Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the Samsonite International 2023 Third Quarter 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 very much, operator, and thank you everyone for taking the time to join the call. Today, we have our CEO, Kyle Gendreau, and our CFO, Reza Taleghani, here to present the results. To kick off, Kyle will make some opening comments. Thank you.
Okay. Thanks, everyone, for joining us for our Q3 results. I'm starting on slide 5. I think the way to sum up is we had an outstanding Q3 for Samsonite International. Our momentum from the first half carried very strongly into Q3, driving significant improvements in financial performance. I would label it record performance on many fronts. We achieved record Q3 results in net sales. Our gross margin, Adjusted EBITDA, Adjusted EBITDA margin, and our adjusted net income were all tremendous, as I'll walk through in a second. The strong growth came across all of our leading brands, particular strength in our higher-margin brands, Tumi and Samsonite, but all brands delivering tremendous growth. We'll show you that.
Our gross margin was at a record level, too, 59.6, and Adjusted EBITDA margin at 20.3%, really both reaching record highs. We had strong cash flow in the quarter, $89 million of free cash flow, in Q3, which importantly allowed us to continue to delever the business. Our net debt was $1.2 billion, and was $159 million lower than Q3 of last year. And our total leverage ratio is now below 2 times at 1.81 times, for September of 2023. This is the lowest level of our net debt position since the acquisition of TUMI, which is why we put that on the books in the first place. From a business update perspective, I'm on slide 7.
Just in a page, to give you a real sense for the record performance. Net sales, $958 million for the quarter, up 21.2% to Q2 of 2022 and up 22.4% from the same quarter—I mean, sorry, Q3, in Q3 of 2019. Adjusted EBITDA of $194 million. EBITDA margin, as I just said, 20.3%. That's up 330 basis points to last year, and even more important, up almost 600 basis points to Q3 2019. So real transformation and profit profile of the business, clearly carrying through from what you saw in Q2, even stronger in Q3. Adjusted net income of $126 million, almost double, what it was at Q3 of last year, and meaningful growth from 2019.
Our gross margin, $571 million, 59.6%, up 460 basis points to last year, and versus 2019 Q3, up 390 basis points. Our A&P spend was $59 million. As you know, we're leaning into A&P. We spent 6.2% on net sales in Q3. You'll see a slightly higher number in Q4, just timing of when we're spending these dollars. For a full year, that'll be a little over 6.5%, and that's up 130 basis points to 2019 and up from last year as well. So importantly, as you look at the EBITDA margins, this, with us continuing to increase the advertising spend. And then fixed SG&A, and as you know, we've transformed the cost structure of this business.
Fixed SG&A, $250 million, importantly, 22.4% of net sales, 490 basis points better than 2019, and continuing to deliver leverage off of Q3 of 2022 as well, up 20 basis points. On slide 8, just another look at the numbers. And again, I think the piece I would take away is we have underlying industry trends that are strong, but our initiatives and everything that we're driving are pushing the business further. So you can see our sales number from $791 million up to $958 million. You can see the gross margin, really transformative from last year and from 2019. 55% gross margin last year to 59.6%.
As our higher-margin brands, TUMI, Samsonite, and Asia, really comes back in line, from a growth driver perspective, you can really see the margin benefits of that, in the rates. Adjusted EBITDA was 17% last year, 20.3% this year, up 45% year-over-year. And adjusted net income, as I said, almost double what it was from Q3 of 2023. So again, record results. On page 9, I think, one of the things you need to think about in this business when you're looking at us and you're, and you're looking at what we're doing to set the pace for growth drivers in this business, this more efficient cost structure we've achieved, coupled with the higher gross margins, really allowing us to push this business. So you're seeing us lean in.
Our year-to-date advertising spend up 140 basis points to prior year. You'll continue to see us push the advertising spend as we drive the business. And while we're doing that, we're still delivering growth in our Adjusted EBITDA margin. And we're really set to continue to capitalize on the growth momentums and opportunities in our business across all of our brands, particularly higher-margin brands, TUMI and Samsonite, which are moving at tremendous paces. On slide 10, this. We've shown this slide before, but I think just to kind of level set the year-to-date numbers and the performance that we're seeing on the overall profit profile of the business. On an as-reported basis, our sales versus 2019 are up 57%. I mean, $57 million.
As you know, we took out things like our Speck business, Russia business, and other small adjustments within the business. And so on a sales that's up $57 million in that time period, our EBITDA is up $181 million. So real transformation in profit. And the year-to-date EBITDA margins, so year-to-date Q3, we're already at 19.3%, and that's up from 13% in 2019, and good progress from last year, where we started to show, and signal what we were able to achieve on the EBITDA, but still tremendous growth, from last year, from a margin perspective as well. By brand, I'm on page 11. By brand, we see strong growth across the board. I might tell you, stronger growth in our higher-end brands.
So TUMI, in the middle of the page, up 44% to last year. Samsonite, our biggest brand, up 37%, with really tremendous growth. And American Tourister, at the entry-level branded space, still up meaningfully at 34.5%. So all of our three core brands are delivering tremendous growth and pushing the business forward. And some of our sub-brands are delivering in the same zip code. Gregory, up 23%, Lipault, 24%. All of our other brands up 15%. There's nothing in our portfolio that isn't moving in a positive way. But you can see the clear focus on driving our core brands is delivering overall growth for the business. On slide 12, I thought I'd give you a deeper dive on brand TUMI. So this is year to date.
You can see year to date, we added $186 million of sales for TUMI, up 44%, driven across every one of our regions. Core North America, up 31.6%. Asia, really turning on from last year to this year, up 70%, with real strong momentum into Q4. Our Europe business up 44% as we start to lay some retail footprint for TUMI within the region and the business, and the brand really establishing itself more and more within the European business. In Latin America, up 75% as we start to penetrate in the key cities within Latin America, and tremendous growth opportunities going forward as well. So you can really see this dynamic shift in TUMI. As a percent of sales from 2019, TUMI was roughly 20% of our business.
Going into 2023, it's 24% of our business. And you can imagine the margin effects of that moving the overall margins of the business up. In that same time period, we've moved TUMI's margins up 300 basis points from 2019 to 2023 as well. So really fueling a very strong growth story for us on both the top line and bottom line. On slide 13, I'll give you a view on Samsonite, where we added $343 million in sales, up 37% from last year to this year. Every region delivering. More mature North American business delivering 16% growth. Asia, as it turns out, 84% growth, with tremendous momentum into Q4. Europe, up 24%, and Latin America, up 33%.
This premium position brand continues to deliver tremendous growth as the business continue to recover across all markets. On slide 14, you know, we talked a lot during pandemic and what we were doing to manage the business and navigate with our retail fleet, but we're back to opening selective store expansions across the globe, as you'd expect. We've added 24 Samsonite stores. We've added 12 TUMI stores, with more stores to come before we finish the year. Asia added 18 new Samsonite stores and 6 TUMI stores. This is where you should expect to see the bulk of our retail expansion, but Europe is adding stores as well.
Four stores with four company stores for Samsonite and two TUMI stores added in the period, and you should expect the pace of TUMI stores to continue to grow within Europe as well. Blended, we have 1,021 stores in the fleet, and if you remember, in pre-pandemic, we were close to 1,300 stores. So, we're carefully adding, and it's delivering on the growth side as well. And I think importantly, comp growth, which isn't on the page, but our TUMI comp growth year over year, you'd expect it to be high 30-almost 35%, and Samsonite comp growth 37%. So these stores in the existing store fleet are really delivering very strong growth. Just a couple of snapshots on stores.
You know, I think it's a key growth area for Asia, for sure. You can see, and on page 15, you can see a new Kuala Lumpur, Malaysia store opened September of this year. Tremendous store with their latest Manifest fit out. You can see a Shenzhen, China store opened in August 2023. A great store and a great location. On page 16, you can see within Asia, I mean, within Europe, we have new Samsonite stores opening. A lot of stores we had closed during the pandemic, we're starting to very selectively open stores. This is a store in Nice, France, opened in June. And then we have a new TUMI Store in Brussels, Belgium, opened in March 2023. So we're really excited about this careful expansion across Asia and Europe as well.
On page 17, this is a tremendous store in a very high traffic Harbour City mall in Hong Kong. I visited this store maybe three months back, really right at the time it was opening. It opened in July of 2023. And this is an open concept store, and it was packed, and it's literally become the top-selling store within this Hong Kong market. And it's only been open for a handful of months and continues to trend very, very positively. And then lastly, we're refreshing a lot of stores. And so this is a good example of New York City. I'm on page 18. This is our Madison Avenue store, and we relocated from 610 Madison Avenue to 575 Madison Avenue.
This store just opened in the last couple of weeks. I was there last week to see this store. Tremendous store, tremendous traffic. It'll be one of our, you know, highest performing stores within the New York market. And it was super busy when I was there, which is exciting at 10:30 A.M. So and you can really see what we can do when we uplift and refresh stores with the newest concept. So I'm very excited about what we're doing on that front.... And then this business, as we step into advertising and push to support the growth drivers of this business across all of our brands, particularly our key core brands, we're, we're advertising strongly and consistently across the globe. Our year-to-date B2C e-commerce is up 44% to last year across all brands.
You can see Samsonite in the middle. I mean, on the side. You can—American Tourister in the middle, focused on color and fun, and really this kind of terrific TUMI advertising we're doing, both on core products and materials and collaborations, which are driving all of our brands. If I go to the next slide, just a quick look, just a tiny taste of what we're doing as we, as we push the business and brands in a, in a competitive space that people aren't able to do the same thing as we're doing. And so you can see Casper Ruud on the, on the left side of the page with, Samsonite. This is our Proxis bag. This has been tremendously successful. We just launched a Boss Samsonite collaboration.
This product's amazing, and we'll start to kind of roll out around the world as we step into the start of next year. This has been tremendously well-received and very exciting. You can see our long-standing TUMI McLaren collaboration, which continues and been tremendously successful. Even American Tourister, and this is a local cricket star within India, really driving the needle, with our India business that continues to move with tremendous momentum. So with that, and I went through that fairly quickly, Reza will walk through some financial highlights, and I'll come back right at the end with some overview and outlook. Off to you, Reza.
Thanks. Thank you so much, Kyle. We're looking at the page at record Q3 results, as Kyle just mentioned. Record sales, record gross margin, record adjusted EBITDA, record adjusted net income. Net sales up $167 million, which is 21% constant currency to Q3 of last year. Q3 2022 gross margin percentage at 59.6%. Also record, nearly 400 basis points better than the same figure for last year. Gross margin has been a great story for us this year, and we're able to maintain that discipline around pricing, and that's helped us in this quarter. Adjusted EBITDA margin, a record 20.3%, delivering on tremendous adjusted EBITDA of $194 million.
$60 million improvement or 44% improvement in Adjusted EBITDA year-over-year. And that basically has rolled into Adjusted Net Income with $126 million of Adjusted Net Income, nearly 93% and 94% better than the same period last year. And moving to the next page, you can really just see just quarter after quarter after quarter as this business has continued to deliver. And the strength that we saw in Q2 of this year has continued to Q3, and then some. So you can see it both in terms of sales, gross margin trends. We're continuing to maintain that mid-59% level of gross margin percentage. The Adjusted EBITDA margin trends just continue to tick upwards.
Advertising, we invested $15 million more year-over-year as compared to last year. It was 6.2% this quarter. We wanted it to be a little bit higher, but you should just expect us to continue to invest in advertising as we enter Q4 as well. Moving to the financial highlights, let's start with Fixed SG&A, which is a point that we've been raising for, you know, well over a year and a half now. This business is completely rerated in terms of the profit profile, and it's largely off the back of the Fixed SG&A structure that we have, along with improved sales performance and gross margin as well. Fixed SG&A expenses for the quarter were 22.4% of net sales, almost a 5% improvement over Q3 of 2019.
Very efficient operating structure in place. Advertising spend was $59 million in the quarter, 6.2% of sales. As I just mentioned, $15 million increase from Q3 of last year. Our net debt position, we are very proud of the overall leverage profile of the business, which has now ticked down to 1.81 turns. Net debt position, $1.2 billion, just over $1.2 billion as of September. And as the strong profitability continued, we had another voluntary debt repayment of $70 million. If you add that to the required amortization of $6.5 million that we had in the quarter, we paid down gross debt by $76.5 million.
Obviously, with the improved EBITDA as well, our net leverage is now down to 1.81 times, a number that we haven't seen since debt was put on for the acquisition of TUMI back in 2016. While doing that, we've maintained ample liquidity, over $1.4 billion of liquidity still. Most of the debt repayments that we've had, we've paid down mostly under the revolver. Although, as we move forward, the revolver is going to be fully paid off, and we'll start looking at other options for delevering as well. The good news is we have plenty of pre-payable debt to continue to do that.
We have strong free cash flow generation, $89 million in the quarter, $152 million year to date, which is really enabling us to do this and to continue to invest in the business in select areas, as Kyle just outlined. Moving to slide 25, just really amazing sales across every single region. Here you're seeing the growth versus 2022. If you're looking at our Asia business versus 2022, almost 70% constant currency growth in Asia, almost 20% in North America. Europe, just a tad over 20%, so 20.9%, almost 21%, constant currency growth year to date, and Latin America, 23.3%.
If I were to give you versus 2019, just for the quarter, we had it a little bit earlier, but just to recap, Asia Q3 was 24.4% above 2019 levels. North America, if we were to exclude our eBags business or the other third-party brands, it was then up 15.3% for North America. Europe, up 31% in the quarter versus 2019, and Latin America, an amazing 65.1% up in the quarter as well. So let's get into the regions in a little bit greater detail on, on, on the next few slides. First off, just, just looking at our Asia business, where the rebound has been, has been really, really great, as the markets continue to open up.
Asia, as you may recall, last year, was the laggard, with China still relatively closed and some of the other markets closed as well. Year-to-date sales up almost 70% from the prior year and 20.1% better than year-to-date 2019. We're continuing to invest in advertising and obviously, our Asia business has a higher EBITDA margin profile, and at almost 25% year to date, well ahead of where the business has been previously, not only in terms of last year at 18.6%, but you know, nearly 4.1% better than 2019 as well.
As you look at the quarter, some of the larger countries that were driving improvement, if I were to give you the numbers versus 2019, India continues to perform up 65% in the quarter compared to 2019. China is running almost 14% ahead of 2019 in the quarter. And Korea, Japan, Australia, all of them contributing as well. Australia, up 18%, Japan up 10%, and Korea almost up 4% as well. Still waiting for the Chinese travelers for that market. So overall, all of Asia has really started to come back again.
Although one of the good things is, we didn't see a huge peak rebound come, and it's been basically coming in and trickling in over the course of the year, and we expect that to continue over the coming quarters and into next year as well. North America on the next slide. North America was one of the first businesses to basically rebound out of the pandemic, and now we're approaching a much more normalized growth level, although still very, very healthy compared to what we estimate market growth to be. So, if we're looking at the net sales overall, North America delivering $932 million of sales, up almost 20% over the prior year and 9.8% versus year-to-date September 2019, after adjusting for eBags, as we discussed.
Strong sales, especially on our higher margin TUMI brand, which has really helped the overall margin profile of the business. Samsonite performing as well. And those higher growth margin, lower fixed SG&A, has really enabled the EBITDA margin to be completely transformed. This is one of the regions where you really have seen that, that profit profile shift. You know, year to date, September 2019, just shy of 12% EBITDA margin. We are now running at 20.2%, for the same period in 2023. Moving on to the next slide.
Looking at Europe, as you may recall, in Q2, we were talking about how we had implemented a new warehouse management system in Europe and how some of the sales had been depressed as a result, even though Q2 was still very, very strong in Europe, with 24.1% growth versus 2019. In Q3, we actually saw some catch-up happen, so it actually accelerated even further than a normalized growth in Q3. So Q3, Europe was up 31% versus 2019, delivering almost $580 million of year-to-date sales. And year-to-date sales were up almost 21%, 20.9% from the prior year, and 28.2% versus year-to-date 2019 overall.
Adjusted EBITDA, almost $104 million, $103.5 million, versus $67.3 million in 2019. That's an EBITDA margin of approximately 18%, 17.9% total, for the European business overall. And again, although we're looking at selective investments, especially in growing some of our TUMI footprints in the region, we're still being very, very disciplined on the cost structure to deliver that profit profile. And finally, Latin America. Latin America was a business that five years ago, when we were talking about it, was basically at a break-even level. So if you look at the numbers, year to date, September 2019, down 2.5.
You're looking at -2.4% EBITDA margin at that time on sales of about $123 million. This year, completely transformed business. You're looking at $20.5 million real contribution from Latin America in terms of adjusted EBITDA, and that's a margin of 13.3%. And we're continuing to invest in that business, so you're gonna see continued investment in advertising. So, so year-to-date advertising spend was 5.6% this year, compared to 3.7% in 2022. If you're looking at those two bars on the right-hand side of the page, but overall, net sales up 23.3% compared to the prior year, 68% versus year-to-date 2019. Moving on to the next slide.
One of the focus areas for us has been just continuing to grow our DTC channels, specifically e-commerce, and then judiciously expanding our store footprint as well. But one of the things that we did in the pandemic was to transform and relaunch most of the back-end systems for our e-commerce platforms throughout the globe and revamping our digital websites in most regions. So if you're looking at the comparison of net sales by channel, DTC e-commerce growth year over year, year to date, September 2022, versus year to date, September 2023. Year to date growth of 44.2% in DTC e-commerce. Retail growth of 42.5% year over year, with wholesale growing about 32.5%.
So, we're continuing to try to grow that size of the pie as it relates to our e-commerce channels, as well as our DTC stores as well. And largely, that has been off the back of comp store growth, which Kyle alluded to on one of his slides. And we're seeing some selective store growth as well. Moving on to the next slide, just in terms of what is selling, travel products have continued to represent approximately two-thirds of the net sales. We're continuing, and that is both in the business travel segments as well as the leisure. Both are extremely robust. Year-to-date, September 2022, we had just over $2 billion of non-travel growth.
And now we're looking at, sorry, non-travel component of that was $708 million or roughly 34.4%. And that's from the year-to-date, September 2023, to $915.5 million on a year-to-date sales number of $2.7 billion or 33.5%. So that split has remained relatively constant, but we expect basically the business travel segment to continue to be robust as we go into 2024. But we're continuing to push through innovation on our non-travel segments to continue that portion of the pie as well.
There's still a lot of TAM available for the non-travel segment, and so that's an area where we have a lot of focus, both in terms of backpacks, briefcases, non-structured travel products, such as duffels, et cetera, and trying to continue to grow that portion of the pie. Moving on to the next slide, Fixed SG&A, something we're extremely proud of, and what we have committed to, and you're continuing to see the trend here, is that that Fixed SG&A, as a percentage of sales, will continue to improve, delivering operating leverage as we grow sales. And you saw this, if you're looking at the year-to-date, September 2019 period, 27.9% as a percentage of sales was the Fixed SG&A component. As we're looking at it in this year-to-date period, we're down to 22.8%.
That's almost a 200 basis point improvement from even last year, where we were at 24.8% as well. So fixed SG&A expenses as a percentage of net sales continue to improve. Variable selling expenses did increase $91 million from the prior year, but that's a large. That's due to the growth in net sales, as you would expect. And the other area of SG&A, obviously, advertising expense increased $71 million from a relatively low spend last year. That's an area that we're focused to and continuing to grow, and we plan to grow going into next year as well to invest in our brand. Looking at the balance sheet, we highlighted a couple of items on this page. Obviously, you'll recall from our...
One of our earlier earnings calls this year, we did refinance all of our debt, pushing out the at least all of the pro rata facilities. We do have some euro bonds that are still on the books as well, but we've extended all of those maturities five years. But most importantly, those maturities are prepayable, and we continue to delever. As I just finished mentioning a little bit earlier, calculated net leverage down to 1.8 terms of leverage, a very, very healthy number. You can see in the year-to-date period, we've circled it on the page, total borrowings are down $365 million year-over-year compared to last year.
We did approximately $76.5 million of it just in this quarter alone, with very healthy cash levels and continued ample liquidity as well for the business, as we had touched on a little bit earlier. In the next page, free cash flow generation continue to improve. So as you're seeing, Q1, we did have some inventory levels. As you may recall, we're very focused on making sure that we have ample inventory to deliver on the sales. And as you look at the subsequent quarters of Q2, Q3, we've generated good cash flow numbers, $125 million in Q2 and almost $89 million of cash flow generation in Q3 as well.
We continue to use that excess cash flow to delever the business, after investing in our stores. And you'll note shortly that we've also improved in terms of the amount of CapEx that we're putting into store remodels as well. Moving on to the next slide, net working capital efficiency. Inventory this year, September thirtieth, was $178 million higher than the low levels at the same time last year. Again, that is intentional. We have been building up healthy inventory levels to make sure that we are in a good position to take advantage of the recovery in demand that we're seeing on a global level. But as time goes on, you can continue to expect us to improve our net working capital efficiency.
Right now, net working capital, as a percentage of net sales is at 15.2%. That's trending towards our targeted level of 14%, and you should expect us to do that through continuing to basically manage the supply teams and making sure that we continue to look at our product purchases to wind that down as we continue to deliver on sales. CapEx year to date, this is on the next slide. CapEx at $49.1 million year to date. As you may recall, our normal run on CapEx historically has been around $100 million, $100 million-$110 million historically.
We have been ramping up CapEx over the course of this year, specifically, trying to make sure that we're in a good position to refresh stores that have not been touched for a while. Typically, when we refurbish a store, we see an uplift in sales and demand as well. And so we felt that it was very important to refresh our stores. We're continuing to do that in terms of investments. We've also put in a significant amount of CapEx in terms of our own factories. As many of you know, we have three owned factories, two that are in Europe and one in India, and we've invested in the capacity expansion there. And overall, we'll continue to invest in software and some other core areas as well.
With that, Kyle, I'll turn it over to you to touch on the outlook, and then we can open it up for questions.
Thank you. Ladies and gentlemen, the question and answer session will now begin.
No, I'm going to... Sorry, I was on mute. Kyle here. I'm going to do a quick update. Outlook. Sorry, operator.
Okay, everybody with me? So as we close out the year and look into 2024, a couple of things to think about. One, outbound travel for China, which is in, I would say, early stages of recovery, is expected to continue, I think, at a more steady level in the coming quarters. And so, as we roll into the end of this year, and into next year, I think you'll see a continuing China story.
... and travel, growth in the markets that reopened earlier, particularly North America and Europe. We're starting to see them normalize, but still with tremendous momentum, as we think about end of 2023 into 2024. You know, Q4 is still very, very strong. Everybody's gonna ask when we get to questions, but Q4, I would say we're still in upper teens growth to 2022. Very strong and strong growth, versus 2019 as well. Again, in upper teens level, versus 2019. So really strong momentum into Q4. We believe we're well positioned to outpace the market. You know, we have, supported by these leading brands that we're really, unrivaled leader from a, from a sourcing and distribution perspective.
Our ability, as we've said on many calls, to invest in real product innovation and importantly, invest in marketing, and you'll see us continue to push the needle there to drive the business. We're spending more on advertising. You know, we're planning to spend a little over 6.5% for the year. You should expect us next year to bump this up. You know, from an advertising spend perspective in 2023, we're gonna be really close to $250 million of advertising spend, really dramatic, and that number will grow next year. That all fuels and allows us to push our stories across the globe with these three core brands at a tremendous level.
We're delivering, as you've seen in the numbers, in these record numbers, fundamentally higher profit profile as we benefit from this, more efficient cost structure and importantly, stronger, gross margin levels. Our overall brand mix is transforming. We can see higher margin brands and regions moving at faster clips. So as TUMI's moving at a faster clip, as Asia really comes back and is recovering, that's moving the overall profit profile of the business up. Importantly, our gross margin up and our ability to manage our fixed costs, off what we achieved during the pandemic is, has been tremendous, allowing us to push the business, at a faster pace. We're generating cash flow. We have this asset-light model, as you all know, if you've been looking at us for a while.
We're well positioned to manage this business with a balanced capital allocation on deleveraging the business, as you're seeing, investing in real organic growth in the business, and you can see us pushing this business really well. As we step into next year, starting to return cash to shareholders. This free cash flow generation, now that working capital is at the levels, you'll see, start to see that deliver even more on the cash flow side. And it's allowing us to have this tremendous balance sheet strength and business model that really we can manage quite well. And then let's not end without talking about sustainability. We are really leading the transformation on sustainability within our industry, and you should expect more from us.
You'll see more and more as we get into next year on our messaging and communicating that, both to our consumers and just in general. Our responsible journey, it continues to be a huge piece of our pillar for growth in the coming years, as we transform this industry. So, with that, we will happily open it up to questions.
Thank you. Ladies and gentlemen, the question and answer session will now begins. If anyone wish to ask a question, please press star one on your telephone keypad. If anyone wish to ask a question, please press star one on your telephone keypad. Our first question is come from Dustin Wei with Morgan Stanley, and Dustin, please go ahead.
Hey, thanks for taking my question. My first question relates sort of near term. Like, thank you, Kyle, for mentioning that your fourth quarter, you are seeing upper teens growth versus the, you know, fourth quarter 2019 and the fourth quarter 2022. But just, you know, wondering if you can provide some more colors by region. And if I look at the historically, that fourth quarter is supposed to be delivering higher EBITDA margin in fourth quarter versus third quarter. So just, you know, is there like... Are we going to see the same trend, like, to finish this year? And I think that would be great if you have some thoughts to share for the 2024. Second question related to TUMI.
I think last earnings briefing, you mentioned that $2 billion revenue target is for TUMI, like sometime down the road. Just wondering if you can provide some more details in terms of like, which market that you are really focusing on. Like, it's really good to see the North America that, you know, TUMI is supposed to be a sort of mature brand, but still growing very nicely year to date. So, you know, some more color by market. Are you going to, like, double the stores in order to achieve that number or, you know, leverage more wholesale or e-commerce and some thoughts on products, ASP, et cetera? And third question related to promotion, I think also related to A&P.
So wondering if you can describe like, you know, what kind of supply and demand dynamics that you are looking at now, sort of by region. Are you seeing some of the competitors increasing the discount, more desperately? Or generally speaking, the industry pricing is still very healthy across the region. And I think the third quarter margin is really good, partly because of A&P. You mentioned there's a timing shift, but, it seems like, you don't really need to spend that more money to, to sort of drive that kind of marketing, like, effect that you want it to be. So, you know, some of the colors on A&P, I think that would be helpful. Thank you so much.
Reza, do you want to take the Q4 numbers, and I can maybe jump in on the others?
Sure. Why don't I start off, Dustin? So as Kyle mentioned, just upper teens growth. As you can imagine, Asia is continuing to outpace the other regions as we enter into Q4. You know, if I had to go in order, the normalizing that you said that we're alluding to is really if you're looking at North America and to a certain extent, Europe. When we say normalizing, it's not even going back to its historical level of growth. As you've heard us say in the past, we expect the industry as a whole to be growing around the upper single digits, and we usually do a couple points better than that as we take market share. We're still well ahead of those levels.
So if you're looking at that upper teens level, you should expect that to be higher towards the Asia numbers. Latin America will be in the same sort of zip code that it is right now, as it relates to kind of year-over-year growth. So they're running around 60%-70%. There's a range that happens, and there is some seasonality in Latin America, bear in mind, that it's very much skewed towards the first quarter business. So that'll be at a lower level and in line with what it's been kind of historically. The North America business, you know, both TUMI and Samsonite, the main difference between the two, obviously, is that our Samsonite business is largely wholesale driven in North America. TUMI is much more DTC.
The one thing is just in terms of timing of orders that, that happen, as it relates to the North America Samsonite business. But, but even that is in Q3, was running kind of in that, that lower, double digit zip code for the North America Samsonite business. So, and, and we do know that the channel, there's still, still room in the channel, and the sell-through is pretty strong for our category overall. The other thing that I'll just touch on, Dustin, is the discounting point, and, and, Kyle, please feel free to, to chime in. Discounting overall, we've been very disciplined around it. We believe in the products that we have. We've been very, very disciplined across the regions in terms of maintaining the profit profile.
That's why you're seeing that gross margin level continue to improve, and there'll be a benefit from mix shift as Asia comes back online, because there'll be a higher, higher gross margin with Asia and with TUMI as compared to some of the other regions. Where we are seeing some promotional activity is in the U.S. business. It was the first market to open up, so some of the competitors are—there is some discounting that's happening there. But again, if you're looking at it from our, from our perspective, we're being fairly disciplined in it, and we're trying to continue to make sure that, you know, overall, we design for that wholesale channel to hit the gross margin targets that we have, even in that channel, despite what might be a more promotional environment there.
And the other thing I'd also say is, as far as the brands are concerned, with TUMI, we're incredibly disciplined around making sure that we don't discount. There's only a couple of windows that we have sales for TUMI. It used to be that it was on sale for, you know, 3-4 weeks. For those two sale periods, we've narrowed that down to about a week for each of those. So there will be promotion. Optically, there will be promotion, but we're still making sure that whatever promotions are there are built into our model to ensure the gross margin doesn't dilute. But, Kyle, let me turn it over to you, and then I can chime in from there.
Okay, great. I think one thing on the promotion that we're seeing, Dustin, is at this very entry-level positioning. You know, so I think you know, these kind of entry-level, maybe even kind of unbranded level, there's much more promotional activity, which is a space that we're carefully kind of avoiding so that we drive our core brands the right way. On the A&P spend, the shift from Q3 to Q4, I wouldn't call it a shift. It's just timing, really. So we spent 6.3% or 6.2% in Q3. You'll see a number closer to 7% in Q4, and that's just the timing of when we're spending, particularly the digital ads, when consumers are moving for holiday and buying and driving our digital and retail store sales, that shift kind of typically happens.
As you know, our Q3, with the end of summer travel, is actually a very tremendous strong quarter for us. Often, that margin profile is even better than Q4 for us as a business, and you clearly saw that. But if I adjusted that for a normalized advertising, we're gonna end this year around 6.6%, I think, on advertising. It's not tremendously different, you know, kind of 20-30 basis points off where we're gonna end for the full year. And again, Q4 advertising will be closer to 7%, just as we line up the timing of that spend. As far as TUMI revenue growth going to $2 billion, I think that is clearly in our sights.
As you know, Asia is gonna deliver a huge piece of that story, and that continues to grow at a tremendous pace. So let's call it 25%+, and I think that will continue. There's real opportunities for TUMI within Europe, as we talked about kind of the expansion within Europe and that brand becoming recognized. That'll be a meaningful piece. But as you rightly say, our North America business continues to deliver tremendous growth for the brand. This is around category expansion. This is around product offering expansion. As we push you, there's more to come here. You'll see us launching new initiatives as we step into next year. I'll wait for you to see that when we get there. You'll see us expanding our women's category, which we've been doing now.
You'll see that even accelerate into 2024 and 2025. Just the sheer volume we take through our retail footprint, the footprints we have today. So we'll open stores in the U.S., but it's really gonna come from the existing footprint that's gonna drive much of the growth in the U.S. business. And I'm talking a growth that'll be, you know, low double digits for North America, very mature. Our digital space is continuing to grow tremendously, as we told you earlier. That'll be a big piece of the story as well. And even Latin America is a market that has real tremendous opportunities for TUMI. So the blend of those all delivering, but at a in order, Asia, Europe, U.S., will be kind of the growth rates that you'll see for TUMI. And I have zero doubt this business is heading there.
We can pick the year, but it's definitely heading there, and the teams are highly energized. I think we answered all your questions, Dustin. I had four written down. We can move to the next or unless we missed anything, Dustin.
Yeah, no, I think it's all clear. Thank you so much for all the answers. Thank you.
Yeah, thank you.
Thank you. Our next question is come from Anne Ling with Jefferies, and please go ahead.
... Hey, thank you. Just some follow-up question here, regarding, like, you know, the product category. Just want to check, like, you know, if I take a look at nine months number by product category, travel continue to grow faster than that of non-travel. But in third quarter, we noticed that non-travel is actually doing better. Is that some deliberate, like, strategy to grow your non-travel side? Initially, I thought that, you know, third quarter normally is a high season for the travel product. So maybe you can share with us, like, you know, why we are seeing non-travel also, like, you know, doing so, so well? That's my first question. And the second one is regarding the by brands.
You know, I'm sure that Samsonite and TUMI has been like, you know, like, very strong, and in terms of like, you know, any entry-level B-brand or promotions, you know, is not going to impact them. But, like, you know, let's say, for example, like, you know, American Tourister, if we have, like, you know, more competition at the white brands or private labels, what if, you know, the American Tourister will start to see some impact in terms of, like, you know, slower sales growth? What will be our strategy, you know, moving forward?
Will we have some other brands to try to compete with the mass brand, or how should we like, you know, view this kind of promotion at the American Tourister level? Thank you.
Okay. On the non-travel side, I think some of the things we're seeing in Q3 and generally, our non-travel is a mix of casual bags, backpacks, and duffels and unstructured luggage, but it's also business products. And what we're clearly seeing is business travel starting to move back in the mix. So you can see brands like TUMI moving. If you look at the growth that we're achieving there and think about the mix of that business, which would be 60% non-travel, that feeds into the story. But across all of our brands, we're pushing both travel and non-travel. We have a very successful line called Ecodiver, developed in Europe, now selling everywhere around the world. I'm sure you've seen this product. I think I showed it in the last earnings call.
This continues to move really well, and when we think about how consumers and younger consumers are moving today, a lot of travel is happening with these types of products. So I'm not so fundamentally worried if one's moving faster than the other, because they're both moving in a direction tied to what we're pushing on the business. But I think that business traveler returning, and really returning in a big way, I think you'll see it in Q4. I'm sure you're all attending more investor conferences, and you see trade shows really starting to boom across the globe. And the outlook for those for Q4 and into next year is very high. All of that fuels a different type of consumer that's traveling.
So as we see more normalization in maybe leisure travel in these, in markets like North America and Europe, you're seeing this very steady pickup in business travel, which bodes well for us. So I think that's why you're seeing some of the mix effects maybe in the quarter. But you know, for the year, you can clearly see the return of travel driving a big piece of our business year to date. As far as A&P and promotion, we're very careful. Now, one piece we do in all these brands is we manage for promotion, right? So if we know we're going into promotion period, we often have collections that are lined up to be able to do that. And that's our scale advantage, that we can do that, as a branded place.
But what you won't see us do, and I want to be very clear, is we. And I'm sure I've said this on calls over the last two years, we don't need every dollar sales. We want the right dollars of sales. And as we get into this kind of unbranded space, really entry-level product positioning, with heavy promotion, we're gonna stay out of the fray of that. That doesn't add anything to us. I don't need to add sales to play in that fray and pull down the margin profile of the business. So with real discipline, we're managing. We will be on promotion during holiday, as you'd expect, but in a much more disciplined way. And the whole industry is acting that way, particularly in the branded space.
That's really the way you should expect us to run and operate the business. So, and it's part of the reason why maybe you see A.T. growing at a slightly - it's still tremendous growth, 35% year to date, but slightly lower than what you're seeing for Samsonite and Tumi, as we're careful about what we enter into there and maintain a good margin profile for that business as well. So, so we're really disciplined there, and, and you should expect us to stay there while still delivering a great growth story.
Okay, good. Great. Thank you.
Thank you.
Thank you.
Thank you. Our next question comes from Terry Young with UBS. Terry, please go ahead.
Hi, thank you for taking my questions. Actually, I got a few follow up questions. Firstly, related to the margin. I wonder, you know, on a Q on Q basis, we do see a gross margin expansion. But if we look at the sales mix by brand, it seems that Samsonite and American Tourister are actually gaining high sales mix on Q-on-Q basis. And I assume there is also a pickup in terms of the wholesale channel. So on that basis, I assume sales mix movement might not be an answer to the gross margin expansion on Q-on-Q basis. So I wonder what drives the margin expansion on sequential basis?
Is it because of RMB depreciation starts to benefit your cost base, given that 40%-50% of production takes place in China? And secondly, I'm not sure if you can provide more color in terms of the sales trend quarter to date, especially in if in October. Do we see some you know consumption weakness in China start to weigh on travel demand? Or alternatively, do we see a strong demand still on the ground for the China and also probably for other regions? That's all for me. Thank you so much.
Reza, do you want me to take this? Well, do you want to take gross margin?
Yep. So gross margin expansion, there's a couple of things. First of all, keep in mind, it's, the short answer is it's not RMB. The reason for that is if you look at when we purchased a lot of this inventory, this inventory has been on our books for quite some time, that we're selling through. But what's really driving gross margin, the biggest component of it is really mix and controlling promotion. So those are the two biggest components of it. The mix shift to Asia and the mix shift as TUMI outpaces growth of, say, American Tourister. There's a higher gross margin profile for TUMI, then Samsonite, and then American Tourister, and then the Asia business has a higher gross margin profile as well.
So those two components are what will really drive gross margin and help us to defend that level. Again, it is running ahead of what our initial plans were for this year, and the good thing is the team has been very disciplined on limiting promotion to be able to keep it at those levels. You know, consumption in China, I can take it or you can, Kyle, whichever you prefer.
Yeah, go ahead.
Yeah. So, consumption in China for us, yeah, it's remained strong. So, you know, we just came out of 11/11. You know, I know there's some others that have been reporting on it. For us, it's looking at the same levels as 2019, and it's nearly double of what we did last year. You know, the Chinese business, as I had mentioned a little bit earlier, is running mid-teens level growth compared to 2019. And for us, the advantage is that it's basically spreading out the runway for growth over a longer period of time. So we didn't see this huge spike of rebound, and then, you know, people are traveling, and then it's coming back down again.
As we said on prior earnings calls, we expect that resilience in China to continue over the course of the next year. So you should continue to expect China to continue to grow at a slower clip for us as compared to some of the other Asia countries, like for instance, India, that all of a sudden was showing double digits, you know, almost 100% growth, 90% growth, 70% growth in various months as compared to 2019. China is going to be running at that mid-teens level over the course of the remainder of this year and into next year as well. And I think that's actually a good thing for our business because it basically spreads it out over a longer period of time, as opposed to having a bounce and then back down again.
The reason for that is, if you look at Chinese travel, it's been largely based off of domestic travel. So we've talked about previously around how international flights to China are still fairly limited. There's a backlog in terms of visas, and then most importantly, there's a backlog in terms of international capacity of flights. That's driven not because of demand, but largely because it takes a while to basically retrain pilots and to get them recertified on aircraft to be able to put on a lot of the long-haul flights. I will just tell you anecdotally, having been... Kyle and I travel all the time, and we see it in some of the credit card data we have as well.
So if you're spending time in Europe, you're starting to see the beginnings of Chinese tourists showing up now. So we expect that to be much more growth in the back of next year. But the China story for us is going to be one of kind of that mid-teen growth over the course of the next year in our view.
Thank you.
Thank you. Our next question comes from [Kaixin] with Haitong Securities, and Kaixin, please go ahead.
Okay, thank you for taking my questions. I actually have three questions. The first one is actually about the fixed costs, because we've seen huge improvements of the savings for the fixed costs. Just wondering, how should we expect the percentage of the fixed SG&A expenses in terms of the revenue for next year? And the second question is about the store expansion. Just wondering if we can have more color about the pace of the expansion, especially in terms of the key regions. And the third question is actually about India. We've seen really strong momentum in India. Just wondering, maybe have some details about the product and also marketing strategy in India. And also, we know we are trying to strengthen the business of Samsonite, not only American Tourister in India. That would be great if we can have more color about that.
Thank you.
Okay. Why don't I start on the fixed costs and stores, and then, Kyle-
Yeah.
Just briefly, obviously, if you want to add to that. Yeah. So fixed costs, so what we said is, as we think about 2024 in terms of fixed costs, expect fixed costs as a percentage of sales to continue to improve. So not only are we trying to maintain the new cost structure that we have, but we're trying to make sure that we deliver operating leverage sequentially year over year. So if you're looking at the different line items of SG&A overall, the variable will obviously increase in line with sales, which is what we've seen this year as well. You have more sales, you have higher variable SG&A as well. The fixed cost as a percentage of sales should continue to tick down. And then the other component of SG&A is advertising.
So as Kyle mentioned a little bit earlier, we want to make sure that we increase our investment in advertising, and we're trying to improve that to, to get that to almost closer to 7% for next year as well. And that's something that we're starting already in Q4 of this year as well. And, and going back to an earlier question, which I think it was Dustin that asked, the, the reason for that is it's not just the ROAS, it's not just performance marketing that we're doing, but we want to make sure that we're investing behind these brands to continue to maintain that premium brand positioning that both Samsonite and, Tumi enjoy.
As it relates to the stores, we're, yes, we are absolutely opening up selective stores, but that's also in line with maintaining our fixed cost as a percentage of sales numbers. So while we're investing in those stores, we're only doing it to a limit to make sure they're the right locations, that they're delivering good revenue growth, and that they're laying the foundation to be able to continue to build all of these brands. So as we build the story to $2 billion for TUMI, for instance, we're going to need some incremental stores. The primary focus for those is Asia first, and then I would say Europe second. There's some selective store growth in Latin America as well, although a lot of that is franchised, especially in Brazil. But there'll be a handful of stores in various regions.
So you'll have a handful that are, you know, in Latin America, North America, but the bulk of the store growth that you'll see will be in Asia as we continue to penetrate countries such as Indonesia, which has remarkable growth potential for. Kyle, I'll turn it over to you if you wanted to touch on India and product positioning.
Yep, sounds good. I might say in the stores, you know, you should expect us to open around 50-60 stores in a year, with Asia being more than 60% of that as we think about geographies that we're expanding, brand TUMI expanding. Next would be Europe, where we'll be carefully opening stores, probably in the kind of 8-10 level, if I remember our-- my outlook for next year, and then more discipline in the U.S. But you'll see us open the select stores in the U.S. Both the mix of Samsonite, I think you'll see us open a few stores next year for Samsonite, and the same for TUMI. So, and I think that's the right pace.
If you've been following us for a while, there's a period that we accelerated very aggressively, and we corrected a lot of that. But at that pace, in the geography we're covering, I think that's the right expectation. I might also say in stores, the refreshing of stores, you know, just updating our store fleet. You know, for many, we had taken a pause over the last three years as we navigated pandemic, and that refresh gives these stores a boost as well. So there's a good bit of work doing on that both this year, and that'll carry into next year as well. As far as India sales momentum, it's been tremendous. You're exactly right. At the start of this year, we really leaned into Samsonite.
Samsonite's approaching almost 20% of our business in India, really surprising us at the pace that it's moving, and you'll see us continue to push that brand as well. And American Tourister has been tremendous and really the driver of that market and continues to be very, very successful. And you'll see us support both those brands within the region, as I think an Indian consumer continues to progress up, I think more and more can reach Samsonite. We actually have tremendous, we use a distributor for TUMI in India, but even TUMI is moving at a really interesting pace within India as well. So the combination of all three brands there will deliver, I think, a good, sustainable growth story, where historically it's been largely American Tourister that's been driving that market.
So we're quite excited for what we're seeing in India. As you know, a highly competitive market, but we continue to win and do really well, in India, across all three brands now.
Okay, thank you. Thank you so much.
You're welcome.
Any other questions, operator?
Yes. The next question comes from Carter Damon with Daiwa, and Carter, please go ahead.
Thank you, guys, congrats on the strong results. So just a couple of follow-up questions. I think, first of all, for Europe, when we were looking at your EBITDA margins for the European business, I think for 3Q, it did jump quite a bit to 20%, I think, from around the 16.5% in the first half. Is there any particular reason why? Just want to check there. Is it, is there a good timing shift from some orders or, I guess, the TUMI uplift also did help, but just want to see if there's anything in particular there. Second question on inventory. You did mention, before in this time also that you're intentionally building out the inventory.
But when we look at the absolute basis for it on the inventories, we're at $735, I think, largely flat quarter-over-quarter. So have we kind of hit an inflection now? And particularly as we head into 2024, when you know, North America could be normalizing, are we gonna see this level start to decline? And then just lastly, on margins, I think you know, we're all very impressed with you know, your growth in EBITDA margins now on record highs. And then we're still seeing you know, the two main drivers, Asia and TUMI, I think, still driving a lot of the growth and upside there.
So I think, you know, I was wondering, hearing your thoughts on what you think a realistic target for the mid- to long-term in terms of margins would be for the business. So just these three. Thanks.
Why don't I take inventory, Reza, if you can just look at the Europe, 2, 3. I think it's a function of summer travel season tremendously strong in Europe, and I think some timing of advertising has really helped EBITDA. I mean, the, the overall margin profile for Europe, and the strength of TUMI. So I'm sure those are the drivers there. But on the inventory piece, I do think we're at an inflection point. You know, if you look at our inventory and inventory days, they're all very, very strong and healthy, but we're very carefully managing that valve now.
So when I think about inventory levels, and if I think about the levels we're at today and where we might be at the end of the year, let's say that stays about the same, but on a growing business, which means that it's gonna be more efficient. That's the way to think about inventory. We're a little heavier than what would be normal for us, and so we're just starting to adjust that valve now to normalize our inventory, as we move into next year. And I think it'll take us right through the middle of next year to get kind of our inventory days, back in line with where we want to be. And it's been tremendously successful. The decision we made to lean into inventory and capitalize on sales has been a huge success for us.
But you're exactly right. We are at an inflection point, which will be helpful for overall cash flows, too, as we move forward into next year as well. On the margin side, I think, the margin story really is, you know, a function of discipline within the business. It's margin expansion across all regions. As Reza went through each of the regions, you can see the transformation. But you're exactly right. As Asia moves at a faster clip, and you should expect Asia to be comfortable double-digit growth for several years, and for TUMI to continue to grow at a pace as we move from this $1 billion kind of run rate to $2 billion, the natural tendency is gonna be for this EBITDA margin to grow.
So we're gonna lean into advertising a bit more and deliver still some EBITDA margin expansion from where I think we'll end this year, with advertising adding maybe 40 or 50 basis points to what we spend, in this year. The margin profile of this business is really, you know, in this kind of transformed level. I'd say it would be in the 19s next year, mid-19s, comfortably, with very strong advertising. And if you really just model it forward, there's no reason why this business, in the medium to long term, isn't north of 20%, if we're managing it the right way, and those pieces of business that are driving the business move at a different pace.
Kyle, just to add, so, so for Europe, overall, the margin profile, you should be aware, in Q3, we continued to invest in advertising as well. So, if you're looking at kind of year to date versus year to date, it was 1.5 points higher advertising year to date this year versus last year. That's intentional because we're obviously trying to maintain momentum going into 2024 and beyond. Overall, in terms of the, there's very, very limited discounting and promotion that's happening in Europe. So, the European team is very, very focused on that.
The comment that was made a little bit earlier in terms of what was happening Q3 versus Q2, that the warehouse management issues were resolved over the course of the, you know, back half of Q2 going into Q3. So we were able to get some of the additional shipments out, but the margin profile of those wouldn't have been any different. So the margin would be very similar as you're looking at that. So the main difference would be advertising that would have been happening year-over-year.
Got it. Thanks, guys.
Thank you.
Thank you.
Thank you. Our last question comes from Brian with Swiss Asia, and Brian, please go ahead.
Hi, management, and thank you for answering my question. Congratulations for the great results. A couple of quick questions. The first one is on your wholesale side. I mean, sales has been pretty good and strong this year, or this quarter, but I did notice in, you know, you discussed some slightly more challenging situations in Samsonite in the US and American Tourister for Europe for the wholesale side. So do you mind giving us some color there on what's happening with inventory and pull-in going into this quarter? The second question is, I'm trying to square your qualitative guidance with your comments that you can do high teens in Q4. But it does seem like on the, sort of, qualitative comments you're making, you could probably get to the two handle.
So is there any weakness that we should be a bit more cautious about, going into Q4? The third question is on the fixed expense. It's been going down very strongly in the last couple of quarters, and, and it's really good to see that. I don't understand how that comes from distribution expense, and in that regard, that's been stable at about 27.5% of sales for the last few quarters. So I just wanted to get a bit more color on the sort of plans you can get in the distribution expense side to further improve margins.
Okay, Reza, I'll, if you take distribution expense, I'll hit the others. Wholesale side, we're definitely seeing, and we've guided this in the past, we're seeing... I describe it as lumpiness in buying, where they're buying and they're managing their overall inventory. So you might have a month that's up, you know, 25% and a month that's down 5% because of the way they're buying in. What I would tell you is the sell-through is very strong. The reality is, as they're buying in a lumpy way, we're probably even missing some sales. So I think there's upside if that was more normalized. And I think that will continue in Q4, that they're buying in a cautious way to manage inventory level. So we see that on our wholesale side.
I think Reza talked about year-to-date wholesale. It's running, you know, up 30 or 32%, which is still very good, but the rest of our business is up, you know, 45%, and you can get a sense for what's happening in this wholesale because of that. Clearly seeing in the U.S., we can see it in Europe, you know, some of our markets, like the U.K. and Germany, which have bigger wholesale customers, the same kind of lumpiness in buying. Fundamentally, the travel demand for our products is still very strong, and I think it's just that buying. So you should expect those lumps, and, you know, I think that will just carry through.
Our North America business, for example, full year North America business, excluding TUMI, this is core North America business, will be up around 8.5% to last year. You know, so a very strong number, and it could have been more if not for the wholesale bouncing. My personal view is that wholesale piece will settle out next year, and I think that'll actually be a benefit to our North America business as that normalizes. What is totally clear is demand for travel products is still tremendously strong, and so, and again, we can see that in the sell-through. As far as Q4 goes, I think, you know, I think we'll be kind of mid- to upper-teens growth. I think that's probably the right place.
Asia will be plus 40%, and in Europe and U.S., where we—or in North America, where we see this more normalizing trend, I think that will keep us below this kind of 20% mark that you're talking about. So still a good, strong story. We indicated what we're seeing, as we're in kind of the, you know, the Q4 range. But I do think that, that normalization's happening, and, and you know, and, and really, when you get to next year, we—our view is we're kind of a low double-digit growth story next year, and with Asia delivering good growth, and U.S. and Europe starting to be in a more normalized trend, which still delivers, a great overall growth for us.
But it's the first quarter that you start to see that as we get into Q4. I think a lot of people are wondering what the holiday sales are gonna look like. We can see demand for travel still strong, and so everybody's watching on the holiday demand, and I think the early indications are, I think it'll be okay. But that factors into, you know, overall kind of Q4 number as well. And again, I think these markets that recovered quicker are now entering into that phase, which I still think is a great number, but it's why we maybe, you know, hold Q4 down a bit from 20%. And I think that's the right place as we step into next year.
And just to add on distribution expenses. Distribution expense, obviously, if you're comparing it to 2019, it's completely transformed. Generally speaking, we're running around 27% as a percentage of sales this year. Obviously, there's a little bit of seasonality for the different quarters, but just roughly speaking, we're about 27%. The fixed component of that, so fixed selling as a percentage of sales, has been completely transformed compared to 2019. So that number is running in the 16s, generally speaking, kind of mid-16 level, depending on the quarter. And the portion that's variable selling, obviously, that does flex up with sales. So as we continue to improve the sales environment, you see that variable component ticking up a little bit as well.
Great. Thank you.
Thank you.
Thank you.
Okay. Operator, are we all done?
Yes, sir.
Okay. Everybody, thanks for joining the call. Appreciate all the questions, and everybody have a great week. Thank you very much.
Thank you.
Thank you.
Bye-bye.
Yeah, thank you. Thank you, everyone. Thank you for your participation, and this concludes the conference. Thank you.