The Thule Group reported a 12.7 percent sales increase for the third quarter to 1.56 billion Swedish kronor (€150.6m-$170.4m). The growth in local currencies amounted to only 3.8 percent, with a drop of 4.4 percent in the Americas compensated for by a 7.8 percent increase in Europe and the rest of the world.
The gross margin contracted to 39.2 percent, which was 1.0 percent lower than in the year-ago period on a constant-currency basis. Operating earnings rose by 3.4 percent to SEK 267 million (€25.8m-$29.2m), and they actually declined by 3.4 percent after adjustment for exchange rate fluctuations. Net income inched up by 1.9 percent to SEK 189 million (€18.2m-$20.6m), but the equity ratio improved by four percentage points to 50.0 percent.
The underlying operating margin (Ebit) of 17.1 percent was still relatively good, but it was 1.2 percentage points lower than in the year-ago period on a currency-adjusted basis. In general, the group's profitability didn't continue to improve as in the recent past as the group sustained higher input and marketing costs in connection with major recent and future product launches. The underlying Ebit margin reached 18.4 percent during the last 12 rolling months, and Thule's management is still aiming for a margin of 20 percent in the medium term.
The U.S. market remained challenging for Thule. The sales decline in the Americas was largely attributed to the planned phase-out of certain low-margin products, combined with lower sales in certain Latin American markets, except in Brazil.
The most recent major product launches were a new stroller, the Thule Sleek, which is going into the stores during the current winter season, and a new generation of user-friendly roof racks. Two of them, the Thule Evo and the Thule Edge, were set for sales in the stores in the fourth quarter, followed by the others in stages over the next 18 months. Major clients in Europe and the rest of the world slowed down their purchases in the third quarter ahead of the introduction of the new products.
Sales of focus products in the Packs, Bags & Luggage category, including Thule's sport & tech bags, continued to show stable growth in the region.
The group has informed U.S. clients that it will pass on to them the effects of new import tariffs introduced by the U.S. government on imports of certain products and components from China.