it continues to grow, I think you'll see the Europe number creep up a bit more.
And just also think about product elevation because one of the things that we talk about is across all the brands, you're improving the product. That also means that the price points are changing overall. And so, that also helps drive the margin point as well.
Next question from Linda from Macquarie.
My question is very simple. One is regarding for the capital reallocations because we noticed that you started to pay the cash dividends, right? Have you think about the share buyback? And in the longer term, how do you think about the allocation between share buyback and the cash dividend? That's number one.Number two, I saw that we probably will be very aggressive for retail market expansion, right? So how do we see about the retail, it's the margin versus the wholesale? And so, that's number two.And number three is that, regarding for the promotion. The -- you mentioned about you will be very vigilant about the promotion. So can you maybe detail more how do you control the promotion? And how do you think about the competition Away in the United States? Because I saw that right now it's almost like everywhere and they also even go to Europe. So is there any brand in your mind or strategy you want to come back for this competition?
Why don't I take the first question on capital allocation? In many ways, share buybacks tied into what do we do with kind of market venue. So we've not been active share repurchasers largely because we are -- of our leverage profile. And so, as we continue to bring our leverage down, I think it's something that can work into our equation, but we're not there yet because I think we have to really think about kind of what the medium-term market outlook is for us as far as where we should be positioned, what do we do. But I do think as we delever and you think about the cash generation of this business, that could be something that works into our mix. We had that question all through pandemic. And my view was the benefit of deleveraging was better than the benefit of me stepping into the market and trying to buy some shares and adding effectively leverage to the business to do that. Now that we're in a different ZIP code, I think it's something that we should evaluate, but you won't see me run out and do share buyback program this year because I think we've got plenty to do to solve our general capital market positioning. So hopefully that answers the question.I think from a dividend perspective, we have a history of paying dividends and deleveraging. I think putting that back in place was exactly the right thing to do. Returning cash to shareholders, I think, is a good measure for us. In the leverage profile -- if we do nothing, you can just do your own math, you'll do math. Our leverage profile approached close to 1x by the end of the year. This is a business -- and so then we start getting into a different ZIP code of what are we doing, and I think we'll be in a good position to make some sound decisions on that as we manage that.Again, the cash flow, you guys all know it. The cash flow generation for this business is tremendous. I think it'll be very strong in '24. As Reza was talking about, inventory levels and working capital and working capital efficiency, we're at 14% working capital efficiency. That will improve this year because it's -- we're -- the cycle is normalizing. Even in '24, we were -- I mean, in '23, we were building and getting ourselves still in the right position. 2024, you'll see even further cash flow generation in this business from where I sit and my views on the numbers. So that's my view on that.I wasn't writing the questions, so...
We had promotions.
Yes. So I'll take promotion on real quick because the margin achievement that we've had, I think if we think about over the last 3 years, we're looking at price increase and what are we doing and repositioning and elevating. The reality is, it's 3 or 4 years of work, and we're really expert at delivering margin, and margin is a function of all of those factors. It's inflation and cost and sourcing, which we're in very strong control over. Promotion is a piece of that. And we've been very disciplined. We've carefully thought through our promotion cadence. And I might argue, 2017, '18, '19, it was too high. The world's kind of reshifted on promotion cadence. It's not that we're not promotional. We're back. If you really look at what we're doing, we're back to being promotion, but we're doing that with products that have been engineered to do that. This is a business that our teams are managing to a gross margin and our ability to do that is a mix of promotion, product development, new offerings, price positioning, elevation, and all of that factors into what we're doing. And the world's become a little -- back to a little more promotion. We can see that.We can see -- you brought up Away. Away has never been on sale, and I'm seeing 75% off sales for Away, which tells me they're a little focused on cash generation and doing whatever they're going to do. They've announced a lot of recent restructurings in that business to figure out where they are. I think we're performing against them tremendously well. I have no intentions of looking at brands like that because we can outperform them with our scale, and that's what we're doing and that's what you should see. And part of that elevation that we have across all 3 of the brands allows us to do that. And our ability to outsize our investment in the industry, I think, really makes a meaningful difference for us. So in many ways, we're right where we should be in promotion cadence and product offering against the landscape of competitors that are all doing a bit of the same. Everybody's in a different ZIP code. The whole industry is in a different ZIP code. It's not like we've outpaced on upscaling and we're worried about losing our position. If anything, we're strengthening our position across all 3 brands.
And you asked about margins as well in retail. So generally speaking, if you're looking at the retail margins, you should also think about it by the brands. So the growth in the retail is also coming largely off of, well, think about who we open stores for. It's Samsonite and Tumi. The one thing that you may not be aware is the profitability of Samsonite and Tumi are not that dissimilar. I mean, obviously, Tumi has a higher gross margin profile, but the reason we're also opening Samsonite stores is think about the -- we're all sitting in Asia. Think about the premiumness of the Samsonite product that you see in this region as well. And so, the retail margins, because you have those 2 brands being focused on retail, as well as the fact that it's obviously direct-to-consumer, you automatically have a higher gross margin that happens, but the EBITDA margin is slightly higher as well.The only thing that I'll highlight is, as you think about wholesale, yes, wholesale has a lower gross margin, but you also don't have the costs against it. So when we talk about American Tourister, the margins for American Tourister on a gross margin level are lower, but if you're thinking about the EBITDA margins because we don't have the investment in fixed costs and stores, et cetera, it starts to narrow the gap. Obviously, it's still lower than the other 2 brands, just given the premiumness of the other 2 brands, but the gap isn't as wide as you would think between those from a margin standpoint.
And all 3 of them have been transformed. When I look at what we've achieved from '18 and '19 to where we are today, every one of those is delivered. This margin expansion is all 3 brands expanding. It's not 1 -- there's outsized growth in Samsonite and Tumi, which is elevating, but all 3 brands have changed their profile to have an elevated margin profile, and it's -- they're all contributing in a really meaningful way.
Okay. We think we have probably time for just 1 more question. So CLSA in front.
Basically some follow-up from me. Firstly, as -- actually we are glad to see the wonderful refurbishment of a lot of Samsonite stores. That's really good. So you also mentioned this will be a normal routine in the coming years, right? So right now, since we have already had some samples here, how do you see the same-store sales change before and after the revamp? And do you have any milestone about how much percent of your total network will be revamped maybe by this year and next year end?And secondly is that, we also noticed Tumi has becoming more and more lifestyle. We're launching golf collection. We're having more and more handbag products targeting female customers. So firstly, may we ask how much does female products contribute to your collection for Tumi? And also for such a transformation to a more lifestyle, more all-category brand, would it be even more GPM accretive? We know this has already been seeing a very high GPM for Tumi. Just wondering how much further potential from this product expansion.And thirdly is about competition in American Tourister. So since the start of 2022 to '23, when the global travel start to resume, we are kept being reminded about a potential competition comeback amid travel comeback. So for your more mass brand -- mass market-driven American Tourister. So wondering the competition from unbranded products. What's -- regarding this part, what is the key competitive strength for this brand to uphold or even gain market share among the competition? These are my questions.
How would you like to go?
I just have to read it. You got a lot of questions. Same-store sales after recovery. So I guided a little bit. We typically see a 10% to 20% lift when we refresh the store. It's -- we're moving -- and many of my team on the -- listening in know that I'm pushing hard on this front. I think we should be moving fast, but there are limits on what we can do around the globe, but if we're spending roughly $30 million on refresh and the average refresh is probably $300,000, you can get a sense for a meaningful refresh. Probably 60 to 70 stores a year across the globe is the refresh levels, I think. Reza you'll know that...
Yes. I mean, we're trying to actually do as many as we can, but there is a capacity constraint as well. And so, it's just how many...
We just need to be smart about it. So what we're doing is prioritizing key performers to really continue to maximize, but in any business that has a retail fleet, there's a normal cadence on refresh, right? And I would say we're catching up in '23. You'll see some further catch-up in '24. And then I think by the time we're into '25, we're a bit more caught up on the refresh cycle. And so, in any given year, there's probably 20% stores being refreshed in some capacity.We're doing some heavy refresh, like in the '23 numbers and the '24 numbers, not only are we refreshing, but we're relocating. If we think a store is in the wrong location, we're moving it. Okay? So that is -- might feel like a new store, but we're consciously thinking about, as we've elevated ourselves, making sure we're in the right footprint. In Asia, we're looking -- like for Tumi, for example, our store footprints are a little bit small, some of the Tumi teams here. We're looking at expanding the existing footprint, if we can, adjacent space or relocating to make sure that we've got the right footprint because as you said, we're expanding lifestyle, we're expanding offering, we're expanding kind of the offering to female consumers. In Asia, we're expanding travel because it's opportunity to expand Tumi travel in Asia. And that will require some refresh or relocation. And so, you'll see some of that happening in our numbers so that we are able to fully capitalize on that carefully because it's not like we want to just add square foot. We have to -- we want to deliver the same operating metrics. So we're very careful on our thinking there, but you should expect us to move there. A lot of the growth story for Tumi will be kind of right-sizing, not only the number of new stores, but right-sizing the fleet that we have that we can show our full potential. And we are very focused. Female collection today, don't quote me in this number because I don't have it right in front of me, roughly 20% of our sales is product that's geared towards a female consumer. The number of consumers that are female are higher than that, but when we look at our product offering and our sales, that's what it is.I think there's real opportunity. We're expanding here. It's a key focus of ours. You saw us relaunch Voyageur a year ago. You'll see new collections. We have new, I'll call them handbags, Asra that's just launched. I just bought 4 of them for Easter gifts for my little nephews and my kids. It's moving in a direction, but to me, it's just starting. And so, that transformation of female consumer offerings for Tumi, I think, will accelerate over the next 3 and 4 years, and you'll see meaningful changes as we get into the end of '24 and for sure into '25, just to give you.Lifestyle is beyond golf. It's fragrances, it's glasses, it's things that are licensed products that just elevate brand awareness. They're not -- these aren't going to dramatically change our sales numbers. They'll add sales, but what it does is allow us to get access and broaden our access to more consumers that should know about our products. And as soon as they engage, and I've said this before, usually once a Tumi customer engages, over a short period of time, they end up with 3 or 4 pieces. Lifetime, 7 or 8 pieces. It's an addictive brand when you engage. And so, our task, as we're expanding, not just in North America, but in markets that we're expanding our footprint is to get more consumers. And so, a lot of what this is, is around offering the brand to people that maybe haven't interacted with the brand. Golf will be a terrific story. It's very exciting. We're all excited about it. For me, what I get most excited about is, one, it directly engages with existing consumers. We know that profile, matches existing consumers, but more importantly, it engages to new consumers that maybe haven't touched the brand or haven't had a chance to experience the brand, and this gives a different lens to that. So...
And it expands the distribution because it's being sold at golf clubs, et cetera...
Yes, carefully expanding distribution. It's not like we want to spatter Tumi everywhere, but this can be in a slice of the market that's a Tumi consumer all day long.What was the next question?
AT competition.
And does that help with the gross margin profile? So I don't think the expansion of lifestyle and this type of stuff necessarily moves the gross margin profile of the business. I think that's what you're asking. For me, the more important part of that is that, it broadens the reach to consumers. Okay? It's not a story of trying to expand our margin profile with this, but it's all elevating, right, because if you think about where we're positioning this, it's around elevating the brand. But that's -- we're doing that in all of Tumi products. And if you look at the careful collaborations that we're doing, they're all meant to elevate and continue to elevate that brand as a luxury performance brand. And so, those are the things we're focused on there.As far as American Tourister, and I think the question is...
The competition at that level.
Competition. I think what differentiates American Tourister against a sea of either local brands, okay, that are maybe strong in a country, a handful of countries is it's a globally recognized brand. Global warranty, global service after sale matters to a new consumer that's traveling. The level of energy that we can bring to the product with marketing to tell the story of what we are. The level of quality, you don't have to spend a little time in a hypermart and look at an American Tourister product against the competitors that are on the floor there and know immediately that the quality profile is different. Our task is to convince the consumer that for $10, $20, $30 more, there's a reason why I'm buying that. Okay? And how do we do that? Best-in-class quality. The product is tremendously attractive against what you typically see on the floor that this is being sold on. And they've heard about it because it's recognizable. It's a brand that's being talked about, it's being advertised. And that drives a consumer, and we'll deliver this promise, guarantee on what we're known for, and we won't allow any of our brands not to deliver quality, durability and expectation that a consumer has. Our task is to tell that next-generation consumer that's leaning into branded luggage that this is what this stands for. And I think we're doing that tremendously well across the globe. I'm really excited about the brand.So, guys, does that answer all your questions? I think so, yes.
Thank you.
Great. Thank you. And it's time. So we will conclude the presentation today. Thank you again, Kyle and Reza.
Thanks, everyone. Appreciate it.
Thank you.
And thank you, everyone, for attending.