Earnings Call: H1 2021

Aug 18, 2021

Morning, good afternoon, and good evening, ladies and gentlemen. Welcome to the Samsonite International 2021 Interim Results Conference Call. Please note that this event is being recorded. I would now like to hand the conference over to Mr. William Yu, Senior Director of Investor Relations. Thank you. Please go ahead, sir. Thank you very much, operator, and good evening, good morning, everyone. Thank you for joining the Samsonite's First Half twenty twenty one Results Earnings Call. Today, we have our CEO, Mr. Kyle Jindro as well as our CFO, Mr. Reza Selakarni, with us. And without further ado, I will have Mr. Zhengzhou begin the presentation with a few opening remarks. Thank you very much. Great. Thanks, William. So starting on Page 4, I'll lead in with We're quite encouraged with what we're seeing in the recovery in the business in the first half and particularly as we move into Q2 and the start of Q3. Sales recovery in the 2nd quarter improved to down 52% versus Q2 of 2019, And that's compared to 57% in Q1. In June, we reached down 48%. That trend has continued very strongly into July, down just shy of our just better than 41% down. The other really positive story for us is we pivoted to profit, starting in May with $3,500,000 and then a very strong June EBITDA of $11,000,000 for a quarter that delivered a positive $11,500,000 of EBITDA. And that Trend really continued very strongly in July with our sales down again 40.9%, but in EBITDA that's north of $20,000,000 for the month of July. So This really is a testament to all of the work we've been doing to get this business positioned for a very strong recovery. Fueling the profit growth is a dramatic improvement in gross margin that we've been focused on, as you know. In Q1, our gross margin was 48.7 And in Q2, our margin moved up to 52.4%. And we're really heading towards normalized gross margin. And for the month of June, our gross margin had reached 55%, which gets back into the territory of normal run rates for our gross margin that we messaged the last quarter. And that's notwithstanding pressures we're seeing on raw material costs and shipping costs that we're seeing with general inflation Across the globe. Achieved positive EBITDA, we said, for the quarter, dollars 11,500,000 and that's on sales that are still down for the quarter 52.2%, Really a testament to how far we've moved the breakeven profile of this business with the initiatives that we've had. We messaged we had a press release on we paid down $325,000,000 in debt, refinanced our Term Loan B during the second quarter And produced and those two items produced $20,000,000 in annualized interest savings on a go forward basis. We dramatically decreased the cash The business from $65,000,000 in Q1 to $27,000,000 in Q2, and a meaningful change in cash flows I'll cover in just a bit versus last year. And it's really reflective of the tight expense management that we have and really strong cash controls that we've left in place across the business along with positive EBITDA for the quarter. And I would tell you, in the month of July, we're seeing positive cash flow for the business all in, which is Really a wonderful moment for us. We've worked with our lenders, very supportive lender group to get further covenant relief As the recovery is taking a bit longer than what we were anticipating, and so we now have covenant relief that will help us right through Q1 and Q2 of next year As the business continues its recovery, we have continue to have significant liquidity. Even after repayment of debt, Our overall liquidity is $1,200,000,000 which is plenty for us to navigate the rest of the challenges as the pandemic continues. Sales recovery, so I'm on Page 5. And the sales recovery, you've seen this Before, our low of 80% down back in April of last year. And here, you can see what we're seeing for Q2, and particularly in June, down 48 In July, down 40.9%. And I would tell you, our look for August feels to be in the same zip code as July. So this Recovery trend continues. And that's really, at this moment, being fueled by what we're seeing in North America and Europe, Where in the month of June, North America was down 41% and Europe started to really catch up here down 47.8%. And in July, the North American business was down 31.5%, so really starting to move strongly into recovery. And Europe's trend continued very strong. So in the month of July, Europe was down 43.6%. So really, these two regions are driving much of the That we're seeing right now. If we go to Page 6, this just gives a good snapshot of the trend here on Sales, but importantly, the trend on EBITDA improvement. And so again, as we stepped in the pandemic Over a year ago in Q2, we had an EBITDA loss of $127,000,000 You can see we've made progress right along the curve, Some tied to the sales recovery, but mostly tied to the initiatives. And as we get to Q2, positive 11.5 I covered the months already, but April was slightly negative, but May positive, June strongly positive. And July, again, over 20% EBITDA, Our $20,000,000 of EBITDA is what we're seeing for the month of July, and EBITDA margin starting to get just shy of teens EBITDA margin in the month of July, Business down 41%. The travel recovery around the world happening at different rates. I have A few slides on that. So I'm on Page 7. And there's a lot of lines on this page, but what we can see here is markets like Russia And China have been performing better. China has had a few dips. I'll cover that in just a bit. And then the U. S. Market has kind of steadily improved. And you can see Brazil is improving, and Japan and India have had ups and downs is the way I would describe it, particularly India, which has had a very strong Q1, and then had a slip back to down 60%, 70% for Q2. And we're seeing in the month of July, India is back to down 35 And on the next page, just a little deeper dive on the U. S. And China. And this is domestic Which is still today driving much of the recovery is domestic travel. And the blue line is China. And you can see China It has really driven a lot of Asia's improvement over the past year. There was a small dip in Q1. We talked about Last time, this was really around the Chinese government slowing down the amount of travel that happens in the Chinese New Year. But then I quickly stepped back up into the Q2. And you can see the fairly rapid improvement in the U. S. Domestic travel story. I've been traveling almost every couple of weeks in the U. S, and it is busy. And you can really see it in the numbers as we go from February, March, April, May, June, Really meaningful increases in domestic travel in the U. S. And on Page 9, this is just another view of that. On Page 9, this is Number of planes flying, so this is daily flight, domestic flights in the U. S. And the blue line is 'nineteen, the orange line is 2020 And then the red line is 21. And you can see we start to get close to the same levels in some weeks, actually in the same level as 2019 as far as domestic flight goes, and that trend continues in the U. S. As we speak today. And so on Page 10, so we've really achieved the positive EBITDA in Q2. It's really driven by the actions that we've been taking In this business, coupled with the recovery that we're seeing. So positive EBITDA in Q2, on sales now 52%. Our first half EBITDA was a loss of just $17,000,000 And if I move to July, our year to date EBITDA for this business is now positive as we get into the back half of the year. And again, as I said, we're really approaching in the month of July alone, we're approaching kind of low teens EBITDA margins As we move forward. Recovery continued, so down 57% to 'nineteen in Q1, down 52 And as I said earlier, June was 48% and July was 41%. And as I also said, the margin story has really been an important push of ours. And as you know, last Our margin was under some strain as we were clearing inventories and reducing and generating cash. Here we are this year with Q2 margins approaching 53% versus 48% in Q1 and very strong margin in June at 55%. July looks to be about the same. And this is despite GSP in the U. S. Not being renewed yet and the inflationary pressures we're seeing. We're seeing freight costs meaningfully up And raw material costs rising. And as a company, as you know, we manage against those. So we're managing both the increases, we're managing the price increasing where we need to And managing with our suppliers to move this business back to its traditional margin levels, which we're having very good success We continue to manage the cost structure. As you know, we generated over $200,000,000 in annual run rate cost savings. And in the month of or in the quarter, the Q2, I would say we're fully realizing those benefits. We had some work we're doing in Q1, but this year still closing some stores. As we get into Q2 and we step into Q3, all of those actions are taken, and we're getting the full benefit of the initiatives on the cost side. We're continuing to manage advertising very closely, and you can see that in our numbers. But we are allowing markets that are starting to move To lean into advertising again. So you're seeing in our North America business, particularly us moving our advertising spend up for both Grand Samsonite, Grand Tumi and all of our brands in the portfolio. And we're starting to lean in as Europe gets moving and the recovery really starts to pick up in Europe, I'm starting to spend more advertising dollars there as well. On the margin story, I'm on Page 11. I thought A page on margin is important because there's a lot here. One, we as I said, we've really moved the needle on the gross margin. You can see Q1 Of last year actually, Q2 of last year was 33.4% as we stepped into pandemic. And where we are today, Q2 of this year at 52.5%, and again, June at 55%, really speaks to the work that we've done. And it really is against some meaningful pressures. We're seeing raw material costs, labor costs, general inflation working against us here. And we're taking the actions that we need to manage that. The freight costs have increased substantially and container availability is very limited at this moment. We're actually seeing challenges in getting goods where we need them right now. And so we're staying ahead of the curve, but we're really seeing the impacts of shipping delays, port congestion and our teams are managing that very closely and that we're pushing our sourcing teams to order ahead And really, get ahead of this so that we're in a strong place, as the business continues to recover. The non renewal of GSP, which we fully anticipate will be renewed, has been delayed and so we're managing that. And that really had an impact in the first half numbers that you're seeing of around $6,000,000 against the gross margin. So as that gets renewed, we'll see the benefits of that moving forward As well. The weakening U. S. Dollar, in many cases, we're buying in U. S. Dollars in Asia. And so we're working with our vendors On that to manage the impacts of the weakened U. S. Dollar and really leveraging the strong long standing relationship with our suppliers To collectively manage the impacts we're seeing on cost increase. So this will be an ongoing effort for us when I look into the back half and into next year. Gross margin, it will be a very large focus here for all of our regions. And what I would say is we're on top of it. No, we're not we're looking at every avenue here to make sure that we maintain margins at historical levels. And on Page 12, it really is decisive actions that are building strong momentum in this business for us. Significantly reduced our fixed cost structure with over $200,000,000 in savings, all being achieved. This is what really is fueling the adjusted EBITDA Positivity in Q2, and that continues. And we continue to manage the business very, very closely. We continue to manage temporary savings and advertising cash flow items like CapEx and working capital to maintain and minimize our cash burn. And as I said earlier, it looks like our July cash flow will be positive. Maybe I haven't said that yet, but July cash flow from where we're sitting today looks to be positive We're back against all of these efforts. We're managing liquidity and capital structure with a very, very supportive bank group. And as I said earlier, we repaid debt. We refinanced our terminal B. We reset covenants. And we're sitting with $1,200,000,000 of liquidity, Which really gives us ample capacity to manage through the rest of the pandemic. We continue to invest Product development. And we I think on the last call, we talked about exciting launches of products with recycled materials or collaborations with other brands to drive the business. And on top of investing in product development, we're also simplifying the business with a very Robust SKU management initiative to really kind of enhance the performance of our SKUs in our inventory. And all of those are playing into Our success story on the margin side. We're fully committed to transforming and leading this industry on the Sustainability front with our responsible journey. We published our ESG report in May. And if you haven't read it, I strongly recommend because it gives a wonderful picture And what we're doing to move the needle from a sustainability perspective and an ESG perspective for this business, and all of our teams are well entrenched behind that. And just lastly, in July, we sold spec. So spec was a business we acquired a few years ago, and we took a decision to really Allow the North America business to focus on its core and sales spec on top of that, and I got a slide on it, and on top of that, It enhances the profit profile of our overall business and our North America business, I suspect, was slightly dilutive on the profit side of the business. So we took A decision to sell that business in July. And another big piece, I'll call of plumbing in the background as we've established Singapore as a brand development and sourcing hub in our new Asia Regional Headquarters. And really, this follows and builds on our 25 year history in Singapore. It followed a global study where we really Looked across the globe at our business and our areas of growth and really where we're taking the business on a forward basis. And we determined that Singapore is the best location for us. We'll leverage this as a sourcing hub for Asia and the Middle East, And it will also provide sourcing and administrative benefits for the North American and Latin American business. Our Samsonite Asian leadership Team is moved to Singapore, is in the midst of moving to Singapore and really to help establish and create And drive our Asian business on a go forward basis. In the midst of that, we've shifted the economic rights to our IP, which is sitting in Luxembourg and continues to St. Luxembourg really has got a really sustainable global tax structure on a go forward basis that aligns with the evolution of our business and The growth drivers in Asia as well as the rest of the world, and Erez will cover a bit later, we've also shifted the economic rights of our European Business, the Belgium, Luxembourg as well, to really reset the structure from an IP perspective in business. All of that completed at the end of June. And as I said already, we divested back in July. This was a business that we acquired about 4 years ago. We sold it for $36,000,000 and it really was a non core brand for us and it allows our U. S. North America team to focus on driving the core business. And on Page 15, despite the pandemic, we remain committed to Reaching our sustainability milestones. As you know, we launched our responsible journey as the pandemic was getting started. It's a journey that focuses on Four key highlights, innovative products, I'll talk about that in a second. Carbon actions and reducing our carbon footprint, Our supply chain and we believe about thriving supply chain and our engagement with our suppliers and really people focused on how do we Better engage our people and teams, which is one of our best assets in the business. So we continue to be focused there. Again, our ESG report captures A lot of the great work we're here, and we continue to really significantly develop products using sustainable materials. And And if you go to Page 16, this will be kind of a first glimpse, more to come as we continue to build on our story here around How far are we leading the needle here on products that are incorporating sustainable attributes? In the first half twenty twenty one, almost 15% of the products that we sold or the sales in our business were from products that had meaningful sustainable attributes. That compares to 7% in the first half of twenty nineteen or the full year of twenty nineteen. So really amazing progress and you will see more of this coming. You can see with core brands, every brand is having an impact. Samsonite is 10%, Tumi is already approaching a 5th of its sales, 22%, Gregory at 34% and American Tourister at 5% and more to come on that front as well. So the teams in the business are very focused. I can see the forward pipeline of innovation and products that we'll be launching into the end of this year and next year. And for sure, this as a percent of our sales And on Page 17, really, where I take heart in kind of the recovery in our position and our ability to Continue to drive our leadership position in the industry. We are set and have launched really amazing products over the past 6 months, Particularly Magneka, which hopefully you've seen by now, I think I was talking about this during the last call. This is a product that's made out of 100% recycled material post consumer. So the outer shell, the inner lining, all with post consumer waste, either water bottles or post consumer waste, polypropylene. And then you can see RockSkin, which is a product that we're producing in our Hungary facility, made out of a material that is fully Recyclable, the outer shell, and the inner linings are using RPET as well. So really two wonderful stories of product innovation. On Page 18, this is Ivan. This is really quite an interesting product with a frame case with a single point of opening in the middle. And what makes this product quite interesting is it changes the way you think about packing. It opens up the product in a really interesting way where it takes more space, less space when it's open, And you can pack deeper into each side of the case, have the ratcheting system, so you can really secure what's within the product as well. Interlining is made out of RPT recycled material and really a very fascinating product if you get a chance to see it from a travel case perspective. And then this has been out there for about a quarter now, but we had a really Well, an exciting product launch with a collaboration with McLaren. We have silhouettes here that capture kind of The racing spirit incorporates carbon fiber within the products, interesting colors, and it's been better than we anticipated. And we have more exciting launches against this collaboration coming in the Q4, and it's been well received across all regions That's when we are sold. And then lastly, we're celebrating our 111th year. Last year, We had 110 and we have lots of plans, but COVID clearly took those off course. But this is a business that's been around for a while and knows how to navigate. And And so we're excited for it, and we're excited as we see travel starting to open. And we really have a commitment to a sustainable future in this business. And with that, I'll turn it over to Reza for some financial highlights, and then I'll come back at the end. Thanks so much, Kyle. And we're on Slide 22. So overall, the first half results, obviously, sales interestingly were basically very similar to our sales in first half of twenty twenty. But as you may recall, the pandemic really kicked in full swing in the Q2 of 2020. And now we're pleased to be seeing that actually this quarter, we're Starting to see the reverse. And so we seem to be heading out a little bit in some of the regions, as Kyle said. So reporting sales of $800,000,000 of sales for the The split of those, Q1, you may recall that we did $355,000,000 and Q2, $445,000,000 So that trajectory is improving. The story is really around the EBITDA, which Q1, we had negative EBITDA of negative 28,000,000 Q2 positive $12,000,000 So for a total adjusted EBITDA of negative 17,000,000 And that trend is continuing into July, as Kyle noted. So if you go back in time, the quarterly evolution of EBITDA, if We're looking at Q2 of last year, we were negative $127,800,000 So when we sit here with positive EBITDA of 12, we feel really, really good about how This business has turned around. And again, it's still in an environment with sales materially down. Net income, it's a loss of $104,000,000 on the half. We do expect that once we get into further territory on adjusted EBITDA that will flow through to net income as well. So we would expect full profitability shortly. Looking at Page 23, it gives you the split in details between the two quarters. I touched on the sales split a little bit as well as the EBITDA. Really around gross margin, Kyle mentioned a little bit earlier, and I'll have a slide on it as well. This is a point that I do think bears Mentioning, which is really the improvement in the gross margin between the quarters. One of the things that we're seeing in the market right now is demand is picking up And inventory levels in the channel are very low, and so all of the teams have been very good in terms of trying to manage the gross margin profile, so limiting the discounting that's happening As well as trying to improve and manage the cost pressures that we see in terms of gross margin as well. So gross margin coming in at 52.4%, Which is a very seasonal pickup from the $48,700,000 that we have in Q1. And obviously, Kyle mentioned that in June that, that had improved further and We're maintaining that in July and hopefully going forward as well. On Page 24, just to recap the financial highlights, and then we'll get into it a little bit of greater detail. Obviously, we've covered sales in terms of how the recovery has been going. We'll get into the regional breakdown of that on a subsequent slide. Adjusted EBITDA of negative $17,000,000 favorable to prior year by $106,000,000 even though sales are flat. And that's really the power of the cost cuts that we had taken early and very aggressively. We're pleased that we have adjusted positive adjusted EBITDA in Q2 for the Q1 since the pandemic began, even though net Sales are down 52.2 percent, and that operating leverage is something that I think we can all expect to continue going forward as well in terms of every improvement in sales. Really, Flow through of that down to EBITDA is very material. Fixed SG and A expenses, we are actually seeing the total flow through of all the aggressive So obviously, we had talked about $200,000,000 in annualized run rate fixed cost savings. You're seeing a $97,000,000 reduction on a constant And again, there are still some temporary savings that are still flowing through. So we had expected a lot of those to run out, but that Permanent base of $200,000,000 of fixed SG and A savings is something that I think we can all count on going forward. Advertising spend for the first half is $15,000,000 lower than the prior year. We are planning on leaning into advertising as the sales recovery begins. And in the quarter, We were back to budgeted levels, and we expect that to improve going forward as well so long as we get an adequate return on the advertising spend. On Page 25, our net debt position of a little over $1,800,000,000 As Kyle mentioned, we did make $325,000,000 of debt repayments as we feel better about the recovery around us, and we are going to continue to evaluate that going into the end of the year and beginning of next year as well. Strong cash position with over $1,000,000,000 of cash and cash equivalents and liquidity of approximately $1,200,000,000 Have plenty of cash cushion. And again, we feel pretty good about our cash burn levels. Really, the cash burn, which we'll see on a subsequent slide, is really due to we're Getting some inventories in just to make sure that we can adequately cover the sales that are coming in, within the remainder of the year. We paid down $125,000,000 That $325,000,000 is broken down as $125,000,000 of the term loan A, dollars $100,000,000 of the term loan B2, which was our most expensive piece of debt, and we also paid down $100,000,000 of the revolver in Q2. We also refinanced the Term Loan B to debt. The pricing was brought down from LIBOR plus 4.50 down to LIBOR plus 300, And the floor was reduced by 25 basis points as well. So it's about 1.75% of improvement on the margin of that instrument, Again, reflecting the better credit profile of the company as we emerge from the pandemic. We also secured further relief of our debt covenants, Which ensures our compliance through next year. Cash burn has improved by approximately $200,000,000 as compared to last year. And again, the cash that we are burning is really around a little bit of CapEx, as you'll see, and really trying to build some inventory levels, as we've talked about over the last couple of calls as well. Net working capital at June was $161,000,000 lower than June 30 last year. With a sales environment that has been under pressure, we have aggressively managed to keep our net working capital numbers in line and improving, Not an easy feat, and that's one of the reasons that we think about cash burn. It's the reason that we feel that we need to make sure we have adequate inventory and sales rebound. CapEx, Still very, very low levels. We spent $6,000,000 in the entire half, which, as you can remember from prior years, this is a trickle compared to what a normal But again, it's one of those things that we have the ability to run an asset light model when we need to, and that's what we've been doing and been very disciplined around store remodels, etcetera. On Page 26, Kyle mentioned that we sold spec in July. The cash proceeds were approximately $36,000,000 There is also an earnout of $4,000,000 if sales for the company end up being north of $107,000,000 by the end of the year. So there is a potential for that. And basically, what that allows us to do is to focus the North America business on the higher profitability components of it. And you should be aware that Speck was losing EBITDA. And so this is an accretive transaction to us. So we're removing a loss making business From both North America and the consolidated results as well. So it improves the overall profitability of the business, and we managed to secure some additional Proceeds, which will be used to further delever. So you should expect approximately a $40,000,000 pay down in debt that should happen in this quarter as well as a result of that transaction. During the first half of twenty twenty one, we had restructuring charges of about $6,000,000 associated with severance. So we continue to focus on SG and A, Not huge numbers compared to what we saw last year, but I think the message is that we do continue to look around the edges and manage SG and A, and there were some restructuring related to that. And also, we had some noncash impairment charges, largely driven by spec total impairment charges were about $30,000,000 Of which $25,000,000 was due to the spec transaction. Even though spec closed in July, we moved it to an asset held for sale at the end of the half, That's why you see that impairment there in the North America CGU. On Page 27, as we're looking at sales broken out by region, You can see that overall, all of the regions are starting to perform in terms of sales. When you're looking at the quarterly breakdown, I think you Start to get a better feel for how Europe is starting to come back again. If you're thinking about the half, it really started whereas last year, we had Asia, And really, Asia is driven largely by China and India, and so India had a bit of a hiccup driving the sales recovery. As we think about what's happening in Q2, you're starting to see North America really firing on all cylinders. Both brands, both in terms of Tumi, American Tourister, Samsonite, everything Starting to recover in the North America business, and we have absolutely seen that. Although it's behind by about a quarter as compared to North America, Europe is starting to Very, very well right now as well. Asia, there is still it's a tale of half of and half nots. So there are certain countries that are still in lockdown. The vaccination rate isn't where it needs to be. And so the Asia numbers, and you'll see this a little bit later on, is driven largely around China performance, Tumi performance across the region as well as India starting to come back again as well. And Latin America is starting to So we were very pleased to see that all of the regions are basically back in positive EBITDA territory as we head into July. And that includes Latin America, largely driven by the Chile business recovering. So as you on Page 28, a little bit of greater detail just to show you the Quarter by quarter progression of the sales. Here, you can see basically the North America business, as I just mentioned, going from down in Q1, almost 58% as compared to 2019, down 44%. And in July, we're down a little bit north of down 30%. So a meaningful recovery, Making the point that really when sales do when people start to travel and move, sales come back pretty, pretty quick. Asia, it's It's been a little bit less of a recovery. It's done a bit of a stutter step if you're looking at it. And we put the ex India numbers on there as well because as you'd be aware, the last time we got together, It has India in the middle of the delta variant and impacting their sales. The good news is as we enter July, India is starting to pick up again as well. And then Europe. So really just about we expect a similar recovery that we saw in North America happening in Europe, albeit a quarter behind. So you can see that in Q1, we were down almost 71% in Europe, Q2 down 60% and then July already Down 43.6%. So that trend that you're seeing should continue in a similar fashion. And Latin America is basically in July, a Meaningful recovery just from the end of the quarter. So as we get into some of the back to school season there, etcetera, we hope that, that trend will continue as well. On Page 29, just to speak around the channel and the mix between travel and non travel. And I do think it's helpful to probably give a little bit of flavor Quarter as well. So in terms of the half, you're basically seeing similar performance by channel in terms of what we saw last year. Although basically, wholesale It started to come back again, largely driven by the strength of the North America business as well as retail. So if you're thinking about compared to last year when everything was shut in Q2, Q2 of this year, the stores are all open. In most of the areas, obviously, there's pockets in Asia where there's still some restrictions. But Generally speaking, most of the retail outlets and wholesale doors are open, and so that's driving a greater push in those channels. In terms of the travel and non travel mix, non travel has been performing very, very well for us during the course of last year and especially in Asia. As we think about the split right now, Q2 of this year, non travel is now 50 is 43.9% and travel 56.1 Just to compare it to last year's numbers, that 56.1 percent travel in Q2 is up from 44 point 6 last year. So what you're really starting to see is people that have been cooped up, really desiring to get out and move, and that's basically driving the luggage side of the business Right now, and we expect that trend to continue to those geographies that are opening up as well, so yes, in Europe specifically. On Page 30, we talk about gross margin a little bit. I think it just bears repeating. In Q1, gross margin at 48.7 percent Q2 now 52.4 percent, and you can see the breakdown in June, we're already up to 55%, and that sort of number is continuing into July and the beginning part of August as well. We have lower inventory obsolescence this year compared to last year. It is an important point that this about $6,000,000 of GSV pressure is not in these numbers either. So that has a bit of a negative drag for us. We do hope that gets renewed, and we hope that it gets renewed with retroactive benefit as well. That could give us a little bit of upside there. But so this gross margin improvement is despite the headwinds that we've On Page 31, SG and A. Obviously, we've been very proud of the actions that we've taken. And Really, the message this quarter is you're seeing it fully in the numbers. So in previous presentations, we've always outlined the actions That we've taken and what the run rate benefits are. Here, you can actually see that they're showing up in the results. So fixed SG and A expenses, dollars 89,000,000 lower than prior year, Not even 2019. As compared to 2019, we're about $200,000,000 better. Now we talk about run rate benefits that were north of $200,000,000 Obviously, this is just the So there's still some temporary benefits that are flowing through here as well. So I do think the guidance that we've given previously that expect just on a run rate benefit, Our EBITDA improving by about $200,000,000 is definitely the same ZIP code that we're in right now, and you're starting to see that play out into the numbers that we're reporting. On Page 32, fixed SG and A specifically. One point of note here is so you see a red bar. So this is basically giving you a bridge in terms of adjusted EBITDA and the benefits that we've gotten out of basically reducing our fixed cost base. The first thing that I'd say is keep in mind, the constant currency sales for the period were $25,800,000 lower in terms of sales. And if you multiply that by our gross margin percentage of $49,400,000 we have $12,700,000 of gross profit decrease That comes just from the sales, our constant currency sales from the half to half. And then what we've managed to do is that we have higher margin Of about $9,400,000 to offset that. So even though we have sales pressure, we've managed to improve our gross margin to offset that. And That would have been $6,000,000 even higher. So we would have more than recovered all of it if we had the GSV renewal. Increased variable SG and A spending is not a bad thing. It means that sales are coming back. So that just flexes up a little bit as sales come up. And then really the rest of the story is $113,000,000 of SG and A savings between advertising And about the $97,000,000 of fixed SG and A improvement, which really gets us to this bridge of down $17,000,000 for EBITDA. In terms of cash burn on Slide 33, every quarter, we expected to have a little bit more cash In terms of inventory build between Q1, between Q2, where we sit right now, actually, we've managed to keep the Q2 cash burn even better than Q1. And so and again, I think part of it is due to the fact that as inventory comes in, it goes right out. So the sales is basically driving a lot of It's working capital benefit that we get. And so negative 27.3%. We feel very good about these cash burn levels, it's all driven by us in terms of trying to build our net working capital position. And so as you think about Q3, etcetera, we're still going to try to build inventory and but we don't The cash burn levels to be anything material. Page 34, it gives you a sense in terms of the benefits of the cost reductions that we've talked about, both on EBITDA and then looking at the cash burn. I mentioned some of these numbers a little bit earlier in terms of the adjusted EBITDA that's happened quarter over quarter And really, the benefit on cash as well. I think this is just largely, Durbin, as you get to Q2 of this year, the $11,500,000 of adjusted EBITDA resulting in cash. That cash, if we weren't building inventory, we would definitely be in positive territory. And so it's I think the message overall is we feel very good in terms of where the business stands, both from an adjusted EBITDA perspective because of the cost actions that we've taken. And cash is not something that we're overly concerned about nor liquidity. On Page 35, Kyle alluded to this a little bit earlier. I'll just spend a minute in terms of the tax impact of the change that we've had in terms of selling the economic rights from Luxembourg. First, to Belgium. So our European IT has the economic rights of that have been sold to Belgium from Luxembourg. Obviously, we have significant operations in Belgium, so it makes sense to have that there. And the remainder of the Americas and Asia IP has been moved to Singapore. That's in support of a brand hub that we've created in Singapore. We did a global review of the best place to locate that given the Growth in our Asia business and the availability of talent in Singapore, we felt that, that would be a good place to have that brand and sourcing hub. That's been set up now. As Kyle mentioned, in order to support that, we've relocated some of our employees from Hong Kong to Singapore to support that effort. And the net net benefit of this from a tax perspective is that our effective tax rate should remain within the historical range. And what that means is typically, we've had an ETR of anywhere around between 24% to 26% has been the range over the past few years, Excluding onetime large items that we've had and as a result of making these actions, we expect that to be the ETR that we can expect going forward as well. Page 36. In terms of the balance sheet, I think we've been very careful in terms of managing the cash levels and the net debt. So net debt at the period in June, down to $1,800,000,000 Obviously, we had the $325,000,000 debt repayment. The other point of note is the covenant release that we saw, I could touch on that on a subsequent slide, but basically, we've secured additional Covenant headroom through which we think will last us through next year and beyond. On Page 37, as part of the transaction, so we paid down $325,000,000 obtained covenant relief And got better pricing on our term loan B. These are all individual press releases that you saw since the last time we had our earnings release, but just to recap everything. I'm sure we'll get a question on it, so I'll just try to cover it right now. The way that our EBITDA is going to be calculated, We have the deemed EBITDA. So now we're sitting in Q3 of this year. So the Q3 number is a deemed number. And so that will be basically be plugged in. And the actual numbers that so the Q3 number will be an Actual number and then the historical numbers will be deemed numbers. And what we're able to do as a result of the covenant relief that we got is Add another $65,700,000 add back to each of these quarters. And the logic around the $65,700,000 is We have repeatedly talked about the aggressive SG and A savings that we have achieved. What the banks and lenders were Able to get comfortable with is that those run rate savings should effectively be treated as if they're as a permanent improvement in our EBITDA structure. And so if you divide 263,000,000 by 4, you get $65,700,000 per quarter. And we're able to basically have that as a run rate benefit on those deemed periods. In addition to that, the so other than that, the existing financial covenants remain So we're shifting from the liquidity covenant that we had as we enter this quarter. We're getting into back to our net leverage ratio, Which needs to be less than 5x for the remainder of this year, stepping down to 4.5x next year and an interest coverage ratio, which needs to be greater than 3 times. Again, I think we feel really good about our covenant levels. And if anything, we just secure additional cushion on top. The $325,000,000 you have the breakdown of the instruments that And repaid here. We've obviously reduced the pricing as well on that term loan B2. The net net of all of this is at least $20,000,000 of interest rate savings On a go forward basis as a result of this action. And again, this does not include the fact that we're also going to be paying down another $40,000,000 of that in this quarter as a result of the Spek transaction. On Page 38, very tight working capital management. Really two points of note here is in an environment where sales are down, we've managed to get our inventory levels down by $185,000,000 And this is the reason where as we look at cash burn, we are aggressively trying to make sure that we source product, Make sure that we're in a good inventory position because sales are coming back and there's very little inventory in the channel, and so we want to make sure that we're able to capture that. Again, net working capital improved by $161,000,000 and our working capital efficiency continues to improve. And actually, we're getting Close to our historical level, even though the sale base is significantly lower than it's been. So all in all, a very good story around that. And just a couple of more points. Just in terms of CapEx, again, we touched on this a little bit earlier, dollars 6,000,000 of CapEx, dollars 2,100,000 of that was in Q1, the remainder in Q2. Very, very tight management around that. We have a little bit of ERP stuff or EPM stuff that we're doing as well as a little bit of store remodels. But other than that, we've kept it very, very tight overall. So with that, I'll turn it back to Kyle for the outlook. Okay. Thanks, Reza. So for an outlook, Just a couple of pages. 1, as I started, we're very encouraged with the recent improvements we're seeing in our sales, particularly in U. S. And Europe. And we're extremely happy to see positive EBITDA as we get to Q2. And as we step into Q3, a really strong start for July. And August looks like it's going to do the exact same thing. So we're really, really encouraged by what we're seeing. With that said, COVID-nineteen, As we all know, continues to pose challenges, recent surges in cases and the Delta variant kind of across the globe at this point. Some markets with slower vaccination rates. As we look at Asia, which has been a bit behind on vaccinations really country by country, but Big markets like Japan and Korea, which have more to go, and approaching vaccination levels, that match kind of Europe and the U. S. Probably into Q1 and Q2 of next year. We'll delay some of the recovery in some of these key markets. Nonetheless, our expectations are we'll continue to see strong recovery in the U. S. Clearly, in the second half, we're seeing it, as I covered earlier. And we're very encouraged in Europe where we're seeing when the pace of vaccinations really moved. We're seeing stores open now. We're seeing Many of our major markets really opening, markets like Germany that had been locked down more than other countries within Europe are really moving. And so we're seeing a second half recovery that will really resemble what we've seen in the U. S. Maybe in Q2. So we're quite encouraged with what we're seeing there. India, as we said, took a backward step in Q2 and really had an amazing Q1. India Q1 was almost We're both in 'nineteen and then ended up down close to 60%, 70% for Q2. And we get to July, and it's down 35% and a really Good story within India, and which will really help drive our Asia story. And Asia, as Reza said earlier, markets China and India, I think, will fuel a lot of what we'll see for recovery, in the back half of this year. And some of these other markets will take a little bit more time as vaccination levels move up, particularly big markets for us like Korea, South Korea and Japan, where the vaccination pace has been a little bit slower. So that will all fuel into a stronger recovery in Q1 and Q2 for Asia from where I can see. And I think China and India will prop up The rest of Asia as we move into the back half of the year. And then Latin America has really started to move again as well with a very strong July. Chile, For example, in July, it was down 11%, and that was down in the kind of 50% range in Q2. So it's truly gets moving, which is a really important market for us that will have big benefits for all of our Latin America. And I was quite pleased to see our Latin America business have Positive EBITDA as we stepped into July along with all of our regions in positive EBITDA territory. So despite the challenges that continue, We're quite optimistic with what we're seeing across all of our regions. As I said earlier, our gross margin remains under pressure, Particularly with things like GSP not renewed, global freight costs really significantly up year over year, raw material costs rising. But Our teams are doing an amazing job, and this is one of the real strengths of our organization and our teams and the ability to manage kind of the sourcing and costing. We have industry leading brands. We can manage where the position price positioning of those brands are to really make sure that we continue to manage on the gross margin side. And you can see what we've achieved really in Q2 and as we stepped into June July, getting really back to historic levels. And I might take a moment to just say our sourcing teams have done an amazing job with, 1, bringing inventory down and their new task now is the challenging with shipping And the challenges with cost increase that this team just continues to deliver. We are seeing challenges with shipping, with container delays, port congestions, And these are having impacts on timing of products. And so as Reza said, we're bringing inventory in, but it's going out as fast as it's coming in. And our sourcing teams are really taking forward actions to get ahead of this in order quicker to mitigate some of that risk and really remain nimble and making decisions and bringing in Products that are drivers of the business and prioritizing what we're shipping in so that we get the full benefit of that. And so again, I think we're well in hand on managing through this, It's a full time job for sure. We're managing the product cost increases. We're taking pricing action where we need to. The whole industry is under the same exact Press your point. And so everybody is in the same spot as far as moving and managing through that. As Reza said during his Presentation. We remain very diligent and disciplined on controlling expenses, not only on the fixed costs, but everywhere we can have temporary benefits, And we continue to manage those, which has been very, very helpful. CapEx completely tight as far as what we're spending. And really, we're going to stay in this mode Right through the end of the year, really staying disciplined on everything that we can manage. We are looking at marketing and marketing expense, and we continue to manage that very, very closely. One of the biggest levers we have, but as we see certain markets starting to move, we're pushing forward on marketing. And so we're still well below the kind of run rate levels from an advertising percent, but you'll start to see us lean in as the market starts to move comfortably into profit territory. And those markets start to move, we want to be out messaging our story with our core brands. So you will see us continue to lean in on that as well. We're highly committed to our sustainability efforts and our innovation. And as I said, with a few products and I look at our forward pipeline, One of our real strengths will be what we deliver from a product offering perspective for the back half of the year. And really as we step into next year, I'm quite excited about what we have in front of us From real kind of innovation and products and a sustainable story. So more to come on that, and we're very excited as a team collectively. And we have tremendous liquidity. We're at $1,200,000,000 of liquidity. I think at the moment where we stepped into this, we were at $1,500,000,000 of liquidity. And this is a business that's just navigated through one of the biggest travel disruption you could imagine. And we're sitting in a liquidity position That gives me full confidence in what we need to do to kind of get the business all the way to the other side of the story. And I might just end on a last slide, which is an IATA projection, which we look at and really gives a kind of picture of Travel trends and what the forward trends are. And I think this captures how I'm feeling about 2022 and 2023. So this would say 2022 As far as kind of global passengers or travelers, whereas we went into pandemic around $4,000,000,000 we think that will be at 88% level, 22 to 19, okay, gives you a sense for what we see, which is a tremendous recovery from what we're seeing in the year that we're in right now. So this recovery will Continue. And as I've always said, I think when you come out of travel disruptions in our history, historic views would tell you, When you get all the way out, it comes back even stronger. And so my view on a forward basis is we really get to the end of 2022 and step in 2023. You'll see growth in travel numbers that start to get ahead of where we were before pandemic. And so all this kind of lines up with what we're seeing. It winds up with what I think our expectations are as we get into next year and into 'twenty three. And as you know, we've changed the profit Profile of this business. So as we get into these levels, you should really start to see a profit profile that comes out Stronger than what we were stepping out of 2019, and we've got the team laser focused on that. So that's What we have, my last slide is on Q and A as travel is coming back. We're seeing it all over, and we're quite excited to see it coming back. And William, I'll go back to you. We're very happy to answer any questions anybody might have. Great. Thank you very much, Kyle and Lisa, for your presentation. And we're now open for Q and A. And I think the first one on the line is Dustin Wei from Morgan Stanley. So And our first question comes from Dustin May with Morgan Stanley. Please go ahead. Thank you. Hello, management. Thanks for taking my questions. So first question related to sales. I think it's really quite positive to learn that July sales only down 41% versus 2019. And I was positive to learn that August trends stay. But just given the so called delta variance is really having a lot of impact, especially in China, so is that a situation where in China, the auto sales kind of went down but got offset by the pickup from the U. S. And Europe sequentially. And when you look at the TSA data from the U. S, actually in the past few weeks, The number of the inter travelers is not growing sequentially just in the past few weeks, but do you see the demand for luggage still picking up Despite that, maybe Dildavarian, I guess, in the U. S. Also kind of dampened a little bit on the domestic travel. Just kind of short term question. If you look at the second half, I remember last call, we talked about maybe 30 plus percent decline for the second half of this year. And if we in the third quarter having a decline of 47%, so should we look for like decline of like 20%, 25% for 4th quarter. And if we look at the next year 2022, I also remember that we talked about the full year 2022 management will look at Decline of 20% to 30% versus 2019. And if that equation still hold, what's the assumption behind the sort of the Recovery rate of the international travel, does that need to be a lot of the recovery of the international travel or in your equation of that Down 20% to 30% versus 2019. It still mainly depends on the full recovery of the domestic travel. So sorry for the strong questions on the sales side. And on the sort of the last question conference, I'll open up those and we'll come back just so we don't lose track of your questions. Yes. Yes. Thank you very much. Yes. Do you want me to start with that? Yes. Let me hit the sales. So Dustin, let's Let's start with your China question. Q1 China sales down 27.6% compared to last year. And if you're looking at Q2, it's the same ZIP code. So we're down 26.7% It is where China is in Q2. So the important thing about China to realize is with China down in the mid-20s, It's in Teams EBITDA margin already. And again, that's the power of the cost cuts that have happened there. So don't only think about it in terms of the sales, realize that, that Flow through benefit to EBITDA is happening as well there. So and China is continuing to be in that area right now. There was a little bloat for a couple of weeks. I know there's some certain provinces in China Where there was a little bit of COVID that started to wane again. And this is all on the back of just domestic travel in China without any international, as you know. So we feel pretty good about the China business with no international travel being kind of in that down mid-20s level, but still being in the mid teens to even upper teens EBITDA margin. The first one Yes. I think we're clearly seeing when we look at kind of July August, we're clearly seeing kind of Europe continuing to build. The U. S. Story continues to be very strong as well. We have in the U. S. Where it's a large kind of big to wholesale customers. Wholesale And there's a very quickly ordering in, so we're getting some of the benefit of that, which will continue into Q3 and Q4 as Customers start to reopen kind of the luggage categories themselves for us. So that will fuel growth. And so I think you might see kind of weekly noises, ups and downs maybe on travel. But for us, I think the trend will continue as everybody gets repositioned for The recovery that's playing out, Delta variant's impacting everywhere. And I think that's really kind of It's a chapter here, but we continue to feel in markets that are really starting to move, they continue to move. I do think Asia is going to be a bit More stuck. I think India and China will fuel a lot of what we're seeing. But these other countries, as I was saying in my concluding comment, Probably take yourself into kind of Q1 and Q2 before we see some kind of better movement there. So You will see Asia probably stay in the zip code of down 50%, maybe trending a bit better in Q4. And really, as we get into next year, it's going to start to achieve the results we're seeing. North America, for July, if I remember the numbers right, Down 31%. This is discontinuing, and the team is just as energized about what we're seeing in August. I think the big question will be, What do we see September, October, November, as we get out of kind of the summer holiday travel period? And our view is my view is Q4 is Probably going to be down in the zip code of 30% to 35%, and that's really what Asia kind of stuck in. So it's not so far off from, I think, what we had guided For the full year, when we were talking last. And that's my best kind of view as we sit today. And as you know, at 40 down 41%, we're producing a margin that's Starting to get into really close to low teens. And if we can get into this kind of down 30%, 35%, you'll see a continuing improvement profit story for us as well. And I'm still on the plan for next year, down 20% to 30%. Somewhere right in the middle of that is I think where we'll end up in an outlook perspective. I showed you that last slide, the true VASA data chart, which is kind of what the expectations are. And the reality is that is going to be fueled largely by kind of the domestic Travel moving and it's really as we get into the back half of the year that I think you'll see international travel starting to move a bit more. I've already made. Reza and I were in Belgium 2 weeks ago, I'm due to go to Italy in 2 weeks or 3 weeks. And we're seeing International borders start to move. It's clearly moving between the U. S. And Europe, but still well below kind of normal levels. And I think Asia will be a bit longer before we see international borders there, which will be important for Asia because I think that will kind of untap Some of the Asia growth as we get into Q2 and Q3 of next year to see some of that going. But we're not so bullish on the timing there. I think that's going to take a bit longer to play out. And I'm just trying to get to, and I think I will get to Singapore in the month of October, just for example. You can start to move. It's just that it's not kind of moving at the pace of historic levels. So Dustin, that's the sales side. So you can Ask your next questions if you like. Yes. Thank you so much for all the details. So just lastly on the sale of SPAC. So could we have a little Details for the profitability of the so called non core brands. So were they generally just lower than the 3 core brands in terms of the profitability? And then is there something that we can rationalize further to improve the overall group's margin going forward? Chek was the only real drag, Dustin. The other brands, as you know, we've been kind of shifting and adjusting. And so when I think about Brand like Gregory, that's performing amazingly well. It performed very well during pandemic. Gregory is in a zip code that's not I'm diluted and it's probably our best performer on kind of other brands and continues to perform very well. As I think I talked on the last call, eBags and have folded that into the business and eBags as a kind of portfolio and a brand which is Smaller in size of the business because we called the 3rd party brand, but is now making profit margins that will line up right with the North America business as we get into the back half of the year. And non distracted, it's just folded into our core team. And the only other brand really to talk about is Hytear, which is North America business. Again, fully folded into the business a year and a half ago here in North America and performing at the same zip code as what we see in North America. So Really non distracting and they're more in line with kind of our core business. That was just an outlier because it wasn't really lined up and followed different So it was really following kind of the launch of phone devices that had distribution channels that were different, Whereas everything else is in the similar distribution channel for us and really non distracting. So we're quite happy with them. And the brand Lipa, which is very small for us, but we fully folded that into our French team, and we have reset strategy there and even brand Lipa, which is very small, is in Territory. And again, it's in line with our core product offering. So I don't think you'll see any other rationalizations, but spec was the one that was obvious for us to kind of move on. And from an EBITDA perspective, I can try to add that. Yes. And just so you get a sense for the spec numbers, So as of December 30 or December 31 last year, the net loss before tax for spec was 29,800,000 Net loss after tax was negative 21.5%. Just to give you year to date numbers, I mean, just so you get a For the year to date, six thirty numbers, respect, were around $5,500,000 $5,400,000 negative. So and for year to date, last year, it was negative $15,700,000 So out of all of the brands, that was the one that was the most biggest drag for us. So we looked at it as it's noncore. It has negative EBITDA, and we can get a decent amount for it And repay some debt with it. So it just seemed very logical to dispose of it. Great. Thanks for this detail. That's very helpful. Thank you very much. Great. Thanks, Justin. Thank you. Our next question comes from Eun Yang with Jefferies. Please go ahead. Thank you. Hi, management team. On the adjusted EBITDA margin, just to follow-up the assumption that you just mentioned, I was on the first question on year 2022 estimate. So if we are assuming like versus year 2019, a 20% to 30% decline in top line. So is it fair to assume that we should be able to go Back or even exceeding that of the year 2019 adjusted EBITDA margin, which is around mid teens, 13%, 14%, given the targeted cost savings that we have done? Yes. So we will be better than the 2019 was an off year for Because if you remember, we had tariffs working into the U. S. Business. And so we will be better. We'll be comfortably mid teens. It's really starting to kind of move into the territory that I've been doing this for a long time here at Samsonite territory that I've always thought we could get to. And that's where the business is still Having room to recover. So the actions we've taken have moved us there. I wouldn't be surprised in Q4, where that We're at the same levels as what you saw us exiting 'nineteen at, and that's where the business down, let's say, kind of 35% or something like that. It's definitely is going to play into the EBITDA margin for next year. We can see it. We're kind of Pacing in July right now, and it looks pretty good. You're already seeing the gross profit margin in the mid-50s already, And so you should expect that to continue and to probably even improve. And then given the cost actions, that should flow through to the EBITDA margins and get to the mid teens. So regardless of the rise in the raw material price, you still maintain your previous guidance about like on the mix of fees in terms of GP margin? For Yes. We're very focused on that. And we've had periods of increasing pressure, and we've been able to manage margins. There's a lot Coming at the group, but we're very clear on what we need to do to manage that. So it's a lot of work, but we're feeling very good. We're working very And my second question is on like competitive environment. Do we know like the pace that we are recovering? Are we like back to the market or like some other players are stronger. The reason why I asked is that lots of clients have interest in the company. And then they were looking at like some of these market share data. Maybe like and I'm not sure whether data like Euromonitor is Whether the numbers are correct or not, is that somehow, like for some for markets like U. S, For the whole Samsonite Group, the market share that offer a little bit in the past couple of years. Are we Do we need to look at market share these days? Do we follow it? Or at this stage, the focus is more about the whole market recovery. At this stage, no, this is not the key focus. Well, it's always a focus, right? And I think The way I described in my concluding statement is we will continue to build on our leadership position. We have this amazing Portfolio of innovative products that we're bringing out. We've got kind of the scale to drive this business. Many competitors haven't Really been able to move much during kind of the pandemic, and we've continued to, in the background, invest and drive our business. So My expectation is we will continue to gain share as we move forward and probably even at a better pace off the back of what's been really challenging. I said on the last call, it's not that we're not going to have competition. It's all around still. It's there. Many competitors are just trenched in and are navigating. But we will be driving this business with this amazing sustainability story, amazing product offerings, and I have every intention with our And one of the advantages we have now is scale matters, and we're bringing in inventory and selling. And so as we're getting placement And moving and bringing products in where many of our customers, let's use in the U. S, for example, wholesale customers are struggling to get Supply from others that we're able to gain share just by the sheer nature of our advantage to bring products in. So I'm feeling very good. My Expectations are we will continue to drive overall growth in the business that will be in line or slightly ahead of kind of the trends, and we should be gaining share in that scenario as well. And that would take Very well. And I would say across all markets is my expectation. The advantage of being the segment leader is as Factory start to come back on. Obviously, we have deep relationships with our suppliers. So typically, we get favorable treatment in that regard. We have our own So in an environment where it's hard to get supply, we can actually turn on our own factories a little bit to help with that. And we're in a very good financial position, thankfully, as compared to our peers. So I think from a market share perspective, that should continue. Yes. I see. I see. So as the first half, we do see market share gain. We're doing better than the industry. I'm going to be clear. I think we can sense it. We're not sitting here studying market share gain, right? We're studying recovery, cost management, But we can sense it around the edges. And as we really see the recovery turning on in the last 2 months, it's clear that we're able to get placement and gain share as we move forward. And this is with markets really like markets of Europe just really starting to get going. And we should be really well positioned, Well, from an inventory perspective and a store and capacity perspective to drive the business. Many of our suppliers weren't paying They're vendors during this. And we kept our vendors whole. We kept things open. We kept very strong relationships. That wasn't the case From what we hear in our relations with our vendors. And so as Renata said, when things turn on, who do they want to partner with? It will be us. Great. Yes. Thank you very much. Thank you. Yes. Thank you. Thank you. And the next question comes from Erwin Remberg of HSBC. Please go ahead. Thank you. Hi there and congratulations. It would be a relief for the team to see a profit. Well done. So three things I had. You were very clear on the margin profile for next year. I'm just wondering for this year, Given the very slight loss in H1 and given that you are close to low teens in July, is it fair to assume Full year margin between 7% or 8% for the full year. Secondly, with inventories being so low, I understand there's lots of discounting going on. I'm just wondering if there's any pricing power that you can exercise. I mean, are you willing or are you able Increased prices on existing products in the market. And then thirdly, I really enjoyed your Sustainability tables by brand. And I'm just wondering if you have any internal targets on where the different brands should go to and If you're able to share some of that. Thank you. So I think as we get into the start of the year, I had an admission to Try to get the overall business margin for this year in this kind of 9% to 10%. And I think I probably said somewhere along the way, that was what I was pushing the business for. I think we'll be short of that because of what we the stall we saw in Q1 and the start of Q2, Erwin. But I still think we'll be in mid single digits full business for the year. So somewhere between 5%, 6%, 7%, maybe on the low end of your range is what I think you can expect for the full year. And you can do the math that says so that means we've got a meaningful kind of improving trend for Q3, which I've indicated. And I think Q4 will be slightly better than that. And really what it does, and we're on a senior team call this week, it really just sets us up for the story for next year, right? If you can exit In kind of that kind of low teens with a business that still has plenty of recovery coming and in full control of its cost structure. And the real question will be, can we manage margins, which is really your next question around pricing power, because we need to make sure that we're delivering on the gross margin side to let that all the way play out. And there is pricing, Robert. We're seeing general inflation price increases. We're seeing general inflation everywhere. To me, it's very real because there's underlying cost increases around labor and materials. And one thing I've always said is this is affecting this entire industry. It's not affecting Samsonite. And So we will be adjusting prices, and the whole industry will be adjusting prices. So there's clear pricing power in our brand, but it's also just Pricing power within the space. And we operate with decent margin profiles. Often, our small competitors have very Now smaller profit profiles, and so you can imagine the challenges of significant cost increases in shipping along with Raw materials and labor challenges, our positioning will be that much better to kind of manage that. And we are taking those actions. So we are Taking actions across regions as needed to make sure that we maintain the margin in the right place. And then I think there'll be The power with all that and there's a lot of uncertainty on things like shipping costs and when does that start to settle out, but the power of all that is there'll be moments where that starts to adjust and we'll be adjusting Within our brands, we won't take advantage of that. We will look to manage our margin profile in the right zip code, which is that historic run rate. The real kind of historical run rate for this business is 56%, 57%, and we're touching on that in June July right now. A lot of these pressures and costs will really carry into Q4 and Q1, and we're taking the actions as we speak and as we get into Q3 and Q4, so that we're well positioned for stepping into next year. And as far as internal targets, I'm still working with the teams on it. It will clearly be a story of growth. And just anecdotally, within one of the brands For innovations that I'm seeing, over 50% of the products that we're seeing for kind of new introductions just for scale are incorporating It's sustainable components. And so you can do the math to know that this thing will move. Tumi is a good example of a brand that's a little bit ahead of the pace. And so If Tumi is at 22% and Samsonite is at 10%, if Samsonite moves that direction, Tumi is continuing to move forward, It's not unreasonable that we're north of 25% of our products, not so far off in the future incorporating sustainable material. But the real question is where and how far can we take that. And we need a little more time as we continue to play it out, but it will continue to grow, And Erwin, to that point, you obviously know we have a base of products that have already been that are global runners that are selling. So For those, it's how do you introduce sustainability into it? Yes. And when you look at Magnum Eco and some of the others, so when you have new products Coming in, obviously, the mix of that is going to be a lot more driven towards sustainable and but then you have the existing product lines that you're trying to weave it in So I have in my office and you've been here before. I have, sitting right across from me, 19 degree polycarbonate for Tumi. Okay. Good. I have and this is an in line change that we've moved the shell to post consumer I mean post industrial polycarbonate into that And the liner made of RPE tape. And this will be an in line change that's a real runner for Tumi from a luggage perspective That we've now incorporated recycled material. And if I showed it to you, you would if I didn't tell you, you wouldn't know that we've made an in line change fully incorporating recycled material. And that's starting to work through many of our product lines. And maybe you don't get all the way on a shell right away, but we can get the liners right away. We're playing around with Dippers and dipper takes and using recycled components. We have a ton of work going on, on packaging to make sure that all of our packaging is maximizing Kind of a sustainable story. So there's a lot going on here, and I think you've heard me say over the last couple of calls, And the whole organization is engaged. So it just naturally is going to continue to move in a wonderful direction here, While delivering on everything that we always deliver on our products, durability, quality, stuff that's going to really last, which is And our long standing sustainability story, but then really giving materials a second purpose within our product. We're starting to really think about kind of the full circle and how do we recycle products. And so our European team is doing a lot of interesting Work with 3rd parties on the full circle and how do we kind of take things back and fully recycle. And I think that will be a wonderful story over the next 5 years as we continue to move on that front, too. So there's a lot going on here. I'm very excited about where we're going. Okay. Looking forward to it. Thanks a lot. Thanks, Edward. Thank you. And our next question comes from Louis Lee with Bank of America Hong Kong. Please go ahead. Thank you. Hi, thank you for taking my questions. So my first question is still on our expectation on the second half trend and the next year. So I remember that last time when we gave this guidance, I think The current situation is not that severe as now. So do I miss anything here? So we're still like very confident to So secondly, it's about our GP margin. So just to mention that Our GP margin improvement is partially due to the stocking up from the channels because We don't have enough inventories when market come back. So if this is the case, can we expect the GP margin So my last question is about the balance sheet. So do we have any plan to pay down Okay. So from a confidence perspective, I think my concluding comments also cautioned about everything that's around us. COVID is still here. It's still A challenge across markets. And so I do think we take those on board, but we're cautious about our counter forward views. But we're seeing markets Let the U. S. Continue and Europe continue. And I caution that Asia is going to take some more time. And that all factors into roughly these ranges that we're seeing. So I think where I sit today, I feel pretty good about the guidance, but I would also caution that the world is in a very different place today. And so We base it off of the trends we're seeing. We're basing it off of reactions, but we're not being super aggressive in our expectations. So I think it's just kind of the flow. I have my own models that say it could be better than what we're saying, and we're tending to manage I'd rather manage cautiously and manage the cost structure against that and over deliver, and that's kind of what we're thinking. But the reality is we're all watching this together. So we're going to need to see how it plays out in managing our levers, which is why I We're managing everything close to the vest still as far as costs go and cash flow and CapEx to just be cautious. But I do feel pretty comfortable with what we're seeing as far as outlook, particularly for The back half of this year. Again, next year, we'll see, but I think we're feeling very good there. First, gross margin growth, don't think that has anything to do with people buying in. Gross margin story is really around the transition from kind of rationalizing inventory levels And some discounting that was happening in the marketplace at the end of last year, really getting back to kind of the normal flow from margin perspective. And so Just because we're selling into wholesale customers, that's not being done in a way that's artificially driving up gross margin. So it really we're starting to get back into The normal course. A lot of the margin pressure last year was around reserving for inventories and really kind of taking more aggressive stances on obsolescence in getting ourselves in the right position. But we're really in stride now on margin. And so again, there's a lot coming at it on the gross margin But I feel very good that it's really a function of something that we can manage on a go forward basis. And then as far as that goes, as Reza said, we're going to pay $40,000,000 or so off of the spec sale. And we'll get to a moment where we step into next year, probably Q1, Q2, where we'll really be assessing what do we do because we're obviously sitting on Plenty of liquidity. I want to see us get into the zip codes of what I guided as we get into the start of next year before we Fully decide on that front, but you should expect sometime next year. I think ideally in the first half, they'd probably be some further debt Paydown, but we'll be kind of managing that closely. So okay. Hello? Thank you. Thanks a lot. Okay, great. Thanks. Great. Thank you very much, Karl and Reza, for your time. And I think this is a good point for us to conclude the call today. Thank you very much, everyone, for dialing in. And as usual, if you have any further questions, feel free to reach out to us. Thanks again for joining the call. Thanks again. I'll call the investor for the presentation. Okay. Thanks, everyone. Thanks for joining. Bye bye. Thank you. Thank you for your participation. This concludes the conference.