Good morning, good afternoon, and good evening, ladies and gentlemen. Welcome to the Samsonite International 2020 Q3 results earnings call. Please note that this event is being recorded. I would now like to hand the conference over to Mr. William Yue, Senior Director of Investor Relations. Thank you. Please go ahead, sir.
Thank you, operator. Thank you, everyone. Good morning, good evening, good afternoon. Today, we have our CEO, Kyle Gendreau, and our CFO, Reza Taleghani, with us to present our Q3 results. Without further ado, we'll have our CEO make a few opening statements. Thank you.
Great. Thanks, William. Thanks everyone for joining us. We're happy to present our Q3 numbers. I am on page four, William, and we'll start in. We are successfully managing this business through the pandemic. We are very actively managing as I think you felt off of our mid-year results, and that's continued. We've taken aggressive action on cost. As you'll see in our presentation, we've dramatically adjusted the cash burn of the business. You'll see a big change from Q2. We've got this business positioned for a successful navigation and step out from the pandemic. From a fixed cost perspective, fixed SG&A, in the quarter, we've reduced by approximately 40%, over $100 million in Q3 compared to Q3 of last year. Over $600 million of in-year cash savings, up from where we presented last, and we continue to make some strides.
That number is higher today than $600 million. The cash burn in Q3, as I said, improved by about $100 million. In Q2, our cash burn was $167. In Q3, our cash burn's around $68 million, almost at the same levels as what it was in Q3 of last year, despite sales being down still in the 60% range. We have significant liquidity, as we said. We all know we took early and clear action at the end of Q1 and Q2 to ensure that we had the balance sheet needed to navigate this thing. We've managed this business well and continue to have ample liquidity to navigate through the challenges in front of us. We're focused, and really when we start to get to a point where we can see recovery as we look forward to next year, we've continued to be focused on innovation.
I'll show you a few products. As you would expect, we've continued to focus on that, and we really are set up for some wonderful product launches in 2021 and 2022 as we see the business turning on. Some of these we've launched within this year, and I'll share some of that a little bit later. In all of our actions, we're starting to see the benefits, we'll show you the EBITDA progress. EBITDA in our largest region, Asia, is already positive for Q3, despite sales in Q3 still being down a little over 63%. That's continuing strongly into Q4. I'll also show you some China numbers, which has moved positive, probably ahead of all of our businesses from a country perspective. Moving to page five, really want to show you the trends. Okay?
We've seen a sequential improvement month-to-month in our business. From the floor in April down around 80% year-over-year. You can see that that's continued to trend positive every single month. As we step into October, we're down 58%. You can see when you really look at July through October, how dramatic that increase has been, down, call it 70% July, down 58% for October. As I sit today, November is looking and feeling like it'll be a similar number to October. That's with markets like Europe and the U.S. having a bit of a second surge with COVID-19. We still see this trend holding on. Moving to the next page, William. The mix of our business has been helpful. This page just captures, these are year-to-date numbers, the mix and how it's playing out.
As maybe you would expect, our e-com businesses perform better. Our e-com business is down around 41%, compared to the overall business down closer to 60%. Our retail business was down 63% year-over-year, and that's largely due to the impacts of closures. Mandated closures across the globe has had a bigger impact on our retail business. Our wholesale business year-to-date down around 57%, which had the same mix of store closures, but also within our wholesale numbers, there are e-retailers likes of Amazons of the world that have continued to be strong players and are having similar results to our e-com business on our own direct sites. Our travel and non-travel is performing slightly different. Our non-travel is down around 48%, versus our travel, as you'd expect, down a bit more at roughly 63%.
You can see the mix of our travel and non-travel getting a little closer to half and half as the business is gyrating. It's always been one of the strengths and one of the strategies we've had for the last several years as far as moving the non-travel component of our business up, and that's proven to be very helpful as we navigate. If I move to page seven, and I think the slides might be turning a little slow, so I'll just make sure I get the pace right. On page seven, I'm really pointing out what I would say are our core travel brands. As we all know, in our core travel brands, there's a mix of both travel and non-travel. You can see in Q2, our core travel brands were down 80%, and we've been seeing continuous progress month-to-month.
Q3 was down 67%, month of September down 61%. Really making progress on the travel side. You can see for sure in our non-travel brands, and I've got here Gregory Packs, eBags, and the reason we include eBags here is there's a good portion of non-travel bags within the eBags family of products that we're selling. You can see there it was down in Q2, just shy of 50%, and in Q3, down 26%. That mix has been very helpful for this business. For me, that's important, but the other big takeaway is our travel categories. Our travel brands continue to make progress from the lows we saw at the end of April to where we are September, continuing to improve into the month of October.
The next couple of slides just talk about what we're seeing for travel. I'm sure many of you are looking at this on your own as well. I've got two data points. One, this is our U.S. airport check-in. These are TSA check-in numbers. We've seen the average here for the U.S. market is around 2.5 million travelers in a day. We're seeing at the low in April, it was around 90,000. That was pretty low. It's worked its way back to, I think it was just this past week that we saw our travel numbers up to one million passengers a day. You can really see the progression here. Still quite off, right. This is kind of matching what we're seeing in our own business when we think about the overall trend in the business.
Impacts of recent surges in COVID, I do expect that overall, this trend should continue. The next page really looks at, we're using RPK as a good measure of travel here. The red line is, I'll make sure the page is flipped. I'm on page nine here. The red line is domestic travel, domestic travel really has been what's bolstering the recoveries that we've been seeing. That steady improvement that we've seen in our own business is really driven by domestic travel, which floored out at down 86% in April, down around 43% in September. Every month getting better. You can see international travel is stuck, right? There's been a slight improvement from the floor. Until we really get international travel moving, this number will stay down.
My personal view is you need vaccines start to move, and you need international borders to start to loosen up to see this international travel pick up. I do think that's coming, and I think the domestic will continue to improve. These are really, when you think about what's fueling that sequential recovery, these are important factors for us. The other thing we're seeing is parts of the world are moving at different paces, and we've put a China slide here. I'm on page 10. To give you a sense for China, which one will argue that's where the virus started, and the low of China was actually in February, not April, like the rest of the world, down 70%. A very steady improvement in China over the months. You can see in the last three months, very dramatic improvements.
If I looked at the total, which is the darker line, you can see these percentages. Down 50% in August, down 27% in September, down 18% in October. Really dramatic improvements in the business. You can see the orange line, which is our D2C channels, recovered fairly quickly, but really dramatic improvements there. We're just pinging Frank, who runs our China business, about Double 11 Day, and that's been a tremendous day for us. I think you will see a very strong November story for China as well. Equally as important, it's not on the page, China had shifted to profitability for us in June. Down 56% with the actions we've taken, we're back to making money. $1 million, it's sequentially grown. In the month of October, we've made $5.5 million off of a business down 18%.
That 5.5 is better than what we did last year within China for the month on an EBITDA basis. Really dramatic improvements, steady improvements in the recent months. I would say dramatic improvements in China. Moving to page 11, I think when we look at progress we've made on EBITDA progression and cash burn, one of the big drivers has been the initiatives we've had on changing the cost profile of the business. Very aggressively and very fast, we've moved the needle. We were happy to report in Q2 how fast we were able to move the needles when we were talking about the half with an overall SG&A down 47%. Dramatic reductions in our fixed SG&A, down just shy of $95 million. The overall cost structure, when we think about SG&A, down $157 million. That's continued into Q4, down roughly 47%.
Our fixed SG&A, which is the bottom section, down $101 million just in the quarter. Overall, we've reduced the cost structure by $178 million in the quarter. Building off of what we achieved in Q2. Reza will walk through more details on that in his section. This really is fueling how we're moving the needle on the EBITDA side. This is what we can control, and we are controlling it very aggressively. If I move to page 12, I think this slide's a very important slide. It captures the progress we've made from the start of pandemic to where we're sitting at the end of Q3. I would say against the trend lines that I've just talked about, that has an improving story as we move forward. You can see in Q2, we had a negative EBITDA of $127 million.
Asia had a negative EBITDA of $33 million, and we had a cash burn of $167 million. That cash burn, as we move to Q4, is approximately $100 million better. $67 million burn in Q4, ahead of our own expectations as we've really drove the business on the cash side. Our EBITDA dramatically improved from $127 million to $50 million from Q2 to Q3. You can see our overall Asia business in Q3 moving to positive EBITDA, $1.9 million. With a very steady story. July was down 1.1, August, +1.5 , September, +1.5 , October, positive $3.5 million roughly for Asia. A really testament to the efforts that all of our teams, and particularly Asia, has put in. With the business still down in this kind of 60% ZIP Code, we're off to making money in Asia.
I think all the rest of our regions aren't so far away from getting to break even and positive EBITDA, even as we have pressure on the top line. From a cash burn perspective, when I look at Q4, I think it'll be in a similar to slightly higher ZIP Code than what we saw in Q3. That's really around working capital timing. Working capital was heavily in our favor in Q3. You'll see it continue to improve in Q4, but maybe not at the same pace as we saw in Q3. Still heading in the right trajectory from a cash flow perspective for Q4. If I move to page 13, there's a few pages with a lot of words on them, but I'll talk you through them carefully. We have a lot of liquidity. We're at a $1.5 billion liquidity.
We knew when we took actions in Q1 and Q2, we needed to make sure we gave ourselves the runway to manage this business through, and we've clearly done that. I feel so confident in our liquidity position, what's in front of us, what we have to do that I know we can navigate this business through this, probably with plenty of capacity on the other side. If it stalls a little and recovery stalls a little, we still have capacity to manage this business through. Not only did we put the dollars on the balance sheet, but we've also got the covenant, as we talked about at the last earnings release, in the right place so that our next covenant measure is Q3 of 2021, and Reza will talk about that some more. I think we'll be in the right place from a covenant perspective as well.
We've seen massive actions from this comprehensive cost reduction on cash burn. Q1 cash burn was -$122 million. Q2 was $167 million. As I said, Q3 is around $68 million, and Q3 of last year was down $63 million. We actually have a quarter where our cash burn is about the same level as the prior year, which is really a testament to all the levers that we've pulled to manage the cash profile of this business, and I'll cover that on the next page in a little more detail. We've also, in Q3, saw meaningful impact from working capital.
I think one of the numbers that really stuck out to me is when you think about a business that's got sales down close to 60%, we've been able to move our inventory down almost $100 million year-over-year, which is a testament to our sourcing teams and our supplier organization that we're working very closely with to manage the inventory and the cash flow of the business. Moving to the next page. We are very focused on cash preservation, and I think equally, if not more important, we're very focused on saving initiatives that reposition the profit profile of this business, not only for navigating through what we're dealing with today, but also positioning this business so that when we step out the profit profile of this business will be in a better footing for sure.
Something as I stepped into the CEO role, I talked about looking to achieve. We will achieve this despite what we're facing. Where are we getting the cash savings and the fixed savings? Fixed operating expenses, down $310 million, and it's up $38 million from what we said at the half. We've continued to push the business to identify savings. Close to $40 million improvement just from three months earlier when we were talking about our half year results. Where is it coming from? Permanent headcount reductions. I'll cover that in a bit. Store closures for stores that we needed to close. I'll cover that in a bit. Really meaningful and hard work to do there, but we've done that.
We're getting the benefits of furloughs and salary reductions that all of our employees have taken, bonus elimination, rent abatements, and other temporary reductions that you'd expect an organization to do. We've not left anything unturned here. We've been very aggressive, as I think you'll see in our numbers. We had $130 million in annual advertising reduction. We just grabbed the lever. It's a lever we always knew we could grab, and we grabbed that and produced meaningful savings. As you know, we suspended our distribution to shareholders year over year, $125 million benefit. We virtually froze CapEx. We'll have the $90 million, I think it'll be a little higher than that versus our 2020 plan on CapEx savings. We've shut that valve down almost completely to put cash in the right place on our balance sheet. We continue to execute on savings actions.
We've identified, we're executing. There's a little more that we're executing in Q4. There's not anybody in this organization that isn't very focused on how do I achieve maximum savings. Equally as important, how do I retain them as we move into next year. We've become laser focused on ensuring that all of our savings that can stick, and I'll cover that in a second as well. Up and above the $600 million in in-year cash savings, which are really around actions, as I said earlier, we've had dramatic improvements in our working capital. That's up and above that triggered just on the inventory side, $100 million in benefit year-over-year. Moving to page 15, just a little bit more color on actions. We have taken this business on a journey to ensure savings and preserve cash.
We're repositioning our store portfolio, and we are very focused on sustaining profitability on a go forward basis that will have meaningful benefits as we get towards the end of next year for sure. We've taken very tough decisions. We talked about this last time. It's a little bit emotional when we talk about it, but we and our entire senior team and all of the managers in our business are taking the tough action to ensure we're in the right place. Our teams are engaged. Despite everything that's coming at us, they're energized. I'm spending a lot more time making sure that our teams feel the energy and feel where we can take this business, and it's really getting this position poised to capture the travel recovery, which will come for sure. The company's identified in-year savings, permanent savings of $64 million.
What's more important is those translate into annual run rate savings of $200 million, of which I think most of that will carry into next year. We've made amazing progress on streamlining the organization. This is tough work, but we've reduced our non-retail FTEs by 25% compared to last year. That's everybody stepping in. This is the entire organization having to get behind this, and it's tough stuff because often these are your colleagues and friends that you're doing, but we're repositioning and not afraid to take the actions we need to ensure the business is in the right place. We're taking aggressive actions on our store fleet. As you know, our retail business is around 25% of our sales, so it's not a huge portion of our business, but it's meaningful, and it's meaningful when the business comes under pressure, as you would expect.
We've taken action on, either through closures or heavy rent adjustments or renegotiation of leases over half, 53% of our retail footprint, and there'll be more to come as we continue to work here. We've closed, we physically closed through September, 146 stores. We have 74 other stores that we will exit early, either accelerating the end of their lease term, all of which will play out in Q4, maybe a tad will carry to Q1, but we're pushing the organization to get this done in Q4. We've successfully renegotiated 174 store leases. This continues. Just with what we've achieved there, that's $7 million in savings in annualized cash rent. All of that continues. Amazing progress across both the cost side and the retail side of the business.
Moving to the next page, and this is a little bit forward stepping before I turn it to Reza, because I wanted to walk through a few of these things because these continue in the business. Despite all the actions, we haven't lost focus on our commitment to sustainability. If you remember, right as this pandemic was starting, we had launched our Responsible Journey, which our entire company is behind and continues to be behind. My personal view is this sustainability focus will strengthen our long-term market position in the business, and have an impact to the world that we're working in. Our teams feel the same way as I do. It's becoming part of the culture of who we are.
We've always had it, but we've put laser focus on this, and our responsible journey really is around a global commitment to lead the industry in sustainability, and we continue to push. I'm really excited about when business really starts to turn on to step out on this footprint. Just to remind you, we're diverting water bottles in a meaningful way, and even though the business is down, we've continued to grow on this front. 63 million water bottles since we started in the middle of 2008, converted for Recyclex, which we're using in a lot of our materials. This number will grow substantially as we move forward. Our commitment to reduce our carbon footprint 15% a year through 2025. Our commitment to 100% renewable energy and achieving carbon neutral by 2025. All of that is very much intact.
Despite the business taking tough actions, we've not lost focus on our sustainability journey. Just a few products before I hand over. We're excited to be talking about products again because we're about to turn the corner here, in my view, as we step into next year. In the midst of everything going on, we launched a very exciting product called Proxis, made with our Roxkin technology. This is something we're producing internally in Hungary. It's an amazing product. We've launched it in Asia, in Europe in July. It had very good reception. Despite sales being down, the reception from the marketplace has been very strong. This will launch in U.S. and Latin America in 2021. We thought right to push it off and have the teams focused, and allow it to play out in Asia and Europe.
The reception, the media reception, the customer feedback, super strong. This product has components of recyclability and end-of-use programs that we're working with our customers. It's a virtually indestructible bag. The bag is amazing. I look forward to all of you getting to see it as you start moving around again. Our teams are very excited. Again, made in our Hungary facility. We've been very focused on with kind of current trends, what consumers are looking for. I'm on slide 18, and really thinking about where we are on antibacterial treatments and really incorporating antibacterial technology into our bags or our bags that help with antibacterial kind of points, which the world's been focused on. We're starting to work, and it's early days, but we're starting to work with very exciting antiviral technologies.
Our hope is we'll be able to incorporate that into our bags in future, but there's a lot of work to do here still. There is a world that's focused on this, and as you would expect, as industry leaders, we are here, and we are focused on this. I'm hopeful in the near future, you'll see us work that out, but we're being very careful on following the science and doing the right things here. Very exciting moments for us, and all of our regions are focused here, and there's more to come on this front from us. Just last thing before I hand to Reza, another very exciting product we launched when we think about our non-travel and our backpack business, and the progress, amazing progress we've had.
We've partnered with Jacquard by Google to launch Konnect-i, which is a backpack that's incorporating the Jacquard by Google technology, which is really around smart fabric technology where you can message to your phone and control your phone by the swipe of your hands on the handle. Some of this is worked into or on the shoulder strap. This is worked into some fabrics, I think it's perfectly suited for backpacks, hands-free movements. Just imagine being able to answer your phone, change your channels, take a photo by just touching the strap of your bag without having to dig your technology out. All really does make a meaningful impact from a technology perspective. I started to use one of these bags. I've traveled a bit in the U.S. over the last few months. It's quite exciting. It's maybe for tech-savvy.
I wouldn't call myself the most tech-savvy, but I think there's going to be a huge pickup on this. It really is a tech, so it's a real technology innovation in non-travel category. This is launching globally around the world, and the media pickup's been tremendously strong with this bag as well. Hopefully you get a chance to check that as well. Check it out online as well, too. That's out there on our sites and both in social media. With that's my update. I'll turn it to Reza to walk through some more of the details, and I'll come back at the end.
Thank you, Kyle. We're on page 21 of the materials. Starting with just the Q3 results overall. We're reporting sales of $327 million in the quarter, which is improved from Q2, where we reported $201 million. Really the story for the quarter is around cost and continued discipline in terms of making sure that we're rightsizing the business for the future. While sales in Q2 were down a little bit shy of 78% on constant currency terms, Q3 is still down 64.7%. Really when we work our way over to adjusted EBITDA, I think that's where we're very pleased with the results that we've been able to see that we're narrowing the gap and getting closer to breakeven.
Adjusted EBITDA for the quarter was down -51%, and that compared to, for those of you who were on the half call, for the half we had reported down -123%. Really material improvement, I think. That's largely driven by all of the cost cuts that we've been talking about and that you're continuing to see in the quarter. When we look at gross margin, I wanted to make a point of actually bifurcating what's been going on in terms of there is some increased reserves that are going in. Obviously we have a manufacturing facility, the three plants that work their way in that fixed cost base in gross margin.
The bullet point that you see on the bottom of gross margin is we did want to isolate for that and just make the point that if you're looking at the quarter backing that out, the gross margin would've been 54.9%, the percentage, as compared to a 58% number for the previous quarter. Really, it's mostly a shift in sales mix that would be the difference between that as you look at the different products and the brands that are performing. On a net income basis, it's largely the flow through of adjusted EBITDA, so we're reporting adjusted net income of -$99 million. If you compare that to the half, we were at -$173 million, so we are narrowing the gap there.
Really the flow through as you go between adjusted EBITDA to adjusted net income is most of you are aware that we did have increased borrowing costs that are working their way in, and that interest expense that is appearing there. On slide 22, just the breakdown of the Q3 sales by region. I think the message is all of the regions are still under strain. Obviously Asia is starting to perform a little bit better with some green shoots there as compared to some of the others. On a constant currency basis, if you're looking at Q3, North America down 64.3%, Asia down 63.4%, Europe down 65.7%, Latin America having a little bit of a tougher time with the virus down 74.2%. Again, if you're comparing it quarter after quarter, there is sequential improvement. Q2 North America was down 74%. Q2 Asia was down 75%.
Q2 Europe was down 85%. Latin America was down 94%. There is improvement, but this isn't really a sales story that we're focused on. It's very much focused in terms of what we're trying to do to manage the EBITDA. On slide 23, we did a little bit of a deeper dive on some of the themes that Kyle was talking about. Here we're looking at the air traffic within China specifically. There is a correlation. It's not a perfect correlation, but there is a correlation in terms of the growth of air traffic and how our business performs. We're looking at in the lines on here what's happening with China as it compares to Asia, and then looking at the bars and what's happening to traffic.
What you're starting to see is that as you work your way towards September, while we're still down year-over-year, you're starting to see some really good performance out of China, and that's flowing through to Asia. Overall for the quarter, so if you're looking at Q3 Asia, we were down, as I just said, down 63.4%, the trend is improving. That trend is continuing to improve as we look at October as well. Most meaningfully, and I think it bears repeating, even with Asia down 63.4% on sales, they've managed to post a positive EBITDA of $1.9 million, which really is a great feat in terms of what they've been able to do in terms of the cost structure. That's on the back of the SG&A.
That last bullet point on the page that looking at SG&A including the advertising and promotion, there is a decrease of $116 million overall. That's what's really driving this performance. Looking at the year-to-date numbers, net sales $1.1 billion of year-to-date numbers. Again, you see that there's a sequential improvement. Obviously Q1 was down 26%. Q2 really was the bottom where we hit almost 78% down with a slight rebound in Q3. As we look forward to Q4, it's getting slightly better, but as Kyle noted in his remarks, I think we have to be cautious as you look at what's happening with Europe and what's happening with the virus in the U.S. as well. Please rest assured that the levers that we have, we continue to push on.
We're very aggressive in terms of managing the cost structure, and I think the results for this quarter continue to show that. As we work over towards adjusted EBITDA overall year to date, adjusted EBITDA is negative $174, but that's largely on the back of what happened in Q2, and we're starting to narrow the gap as we get into Q3 and hopefully narrow it even further in Q4. Looking at year-to-date sales, again, this is just a breakdown of the year-to-date numbers across by region.
I think you're starting to see it's the same theme that every region is battling with the virus on slide 25. When we look at year-to-date, the good news is as you look at the quarter-over-quarter, Q3 is better than Q2, and we hope that Q4 will be a little bit better as well as we look at it across every region, and we expect Asia to do slightly better as compared to the others. On page 26, we put together an adjusted EBITDA bridge. You saw this in the last presentation as well. I think what we're looking at here is the year-to-date numbers, but I do think it bears just a couple of minutes for me to go through in terms of what the quarter improvement has been.
At the end of the day, the biggest story is when you have the sales that are falling off, that large bar is the gross profit decrease from lower sales. As we work our way from left to right, we're looking at the year-to-date numbers in 2019. There's a little bit of a minimal FX impact of $5 million. Really the large negative is coming from $857 million of gross profit decrease from lower sales. That number, if I was looking at it quarter after quarter, in Q2, there was about $401 million of negative impact. In Q3, that's now down to $329 million. There is a little bit of sales positivity, I would say, quarter-over-quarter that's coming in, but it's still a massive number.
I think the message here really is as you work your way to the right, you're battling a very tough sales environment. If you look at the green bars, that's the actions that we as a management team collectively have taken to try to make sure that we try to claw back. If we hadn't done anything between the gross profit decline from sales and the gross profit decline from the margin impact that we had, we would have been sitting here and saying that we would have been negative $594 million. Obviously, we're not sitting here and getting paid to sit on our hands. We've taken aggressive action.
The good news is we've taken that -$593 and clawed it away, as we work our way to the right to a -$173 number, which again, we hope to get to break even, then really positive numbers next year. The largest bar here is that fixed SG&A decrease. This is something that we have repeatedly talked about, and we're very pleased about because there's a component of natural SG&A that comes from the variable, that'll flex up and down with sales. I think what's really meaningful here is that 224 number. That 224 number, in Q2, we had $100 million of benefit. In Q3, we've added another $100 million of benefit to this bar. That fixed SG&A improvement is something that's going to reward us going into next year and beyond as well.
As we think about the EBITDA margin of this business, those actions are what really is going to help reset this business, both in terms of headcount reductions as well as what we've done in terms of rationalizing our store fleet. Going to the next slide, just to touch on some of the financial highlights on one or two pages. We've talked about net sales overall, each quarter, so I won't spend much time on that. The adjusted EBITDA for year-to-date September is that -$174. We're reporting an adjusted net loss of $271 million. Again, I think it bears noting that as you're looking at it from a quarter-after-quarter perspective, this is the year-to-date number. In Q1, that adjusted net income was -$38.6. In Q2, we added another -$134.5.
When we look at Q3, we're looking at a little bit shy of $100. You're looking at between $90 and $100 of remainder. We are narrowing the gap as we look at every subsequent quarter. In terms of restructuring charges and impairments, most of this we talked about on the last call. Again, I'll give you the quarterly breakdown because we're looking at a year to date number here. The year- to- date number here is $37.8 million. At the half, we reported $28.8 million. Really in this quarter, we have another $9 million of restructuring charges. Those restructuring charges are as a result of one-offs in terms of basically headcount reductions and store closures. As bad as they are, we don't like charges. The flip side is they do have run rate benefit to us as we go into the future.
As it relates to impairments, a de minimis amount for this quarter. Year- to- date, we're reporting $882.7 million. I think the important point of that is at the half, we had reported $877 million. In Q3, we just basically have an incremental $5.6 million of impairments that have to do with our IFRS 16 right of use assets. Moving on to page 28. I think it was a very important point and something that we're really proud of. Net working capital in September was $85.9 million lower than September of last year. If you think about that's not an easy thing to do when sales are down significantly. I think it's a testament to the team's discipline in terms of both the supply chain management, as well as working down the inventory levels that we were able to achieve that.
This CapEx number is something else that I think we are really proud of because oftentimes we get questions about what is truly maintenance CapEx versus what needs to be done. I think over the last two quarters, we have really displayed the fact that we do have the ability to throttle back the CapEx in this business. In Q2, you were looking at $2 million of CapEx, $2.3 million to be precise. In Q3, we had $1.2 million of CapEx. We are not starving the business. We are looking at it and just being very disciplined in terms of what really needs to be done. Obviously, if we had store openings and things like that, there would be a CapEx associated with that. In an environment where we are being very rational in terms of our store fleet, we are able to manage the CapEx aggressively as well.
Our net debt position is at $1.7 billion as of September. Most importantly, we have $1.5 billion of cash and cash equivalents and liquidity of about $1.5 billion. Those of you who've been following us and were on our Q1 call and our Q2 call, we were preparing for a scenario where we might have been burning anywhere close to $300 million a quarter of cash. We are nowhere near that. I think the really good news is if you look at this $1.5 billion, we feel very confident, and we said the same thing at Q2, we're going to repeat it here again, that this is absolutely adequate liquidity for us to get to the other side of this pandemic.
We hope to be able to show you that the insurance capital that we ended up taking up in terms of the Term Loan B, the incremental $600 million of borrowings that we took on, that we'll be able to repay that at some stage next year and reduce our debt levels as well. Kyle touched on cash burn. As you can tell, we're very proud of the number that we're posting for Q3. Q3 cash burn of $68 million. It's basically the same number we had last year. Last year, we were at $63 million. As we look in Q4, Kyle did mention this as well, Q4 will be somewhere in line with that. It'll be a little bit higher because we'll have some inventory build that we're doing as we prepare for sales for next year.
I think we feel really good about the actions we've taken on cash burn overall as well. On page 29, just a little bit of additional detail on the SG&A cuts that we talked about. $310 million of expected in-year savings. That's another $38 million that we're reporting this quarter. We've continued to find savings that actually hit us this year. As we look at it, really what we're happy about is what's that projection look like as we go next year. We have in-year permanent actions of $64, but given as the timing that those actions were taken, that translates to $184 million of annualized run rate savings. That's what you can expect if you're modeling us out into the future in terms of what the flow-through is going to be. That's the difference in terms of the SG&A structures that we see.
I'll get into this in a little bit greater detail, but I'll just preview it with you right now. We do get the question in terms of you've rationalized the store fleet, what's the impact of that on sales? In addition to this, there are other savings that we've also pulled back on that have a flow through. The EBITDA benefit that flows from this is basically the same number. The net of this is, even though you have some sales that are coming down, I think you should expect that as you look at next year, that this 184 number is something that projects on a run rate basis going forward as well. SG&A, including A&P, within the adjusted EBITDA number, decreased by $177 million, or 46.5% in Q3 compared to Q3 of 2019.
Again, the reason we're highlighting this with such emphasis here is it's one thing to say in Q2 and at the end of Q1 that we've taken actions that have the benefit. You're actually starting to see the numbers flow through the results now. Moving on to the next page, a little bit of greater detail on the SG&A. We've continued to identify and execute additional fixed cost savings. We have the $184 million of estimated annual run rate savings. Again, if you looked at the same slide from our last presentation, we were $128 million at the half, so we're pleased to have found even more savings from the last time we got together. The breakdown of this is coming from headcount reductions and store closures. We feel pretty good about our store fleet overall.
We've exited 146 stores so far. Another 74 are due to close as well, so you're looking at 220 total exits in aggregate. That's off of a store fleet of 1,294 at the end of the year. We feel pretty good that these are locations that we aren't taking actions on stores that we thought that would impact our revenue environment if you're looking next year or the year after. We looked at these as these were marginal stores. Given the performance that we were expecting over the next couple of years, we felt that it was prudent to exit these. We feel really good about the remaining store fleet that we have. There's still a very strong DTC strategy that we have. We feel that it's the right type of stores as well as the right locations as we look forward as well.
We're planning on actions on approximately 53% of our entire store fleet. Those stores that we haven't exited, we've renegotiated leases. So far we have 187 stores that we renegotiated rents. That was another improvement that we have from the last quarter. You start to see that benefit as well as you look at it in terms of our overall SG&A going forward. On page 32, this is a slide that Kyle touched on a little bit earlier as well, as you look at the sequential quarter-after-quarter improvement on fixed, variable, and A&P. The one point that I'll note on here is if you look at Q3 2020 versus Q2 2020, there is an increase on SG&A, even though it's a massive decrease. Please bear in mind where that comes from.
That's because we have incremental sales. The sales start to go up, the variable component of SG&A is a little bit higher. You see that $30.2 number in Q2 has grown to $41.1. That's not a bad thing. As you have higher sales, you have a higher variable, I think the important point here is looking at that fixed bar, that fixed bar in Q2 2020 of $155.1 is now down to $150.5. We hope to be in that zip code as we work our way forward as well. Moving to the balance sheet on slide 33. Again, we've talked about the cash burn a lot, so I won't spend a lot of time there. We feel pretty good about our liquidity position and where cash stands.
We took very aggressive action very early on in terms of shoring up the balance sheet and making sure that we have adequate liquidity. You're continuing to see that benefit here. The one thing that I would say is, as you think about our interest cost, it is a little bit inflated right now because we have incremental debt that we took on. We felt that that was prudent to do to make sure that we have ample liquidity to make it to the other side. As we work towards next year, we're going to revisit that at the appropriate time and figure out what we should do in terms of converting some of that cash and paying down debt as well. We remain very committed in terms of making sure that we maintain leverage coming out of on the other side of this pandemic.
On page 34, in terms of working capital. I'm sorry, before I move on to working capital, I should just make a note. We do get questions around covenants. Covenants have been suspended. The only thing that we're monitoring is a minimum liquidity of $500 million. With $1.5 of liquidity, we're triple where we need to be. The next time covenants get measured are this time next year. We feel pretty good about our trajectory of our business to be able to meet those covenants at that stage when we get there next year. In terms of working capital, I've touched on this already. Very good working capital quarter after quarter. We're seeing an improvement despite the weaker sales environment. We've highlighted the inventory numbers here, because inventory at September 30th was $95.5 million lower than the prior year period as well.
That working capital benefit really is coming from good work around inventory levels and inventory management despite the weaker sales environment. Page 35, again, if you look at the CapEx trend, this business, typically, if you look at us last year, thereabouts, we're doing $90 million-$100 million of CapEx as kind of a normal run rate benefit. We have said this consistently, that we do have the ability to dial back on it, and I think everyone can see based on the numbers that you see here. When we took the decision in Q1 that we're going to dial back, we dialed back aggressively. Year- to- date, we have $22.7 million of CapEx, and that would've been even lower if we wanted to dial things back in Q1. Q2 and Q3, you're talking, what, $3.5 million of CapEx over two quarters. We feel pretty good about that level overall.
With that, I'll turn it back to Kyle to talk about the outlook.
Great. Thanks, Reza. William, I'm on page 37, which is really, when I think about it, kind of near-term focus and I might say medium to long-term views as well. Just to recap, one of the things that we have been very focused on, and I would be remiss not to talk about this, is ensuring the safety and well-being of our employees, customers, all of our partners, continues to be a top priority in our company. We have varying offices opened around the world or reduced capacity. In Europe, we've seen a lot of recent closedowns. We've followed protocols across all of our business to ensure employees are safe as we manage our stores and our store fleets as they've kind of started to reopen over the last quarter, ensuring that that's set up the right way. We're doing the right things here.
It's a focus for all of our management team. We've taken, and as I think you've seen in this presentation, significant actions to preserve cash. We continue to focus on identifying and executing on permanent savings, and we've had tremendous success in reducing the fixed cost base of the business. We will hang on to it. One of the real tricks for this management team now as we step into next year is to ensure that these fixed cost benefits, we retain as much of them as we can, which really do reposition the profit profile of this business as we move forward. As I said earlier, reopening stores in a cost-effective and safe way, in an efficient way.
We're opening stores in many markets because our landlords are pushing or the centers we're in are pushing, and we need to make sure that as we're reopening, we're keeping people safe, but also ensuring that the profit profile or the cost of opening stores kind of lines up as we carefully open stores and get ready for when the world starts to move again. We're very focused there. Our retail teams and regional teams have been doing an excellent job here as well. Many of our restructuring actions impact our people. It impacts me and Reza. It impacts all of our senior team and all of our managers.
One of the things we need to do in this business and one of the real strengths of this business has always been the people we have and ensuring that our teams stay energized and empowered to navigate through this off the backdrop of some really heavy actions that we've had to take. I feel very strongly that our teams are in the right place and as I said earlier, I start to spend much of my time on ensuring our teams are in the right place and are feeling engaged and empowered, of which I'm very happy with our team. We do have a global platform with diverse products and product categories, and we talked about how the mix has impacted our business and how our way to market with different channels has impacted our business with very strong regional teams and regional focus.
That's always been one of the strengths of this business. As we see the world recovering and the world really getting back to travel, which I know the world is anxious to do. I know myself, I'm very anxious to start moving again. I think we're really well positioned to capture the business as it comes back, both on the travel side, the non-travel side, which has performed well across all of our channels. You'll see e-commerce as a bigger percentage of our business as we move forward. That will continue to grow. Our e-com teams across the globe have done amazing work, and I think we're well positioned with this balanced story that we had before going into COVID and on the coming out of this pandemic, I think the true colors of that diversity really show in this business.
We're very focused, as I said earlier, on the sustainability and innovation. There isn't a moment where we've stopped thinking about innovation and what's next for us. We might have slowed down the pace of what we're releasing to the market, but be assured in the background, we're laser focused on innovation, sustainability, and we're very excited as a company to really step out of pandemic with this as a wonderful foundation to come out with. The teams are very engaged here. I do think the marketplace will be disrupted. I do think there'll be smaller plays in the industry that struggle to kind of come out of this. It will remain competitive and remain fragmented. As you know, this market's very fragmented. I do think we'll have an upper hand in many markets as the competitive landscape's in a difficult place.
We'll be driving the business and should be in a position to gain market share as things turn on. Lastly, and Reza's hit it and I've hit it, what we've done to ensure liquidity and capacity to navigate through this has clearly paid out. We have excess capacity here, which I think is important. Even if COVID takes some stutter steps and we're looking at the news today, everybody's watching the news. Europe's in a difficult place. The U.S. market's in a difficult place, and other markets around the world as COVID-19 has a little bit of a resurgence in some steps. We've got plenty of the capacity to navigate. It will navigate. The vaccine news, I think all of you have seen our share price in the last few days.
Vaccine news about the world getting back to travel and the pent-up demand for travel really will bode well for this business. We're in a position that we can navigate to that with the liquidity we have. That's our presentation. We're very happy to turn it over to questions, William, and hopefully we've given you a good picture of where we are, and hopefully you've got a vibe for despite still being in a heavy situation, kind of the energy and the excitement that our company has as far as our ability to navigate through. I'm really excited for when people start to travel again. With that, William, I'll turn it back to you.
Thank you, Kyle and Reza, for your presentation. Before we take questions from callers, I'd like to go through a few questions that we've received online. Basically, they fall into two buckets here. The first one is around the savings. First question, how much of our SG&A savings came from furloughs? The question here is obviously, as stores reopen, and government reduce the support for these furlough programs, these savings will go away. That would have a bearing on cash burn going forward. Related to that, there are a couple of questions about how to think about cash burn going forward. Is Q3 cash burn a good number to use for modeling cash burn going forward? Looking ahead into 2021, do we think we'll be able to get back to positive cash burn?
Are we looking at possibly zero cash burn in the Q1 and then positive cash generation in the Q2? What will our priorities be as far as debt reduction or investment in CapEx and building up the business again?
William, why don't I take that and then Kyle can obviously chime in with his views as well. As it relates to SG&A, the numbers that we're talking about, so when we're talking about kind of run rate savings that are, quite honestly, fast approaching $200 million, those are the permanent reductions that are going to flow through to next year. When I talk about temporary savings, which is not included in that number, that's the furloughs. The point that I made as I was going quickly through my presentation as well is, yes, there are some reductions that happen in terms of stores that you would have a revenue impact as well.
It is safe for your modeling to assume that $180 million-$200 million, if you want to range it, that will be an EBITDA benefit because there's other savings such as the furloughs and other things. For instance, as Europe is shutting down, again, there's some temporary savings that you'll even see in Q1 of next year. Things like that, or shifts that we'll have in terms of our T&E and consulting spend and things like that. When you net all of that out, the net-net of it from an EBITDA perspective is that you should expect next year and beyond to have anywhere between $180 million - $200 million of EBITDA benefit that comes from permanent fixed reductions in SG&A. That's the way that I would think about the furlough piece of it. Essentially, we're excluding the furlough component when I'm giving you that number.
Where you would've seen the furlough numbers, where we're talking about in-year savings, and obviously the in-year savings are significant. When we talk about $600 million odd of in-year savings, that's where you see benefit from furlough, et cetera. It's on top of that. As you think about cash burn, where we've come to now is what I would say you have a normalized number, but working capital is the component that's going to shift. If you think about Q4, we will be anywhere in the same range to slightly higher in Q4 on cash burn, simply because we're expecting sales to pick up next year. We're going to be starting to take some orders in, and there's going to be some inventory that we're going to start to take. There is some seasonality in the business as well when it comes to working capital.
I think that cash burn number, and again, Q1 of next year, we're not expecting a wildly different sales environment to Q4. If you're thinking about cash burn in Q1 next year, it should be in the same sort of zip code as you're seeing in this quarter. Where you will start to see breakeven cash burn and start to see growth is really latter part of Q2 next year and then Q3 and beyond. That'll come in with the sales environment picking up again. Again, the reason we spent some time talking about China and Asia on this call is you're starting to see, even with sales down 50%-60%, you start to generate cash, you start to generate EBITDA. For the entire business, we expect that to start to happen really on the back end of kind of Q2 next year going into Q3.
Yeah, I think that's exactly right. We're going to stay disciplined next year. When you think about 2021, we're still in recovery mode, we'll be feeding the business and pushing the business, but from a cash flow and management perspective, we'll be keeping tight reins on all of that. From a thing like an advertising expense, which would arguably be an investment in the business, we're going to keep advertising at a similar percentage to what we're running today. As the business is recovering, we'll be feeding advertising in, but we're not going to get ahead of ourselves because I think recovery really is a building story for next year. Q1, Q2, Q3, every quarter should get sequentially better.
My personal view is vaccines will start to work out towards the end of the Q2 in a way that I think Q3 and Q4 will be better situations. I think as Reza rightly said, that's when you'll start to see cash burn turn back into cash generation with really strong discipline in managing the cash flows of the business. The key messaging I've had to the team is do not let our guard down at all. On the savings we've achieved and on the cash burn or cash generation opportunities as business, we need to be very focused right through next year, is the way we're managing the business. Okay, William?
Okay. Just one more question.
Yep.
Around KPIs for the team going both in the short term, the next year or so, and then in the long term, what are we looking at? What would be the team focused on in terms of KPIs?
Well, I would say for next year, it's what I just said. The organization, and when we think about next year, it's around achieving a level of EBITDA that I think we're able to achieve. I have the business very focused on that. Related to that, cash generation. It's the wrong moment to try to switch KPIs to revenue in an environment where we're not going to really be able to drive the revenues. It's a recovery zone. I think as we step back into 2022 and 2023, I think 2022 could be one of the best years for this business when we think about revenue starting to come back. Our profit profile dramatically improved from the initiatives we've achieved here.
What we really need to do in 2021 is retain as much of these savings as we can, allow the business to convert to cash generation again, and we all have the senior management team very focused on that. You'll have a guarded KPI for next year around profitability, cash generation, and then we'll start to turn it back into initiatives that'll drive the business. I wouldn't put it past us to start to put incentives around revenue growth tied to sustainability. This is thinking forward. This isn't concrete.
When I think about what really excites this whole organization, it's around how do we move the needle in this business, drive revenue growth while delivering on the story that I've talked about for several years, which is a profit profile that moves up above the mid-teens level, which I think this business has the capability of doing. That's too early to start to set those targets now, William. It'll really be as we come out of the recovery year of next year.
Thank you very much, Kyle. Operator, why don't we start taking questions from people calling in? Thank you.
Thank you. Ladies and gentlemen, we will now open for questions. If you'd like to register for any question, please press star one on your telephone. Thank you. Our first question comes from Erwan Rambourg with HSBC. Please go ahead. Thank you.
Yeah. Hi, gentlemen.
Erwan.
I hope you can hear me. Hi there. Maybe three follow-ups. I think, Kyle, you talked about the competitive landscape, still the market being competitive when the world will reopen. I'm just wondering if you've seen anything in the short term in terms of some of your competitors disappearing or some of your competitors resorting to sort of extreme actions in terms of discounting or anything that would move the needle in terms of the way you would think about the business overall. Secondly, I'm wondering if you can comment on what level or what timing you could go back to making money outside of Asia. I think it's incredibly impressive that you're actually managing positive EBITDA despite sales being down 63%. How do we need to think about other regions getting to that point where you're starting to make money again?
Then, sorry to be a bit short term, but any indications on how we should think about Q4 ending up in terms of sales declines and EBITDA levels? It seems that the business is basically improving by a few percentage points month after month. Should we basically draw a line there? Or is there anything we should have in mind for the short term? Thank you.
Okay. Why don't I take them and then Reza, just pipe in. From a competitive noise perspective, Erwan, as you know, there's not great visibility, but you can just get a sense for by the noise you hear on The Street. I do think some players will struggle to sort out their funding to pull out. We've not seen anything specifically, but anecdotally, I know that many players are wondering around their own liquidity challenges. If noise on The Street or noise in our wholesale customers or noise digitally are any indication, the marketplace has gone very quiet. In many ways, we're the only noise out there, and we've got ourselves really restrained on the spending. Sorry to not be more specific, but it's a general vibe that's clear in the marketplace.
I think there are brands around the world that are on some sort of life support. If you're a European brand, maybe you're getting more subsidy within Europe. That's not going to be a recipe for a strong recovery. Hopefully, you get on our tone. We're excited about a strong step out. I think many people are worrying if they're going to step out. I think that makes a big difference when I think about where we're sitting today. Moving to profitability and break even, which is really what we're pushing this business to. I would say we're getting very close across all of our regions on achieving profitability. Q4, it's hard to call at the moment. I think maybe a week ago, I would've been saying the trend continues. I think we're seeing Europe and the U.S. have a little bit more noise with COVID.
We're seeing Europe have some refresh lockdowns. I think there's a scenario where Q4 might look like Q3 from a sales perspective, maybe a tad better. Because if Europe and U.S. are taking a little bit of a stutter step, and it's really Europe more than the U.S., Asia is having a moment that continues to be strong. If Asia can continue its trend, it might just blend it out and we'll see that continued sequential improvement. Where I sit today, November feels like what the October number is. If that gives you any indication, maybe it slows down just a bit. I'm not so worried about a slowdown that takes a month or two because I think the overall trajectory will be fine. Hopefully that gives you a little bit of an insight for Q4. Our Q1 view is we should be able to get this business.
If we're able to get the business into, let's say, low to mid 50% decline, which I think is probably a realistic view for Q1. Again, we're not controlling the measures there, right? We'll all be watching what the world does. Let's say it plays that way, which isn't such a dramatic improvement from where we're trading right now. I think this business gets right up to the edge of break even, if not positive EBITDA consolidated. That's what we're shooting for. As you know, we're controlling everything we can. It really is a function of our sales down 50%, are they down 55%? We'll be right on the razor's edge, Erwan, which I think is a huge accomplishment. Can you imagine a business down in that 50% zip code, break even or making money?
I think our whole teams are very laser-focused on attempting to achieve that. I think we're going to get really close to it. When I look at month of October trading, every region is very close to what I would say, smelling distance to break even at down 58%.
Excellent. Very useful. Best of luck. Thanks.
Yep. Thank you.
Thank you. Our next question comes from Anne Ling with Jefferies in Hong Kong. Please go ahead. Thank you.
Hey. Hi, management team. I also want to talk about 4Q. Would you share with us? You just mentioned about the October trend to us. Would you give it a little bit more breakdown in terms of by market or certain key countries. You talk a lot about China, but what about, for example South Korea or some of the other markets? You share a little bit more with us the sales trend quarter to date. This is a key question that I have. Thank you.
It's a little bit forward, but maybe we'll give you some color by region. I think we can do that. How's that for October?
Yeah.
Yeah.
Kyle started to say it as we were just going through it. The trend right now, we covered Asia in detail. Asia's recovery is obviously being led by China, but the other Asia countries are starting to contribute. As you look about at October, it's not just the China story anymore. If you were looking at the Q, it was basically China was the reason that Asia ended up being at positive EBITDA. As you work your way into October and the early numbers for November as well, you're starting to see some recovery in some of the other countries. For instance, Korea is a good example where you're starting to see some better numbers. If you're looking at it on a regional level, Asia is starting to come out of it the fastest.
Europe was on a positive trajectory in Q2, but now they're actually lagging because they're going back into shutdown again. We started to see it in Germany, you started to see it in France. Belgium is obviously where our European headquarters is having some of the highest percentages of COVID cases. I would say Europe is probably the laggard as well as Latin America, which Latin America is one of our smaller businesses, but Latin America had a really tough time in Q2 just because everything was shut down. That one is starting to rebound in Q4, but it's a smaller number. I think what's meaningful is if you think about our direct-to-consumer business versus wholesale as well, because I think that's another important point, because what's driving the revenue declines is the fact that our stores are shut, our channels are shut.
There's still some wholesale because when we think about our wholesale channel, it includes some e-tailers such as Amazon and others. If you think about our North America business, North America Samsonite is doing better than North America Tumi because the Tumi stores are still lagging and there isn't as much traffic going right now. Just to recap it, as you think about Q4, you're going to see Asia up at the forefront. You're going to see North America Samsonite starting to come back and approaching break even. Europe is going to be a laggard as compared to the other regions. It doesn't mean that they're not narrowing the gap because they are, but just because things are being shut down.
Latin America is reversing its course from a really bad Q2 to slightly better in Q3 and Q4, I think is going to start to trend positive as well.
Yep.
Okay.
There's a very good chance our Q4 looks like what we're seeing at the end of Q3. Our own modeling would say Q4 is going to be 55%-56%. There's a very good chance it looks like 58% with what we're seeing in Europe. It's hard to call, right? Again, that's not so troubling for us because we've continued the trend. Even when you look at our Q3 numbers, a lot of what we achieved happened within Q3. The effects it'll have on Q4, will have a kind of building effect. I do expect our EBITDA profile to continue to improve in Q4, even if sales, we're talking points, even if sales are off a point or two, we're still going to see progress on the bottom line.
Off point or two are really around how the worlds are reacting to COVID, what's the period of lockdown, how does that progress.
I think it's still fair to say that if you think about sales, Q4 and Q1, we're not sitting here saying, "Oh my God, we're going to have a huge recovery in the next quarter or two." It's more of the same. If you were looking at the Q3 numbers, you just carry that forward with some level of recovery. That's probably the next couple of quarters. Then it's really on the back, and Kyle said this a little bit earlier, it's really on the back of there's a vaccine, people are starting to move, things are starting to feel better, things are starting to open up, where probably the back half of Q2 would be our guess, but it's a guess.
Yeah.
Is when you really start to see that.
I would say there is this kind of steady travel improvement, right? I think the world is becoming more attuned to how to manage with COVID. I think we see very slow but steady improvement in travel numbers. We're seeing it in Asia. There's domestic travel in Asia, for sure. We continue to see it in the U.S. I think Europe's going to have a little bit of a stutter step. All of that feeds into a story that allows the revenue number to continue to trickle in the right direction. I think the big wins are when people really start to get some confidence around vaccines and get their arms around. We're seeing some spikes in COVID today, but we also saw periods where we started to reverse that. I think when we get to that point, those will be exciting moments as well.
I think that will, as Reza said, start to play out in Q1, and for sure in Q2.
Okay, got it. Another question that I have is on the GP margin. When will we be able to see the GP margin recover back to the 50%-plus level or 55% in general? Yeah.
The reason I wanted to take a little bit of point of just to isolate the reason that you're seeing it at that lower number right now.
Yeah.
It gets a little bit muddy with the fact that we have manufacturing facilities and you have some inventory reserves and other things that are working its way into the number. The underlying number is already there. There's a little bit of sales mix that's there. It's not like we're discounting. We've been actually fairly disciplined in terms of the pricing of the product as well. It really is going to be, if you start to see beginning of next year, it's going to start to come back again. Again, I would look at it just in terms of backing that out and saying, "Well, what's the normalized run rate that I'm looking at for that GP margin right now?" I think that's the way that we look at it internally.
Okay.
Our total view for next year is we're back into the mid-50s gross margin. How that plays out by quarter, we're still cooking, but the total view for next year is we think we can get to that kind of normal mid-50s range.
Okay. Got it. Thank you.
Yep.
Thank you. Our next question comes from Dustin Wei with Morgan Stanley, Hong Kong. Please go ahead. Thank you.
Hi, Kyle, Reza, William. Thanks for taking my question. First question regarding the Asia break even. All the three major regions seeing sort of similar sales trend in the Q3, while Asia have much better sort of break even, a little profit. Is that because of better gross profit margin, or what's the reason behind?
Yeah. As you know, Asia was our highest margin business. It's a really good forward teller, right? When you really look at gross margin and EBITDA margin, Asia as a region has always had slightly higher margins. They get to positive faster than the other regions, largely because they've executed on the cost savings initiatives and have been able to kind of maintain their overall margin profile if you kind of weed out the noise. They get there faster, but it's a perfect telltale of the rest of the regions get there when the sales number just improves a bit more, right? It's not a surprise to us that Asia gets there a little bit ahead of the rest of the regions just because of the way the profit profile of the business works.
All right. That's great. Another question, a little detail on the China DTC that saw, I think, 30% growth in September. Is that because the pent-up demand or how should we read that number? Should we expect that China DTC continue to be a strong double digit?
Well, I think we're going to see a very strong China from Double 11, right? The early reads from our teams today is very strong. I do think there's some pent-up demand. I think China started to move a bit more. I think there was an extended, if I was talking to Frank, an extended back-to-school season in China that's played well. When you really look at the underlying China's starting to move in a more meaningful way, and that really started to show, I might say at the end of August, but clearly in September and as we stepped into October. I think it's a combination of all of that, Dustin, that feeds into the China business. China team is excited. They're hitting me with opening stores already, if you can imagine, because they're ready to go. We're being disciplined there.
There's a real story around how well China's been able to manage this. Domestic travel in China is a big piece of that market. As you see domestic travel around the world starting to recover, China's getting a good uplift from that as well.
All right. Thank you. Along that line, in terms of the e-commerce business for the group, what would be different after the pandemic? What's being changed now to strengthen the company's e-commerce?
I think we had really strong teams already, Dustin. I've been so happy with the organization and how we've positioned. In the midst of the pressure we've done, we've continued to do things like focus on our websites, improve speed, time. I think one of the things that's come out of pandemic, and we were already focused on it, and lots of companies were, is the allocation of your marketing spend ends up on the digital site. We're already moving there anyway. I think what you'll see as we come out is that we'll be that much more focused and attuned to your marketing spend being driven digitally. I've been happy with every one of our regions as far as what we've done.
Even Latin America, which I've talked about this before, was slightly behind the eight ball on. Its digital team and its allocation of marketing spend has made tremendous progress. I think when we look at markets like Brazil, that we're focused on variabilizing the cost structure in a big way, you're going to see digital and e-com be a huge piece of Latin America as it steps out. Our European team has just crushed it. The guy that runs that, Eduard, has done an amazing job. Not only is he driving Europe, but he's helping all of our business with the work that he's done on managing data and directing marketing spend, and being attuned to customers' requests and desires. I think we already had a strong team. I think it just laser focuses how we spend our money and how we drive.
I think at the end of or within Q3, our digital, our direct-to-consumer e-commerce business is around just starting to approach 15% of our sales. Last year, it was around 9.5% of our sales. I do think as this steps forward, you're going to see e-com as a percent of sales continue to be a stronger piece of our business. We know that the margin profiles there are better for the business. It's a starting point for where consumer shops. You'll see our digital spend and marketing spend be that much more focused. I think it's going to play out really well, Dustin.
Thank you very much. Last question on tariff. With the potential election result, would you sort of foresee that, the tariff that's being talked about in the trade, could that be called back? What's the progress in terms of the move of the supply chain? Thank you.
I'm not expecting big tariff changes off of the administration change. I do think the dialogue will improve. I do think there'll be chances in the medium term to end up with positioning that's more appropriate instead of standoffish. I don't think there'll be this kind of immediate shift. We're not so bothered by it, to be totally honest. It'll be helpful for us. We're approaching levels where we've shifted out of China for our North America business, well more than 50%, 60% of our business. I think my numbers for next year say we'll be sourcing less than 35% from China for the North America business. That was 95% two years ago. This team has really done an amazing job of shifting. The quality of what we're getting outside of China is as good as ever. I don't think it's going to have such an impact.
We're not sitting here hoping that it'd be nice to see some tariff relief and some tariff cleanup, but we don't need it to deliver the margins that I just talked about for next year. We are looking at GSP countries because those do matter, and those are up for renewal at the end of the year for the U.S. There are some countries that we shifted sourcing to that are subject to a GSP renewal. We expect that renewal to happen. Now, it might have a lag effect which has happened in the past, so we're watching that. If it has an impact, I think it'll be very short-term for us, and the team's already laser focused on that as well. Tariffs in and of themselves, we're managing this business as if they're here. If we get some relief from it'll be upside for us.
All right. That sounds good. Thank you very much.
Okay.
Thank you. Our next question comes from Liwei Ho with CICC. Please go ahead. Thank you.
Thank you, Kyle and Reza, for your hard work and efforts, congrats on the cost savings and the execution improvements. I've got three questions. The first one is to follow up on e-commerce. In the nine months of 2020, our e-commerce has already made up 21% of the total sales, up from 15%. What is the benchmark level going forward for the company? You talk about the margin advantages. Can you quantify that? How much OP margin for e-commerce can be higher than the offline channels? I'll ask the other two later.
I think I'm going to answer from a direction perspective. This isn't so different than what we were thinking already. I think we're just going to get there faster. I think there's no reason why our direct-to-consumer e-commerce business isn't in the 20%- 25% ZIP code. Maybe two years ago, I would've said 20%'s a good target. There's no reason why it probably doesn't get to 25% in the short to medium term. The other piece that is muddled into our wholesale business is our e-commerce wholesale customers are booming. When you blend that together with our own D2C e-commerce, you're going to find that kind of digitally getting to our consumers has become a big piece of our story. I think we're crushing it.
I think when I look at the content and the creation of content and media to not only support our own D2C, but our wholesale e-commerce customers really is going to move the needle. It was already heading there. I think it's just accelerated. I might set you a target of the 20%-25% range of our D2C e-commerce.
I can just interject there, just so you have the breakdown of it. What we're talking about is when you talk about that 21% number, about 13.3% of it is our D2C e-commerce business that Kyle was talking about, 7.7% of it is the wholesale piece. He's basically saying that 13.3 will grow to that 28.
Yeah. Just our D2C e-commerce. That's what I was focused on. Sorry. Thanks for that clarity. Yes. Our D2C e-commerce, which is at 13%-14% today, there's no reason why that doesn't get to 20%-25%. That overall 21%-22%, if you just do the math of that and assuming our digital customers and all of our wholesale customers are changing their game to focus digitally, and we're able to really support them very, very well. We show up with amazing products, but with content that they can really drive it on their own business will become a big piece of our story as well. Staff that will grow at the same kind of range of magnitude, in my opinion. From a profit profile perspective, our D2C e-commerce looks like our best retail store.
If you think about gross margin mix, and I'll let you do the math, so I'm not trying to give you an EBITDA margin, but from a gross margin perspective on a digital e-commerce, on a blended business, we're probably closer to 63%-65% against an overall gross margin of the business that's 55%. You can do the math to say as that kind of margin profile changes, that will have some effect. The flip side is as you grow your e-com business, your marketing spend mix increases. I'd mentioned just before we get into COVID-19, you should probably assume that our marketing spend over time as the mix changes probably goes up as well. It's not a straight pass-through of that margin dollars. You got to spend more on the advertising side to do that.
We're not talking major differences on the blended business. If we were at 6% or 7% advertising, I started to say a year ago, that might have to go to 7% or 8% advertising as the mix of our e-commerce business changes. There's a lot to cook out there. Overall, that will still have a blended gross margin, EBITDA margin impact in the long term for this business. Okay.
Got it. Thank you very much. Yep, that's good news.
Thank you.
yep, thanks. Next question is about the industry landscape. During the COVID, do we see people buying more luxurious luggage or cheaper luggage? To put into perspective, do we see better Tumi sales or better Samsonite sales, and how are we looking at it going forward post pandemic? That's about the industry price point change. Yep.
For us, some of it has to do with how channels are performing. I would say on balance, our Tumi brand and our Samsonite brand sales are running better than American Tourister sales. There's a slide I had in the presentation, you can go back to it, but you can see that there's a little more pressure on American Tourister. I think that's to do with as much kind of that consumer level, maybe not spending at the same levels. Maybe they're feeling more of the pinch of this as we see people on furlough and unemployment, but also the channels that that was being sold into have kind of shifted focus there. Travel is not as focused. I would say Samsonite and Tumi are performing better than American Tourister.
I think it's as much to do with the consumers as it is to do with the channels that we're selling in. Samsonite and Tumi, for example, are better positioned digitally than our American Tourister business is. I think there's more opportunity for that to expand for American Tourister as well. I think that's indicative of what we're seeing. I would tell you our non-travel, and I covered it in the presentation, has gone very well. Again, the mix of our business, non-travel to travel, is better in Tumi, better in Samsonite than it is in American Tourister. I think that's also linked why those brands are performing better. In markets like China, we're seeing booming sales for Tumi. We're seeing Samsonite very strong, and we sell American Tourister and our wholesale customers are slightly lagging in China.
Again, that's the same mix. There are moments where Tumi's up year-over-year. I think in the month of October or November, don't quote me on this exactly which month, Tumi's up year-over-year. Samsonite's not so far behind when your business was down only 18%. I think it gives you a little bit of a temperature that you're trying to get a read for. Tumi in North America is a victim of its heavy retail footprint. Retail traffic is down. E-com is doing really well for Tumi, but retail traffic in the U.S. is down. Tumi's slightly lagging our Samsonite business in the U.S., which has a better mix of wholesale, retail, and e-commerce. Again, channels really matter here as well. Again, all that's in the presentation.
If you look at it, I think you can do a little dissect to see exactly what I'm saying when you look at that brand page.
Got it. That is very clear. Yep. My last question is a housekeeping question. Don't you have the updated guidance for revenue and margins this year and next? Thank you.
That's a trickier story. I think we've given guidance for Q4. I think we've given you some indications for Q1. I do think next year is better. I think on a blended basis, next year, when you blend a tough start to Q1, Q2, some recovery in Q3 and Q4, but not recovering all the way back. There's no reason why next year isn't down 30%-40% to the 2019 numbers. That's because there's a building recovery going on. That's our best view. It's a hard one to put your thumbs on, because it's not fully in our control. That's how we're modeling the business so that we can make the right decisions. We will deliver positive EBITDA next year.
I guess the only indication I'll give you is if that's all improving and I think we can get to break even or positive in Q1, I think you can do the math to say we should have a good story next year. I think our exit run rate for the end of next year, I think will be a really wonderful moment for this business. If you just do the math, think about the savings that we've talked about, what sticks. I don't want to be so crystal clear on guidance because there's a lot of moving pieces, if that's okay.
Yep, got it. Thank you. That's very helpful.
Yep.
Thank you very much, everyone. Thank you, Kyle and Reza, for the presentation and the Q&A. We are getting close to the end of the presentation, so we will just wrap it up. Thanks, everyone, for dialing in tonight. Thank you.
Yeah, really appreciate it, everyone. As always, you can get to William with questions, and we really appreciate everybody's support. Thanks for the feedback and questions, too.
Thank you.
Thanks, William.
Thank you. Thank you for participation. This concludes the conference.