Samsonite Group (1910) H1 2013 earnings summary

Executive summary

• H1 sales rose 16% to just under $1 billion, adjusted EBITDA increased nearly 20%, and adjusted net income grew 17.5% excluding the prior-year deferred tax benefit.

• Growth reflected geographic and brand diversification, with strong North American and Asian results and further expansion of American Tourister, High Sierra and Hartmann.

Financial highlights

• Sales increased 16%; reported net income rose 5.5%, while adjusted net income growth was 17.5% excluding the prior-year deferred tax asset benefit.

• Adjusted EBITDA margin reached a record 16.6%, up 50 bps YoY; gross margin was slightly below H1 2012, reflecting stronger lower-margin U.S. wholesale and American Tourister mix.

• Advertising and promotion spend was $64 million in H1; spend was slightly lower as a percentage of sales, with H2 planned at the same or higher rate than H2 2012.

• Adjusted EPS growth was ~17.5%, versus reported growth just over 5%, reflecting the prior-year tax benefit.

Outlook and guidance

• U.S. organic growth is expected in the mid- to upper-single digits; management saw a chance of near-double-digit organic growth for FY 2013.

• China Samsonite sales were expected to remain broadly similar to H1 trends in H2; China margins were expected to remain consistent YoY.

• FY tax rate guidance was 25%-26%, with ~26% considered a suitable modeling assumption.

• FY CapEx was expected near $60 million, versus typical annual spend of $40 million, including a Belgium warehouse and hard-side capacity expansion.

• Management expected Europe to improve steadily and H2 currency impact to be neutral or slightly favorable overall, with Asia weaker and Europe stronger on a reported basis.