The Thule Group reported this week on a continued favorable trend in sales and earnings for its Outdoor & Bags segment, which is getting full attention from the management due to its new strategic focus on the sport and outdoor sector. Its commuter cycling backpack won first prize last month from Cycling Weekly, the leading cycling publication in the U.K., while its technical Capstone and Guidepost backpacks got top marks in the Brazilian edition of Outside magazine.
As previously reported, the Swedish company divested on Sept. 2 its snow chain division, which accounted for 3 percent of group sales in 2014, generating an operating loss of 32 million Swedish kronor (€3.4m-$3.7m). It has initiated a strategic review of its remaining businesses in the so-called Specialty segment, consisting mainly of the American Work Gear division, which is profitable.
Boosted by the launch of new products in the areas of child strollers and sports & travel bags, including the company's new line of backpacks, Thule had total turnover of SEK 1,343 million (€143.0m-$155.3m) in the third quarter ended Sept. 30, indicating increases of 13.6 percent in reported terms and 3.0 percent on an organic basis, with a larger proportion of sales in the higher price segments.
Thule's Outdoor & Bags segment raised its sales by 12.4 percent in the quarter to SEK 1,244 million (€132.5m-$143.9m). In constant currencies, sales grew by 2.7 percent, with a 2.7 decline in the Americas more than offset by a 6.2 percent increase in Europe and the rest of the world. The drop in the Americas was attributed to lower sales of bags for electronic devices due to a declining market for cameras.
The Outdoor & Bags segment generated an underlying operating margin (Ebit) of 19.0 percent for the quarter, down slightly from 19.1 percent in the year-ago period. For the first nine months of the year, the revenues of the segment were up by 17.8 percent to SEK 3,998 million (€425.7m-$462.4m) in reported terms and by 5.7 percent in local currencies, with a decline of 1.6 percent in the Americas and an increase of 9.9 percent elsewhere. The underlying Ebit margin for the period fell slightly to a still high level of 21.0 percent.
In the Specialty segment, sales went up by 27.8 percent to SEK 119 million (€12.7m-$13.8m) in the latest quarter, with a rise of 5.5 percent in local currencies. For the nine months, sales rose by 31.3 percent in kronor and by 4.6 percent in local currencies, producing an improved underlying Ebit margin of 12.3 percent.
In the third quarter, the gross margin of the group declined by 1.5 percentage points to 37.8 percent, due especially to goods being purchased mainly in U.S. dollars and sold mainly in the European market. The underlying Ebit margin rose slightly to 16.6 percent. Adjusted for currency effects, the Ebit margin improved by 1.4 percentage points to 15.2 percent.
The improvement took place in spite of extraordinary expenses of SEK 12 million (€1.3m-$1.4m) related to personnel reductions initiated in the second quarter at the group's operations in the U.S., Belgium and Hong Kong. Combined with previously implemented new processes and logistics, this has resulted in greater efficiency for the support functions of the Outdoor & Bags segment.
The bottom line showed a net profit from continuing operations of SEK 148 million (€15.8m-$17.1m) for group in the quarter, up sharply from SEK 81 million in the same period a year ago. This doesn't include an expected capital loss of SEK 130 million (€13.8m-$15.0m) for the divestiture of the chain business. The transaction will result in better cash flow, and Thule will get an initial payment of €10 million, plus a maximum of €10 million based on sales over the next two winter seasons.
Net earnings from continuing operations grew to SEK 565 million (€60.2m-$65.3m) over the first nine months of this year, compared with SEK 339 million in the corresponding period of 2014. The equity ratio of 46.3 percent reached at the end of September was much higher than the ratio of 25.6 percent of a year ago.