Thank you for standing by, and welcome to Samsonite International S.A. 2014 interim result announcement conference call. At this time, all participants are in listen- only mode. There will be a presentation followed by a question- and- answer session. At which time, if you wish to ask a question, you will need to press star followed by the number one on your telephone keypad. I must advise you that this conference is being recorded today, August 27th, 2014. I would now like to hand the conference over to your first speaker today, Mr. William Yue, Director of Investor Relations. Please go ahead, Mr. Yue.
Thank you, everyone. Today, we have our Chairman and CEO, Mr. Tim Parker, our COO, Mr. Ramesh Tainwala, as well as our CFO, Mr. Kyle Gendreau, with us for the call. Tim will begin the presentation, and then when we are done with the presentation, we will go into Q&A. Thank you. Tim, on to you.
Okay. Thank you very much, William. Good morning, good afternoon, good evening, everyone. Very pleased indeed to present another set of record results. We will move straight on to slide number four, where you can see that in constant currency terms, our net sales were up 13.8%. Our adjusted EBITDA, the key performance measure that we look at, up 14%, and the EBITDA margin up to a new high of 16.9%, and a net income following similarly up to 13.9%. Next slide. As I mentioned, the sales are up by a very impressive 13.8% in constant currency terms. If we take out Speck, which is the major acquisition we have made, the true underlying growth rate, in constant currency terms, is somewhere around 12.7%, which I think is still very impressive.
We have been hit, as often as the case, by a mixture of appreciation and depreciation, quite a few Asian currencies have been down. On the other hand, we have had a better situation with the euro, which is our key trading currency. Our gross margin is up 12.6%, and this is really the usual sort of mixture of shifts in retail, wholesale, and shifts in the composition in regional terms of our business. In actual fact, just up by 10 basis points. As I have said before, the very diversity of our business tends to keep a lot of these key measures pretty much on a constant level. Next slide. If we look at the EBITDA performance, I think it is a fabulous turnout, 14%. This is really a mixture, in part due to the gross margin improvements I mentioned.
It's due, in part, to the slight drop in advertising percentage, down from 6.5% to 6.3%. This is partially due to the good news that our sales are ahead of anticipation, and partly due to the fact that we have been a little conservative in the first half and expect to make that up in the second half. Of course, we are seeing the benefits of higher sales off a fixed- cost structure, i.e., operating leverage. 16.9% EBITDA margin, I think the best we have achieved. Adjusted net income following pretty much the same track. The only point I'd make there is that the effective tax rate has moved up ever so slightly from 26.2% to 26.4%. That, I have a feeling, is in part due to a slightly higher proportion of American business in the total. Moving on.
The next over the agenda slide to the business highlights. I think what's impressive about this result is that it's been achieved around the world. All of our regions have performed well. Particularly pleasing to see the progress in Asia, up 17%, on which I'll comment in a moment. Europe up 10%. North America up 8%, excluding Speck, and LATAM up 20%. We've seen a good continuing growth in the world market for travelling up by around 5% in the first four months of the year. I feel that the business is well poised, actually, to take advantage of an improving situation in China. I think as we'll explain, we've seen a better position in Europe, Italy, and Spain returning to growth. I think also that the acquisitions we've made give us plenty of opportunity in the more mature American market.
American Tourister are our key mid-market brand, where we still have a lot of room for growth, up 17.5%. Samsonite up 12%, well, 11.8%. We've done well with High Sierra. Growth of 22%. Hartmann, really, we're still sorting that out, but off a low base, still up 13%. After a fallow period last year, it's pleasing to see that the acquisitions have started to happen again. Speck, the leading brand in protection of mobile devices, number two in the States. Gregory, a high-end backpack business, but not just that, also a leading lifestyle brand in casual in Japan. Lipault, a fashion brand based in Paris. Growth across all categories, perhaps slightly less impressive in business, but that reflects in part the reclassification of some of our previous business products into casual as a result of the office becoming casualized and people carrying more backpacks than bags.
Advertising, although slightly down as a percentage, is still a very high investment of almost $70 million, which continues to dwarf any of our competition. The company is still generating cash flow, high level of conversion from EBITDA, around 60%. Unless we make any further acquisitions, we expect cash flow over the remainder of the year to pretty much put us back in a net cash position by the end of the year. The acquisitions that we're making adequately funded from internal resources with all of the earnings enhancements that implies. On to the next slide. As I mentioned, very strong growth around the world. Asia, benefiting from the investments that we're making in American Tourister and Samsonite RED. American Tourister doing particularly well in India, South Korea. The key growth driver in China and Australia. In Japan, we're continuing to see progress with our Samsonite brand.
In North America, as I indicated, after quite a few years of way, way above average market growth, we've returned to a more typical growth rate of 6% at a wholesale level. Very good retail comps, 11.4%. A big, big year, half year, I should say, in Canada, which was driven by a couple of larger wholesale drops. I think the prospects for the American business remain now very attractive with the acquisitions we've made offering new avenues of growth. Actually, we still believe that there are some further opportunities to increase our American Tourister business in the States. A good first half year in Europe. Plenty of markets contributing. If we look at the constant currency growth of just a tad under 10%, excluding Lipault. All of the major markets have contributed here. Germany, France, the U.K. Good results in Italy and Spain, up 13%, and Russia 11%.
A lot of opportunity there. We have a big hardside business in Europe, and the Curv products continue to perform well above the market. Finally, Latin America, much smaller part of our business, is in the throes of transition, and I'll comment a bit more on that in a moment. Moving on to the Asian business. A very, very good start to the year, actually. A market, India, for example, which we've not achieved quite so much with in the last couple of years, really coming back now with growth of almost 25%. Despite the ghastly disaster in Korea, that market has still managed to do almost 15% growth. 8% may be slightly lower in China, but there are plenty of reasons to be optimistic there, and I'll talk about that in a moment. Very solid growth out of Japan. Constant currency, 23%.
American Tourister really fueling our business in Australia. Fantastic performance in a more mature market. If we look at the key drivers of growth across the region. American Tourister up 18%, and Samsonite up 15%. Of course, the RED brand is exploding, and we've got a lot of traction there, not just in Korea, but also now in Japan. The wholesale channel up well, but we're also seeing the benefits of investing in more of our own retail. We added 30 net new stores. Comp growth across the region of almost 12%, which I think, again, points to the fundamental robustness of our marketplace. Travel category up 14%, and casual business, again, really making huge growth, at 88% growth, of Samsonite RED and our High Sierra brands. As I mentioned, business, less apparently to talk about there.
It is influenced by large B2B deals, and I'm expecting something better to report for in the second half of the year. Not only have we seen strong sales growth, but we've managed to get some very good operating leverage. As you can see, the EBITDA margin has moved up to almost 21%. A very encouraging start. Just to look in a bit more detail at China. As I mentioned, the mid-market American Tourister brand continues to drive our business. We are opening still plenty of new points of sale, 136, including 10 new company stores, increase, and fundamentally strong retail comps. I think as we look in the future, we're becoming increasingly confident about being successful in the new environment in China. Samsonite is still a big opportunity, but the less exclusive brand, American Tourister, will drive our growth in the future.
We see huge potential in the e-commerce channel. That is really exploding at the moment, and also TV home shopping. A combination of having the right brands in the right place and some new channels opening up, which will enable us to reach, I think, an even bigger proportion of the consuming public, I think make us very confident about growth acceleration in China over the second half of the year. America, as I mentioned, a slightly more normalized growth rate in wholesale. We're very happy with that. We still have a very high market share in the market. We're still regularly voted the best service provider by our customers. I think the opportunities over the next few years are quite exciting with four of the brands that we have bought really having a base in the U.S. Retail comps are not bad at all. 11.4% retail sales growth.
We did have a very good first half in Canada, which was pleasing to report. Growth, I think, across all our business, with the exception, as I mentioned, the business which is again governed by some quite large B2B business falling in different quarters of the year. Obviously, in the short run, our American business performance will be influenced by the addition of Speck, where it will take us a few months to essentially reconfigure the business and sort it all out. Although our sales are up 11.4%, the EBITDA margin has fallen ever so slightly, down to 17.6%, but not for long. Moving on to Europe, the next slide. Again, a very satisfactory first half to the year. Most markets are performing very encouragingly. As I said, we've got a very strong hardside business under Samsonite.
We've also benefited from growth in retail, a large factory outlet store chain, which is doing very well in Europe. We're now starting to move more into an experiment with more high- street shopping, multi-branded shopping. We've seen a substantial growth in e-commerce, up 60%. Our retail business has certainly helped to power Europe forward. As you can see, a much more encouraging result from Italy and Spain. A key element to our strategy in Europe over the next few years will be to achieve the full potential of our American Tourister brand, as we have done in Europe. This brand addresses a very different price segment from Samsonite. It's a very large value segment.
The brand hasn't received much investment in Europe, and we're now investing behind this brand and achieving some very encouraging results in the first two markets where we have put our efforts, which is in fact Italy and Spain. This business is entirely additional. In no way is this overlapping with Samsonite. It's a different customer, it's a different segment, and for the most part, the channels are different. We've had actually some very encouraging success with the business segment in Europe. We've put a lot of effort into improving our product ranges, and that was up almost 37% in the first half. Most categories doing well, perhaps less so with casual, but that will benefit from the introduction of High Sierra in the second half. Taking it all together, the EBITDA margin has seen the benefit of the sales increase and reached, I believe, another new high of 16.7%.
Latin America, moving on to page 14, is really in transition. The business is up, but we are still in the middle of an inventory reduction program in Brazil following the take-back of stock from some of the distributors, and the need to sort things out before we really launch our own direct business with a fair degree of investment in the coming months. We've seen pretty good results out of the other two major markets, Chile and Mexico, although the Chilean peso has devalued sharply against the dollar, so the profits from Chile are worth a lot less in dollars. We also have seen pretty much the elimination of our business in Argentina. It's been a sad couple of years, but on the other hand, there's nothing more to lose. In future, there won't be any drag on growth. We've got the Brazilian prospect, which I think is enormous.
I think we believe there is a huge opportunity in this market. Our share is tiny. This is a market that is roughly probably bigger than India in size. Samsonite have really not done much in Brazil for a number of different reasons. We're in the process of, I think, putting together a program which will enable us to overcome some of the traditional trading blocks in Brazil. Watch this space. The other two key markets, I think, have got lots of opportunities to achieve more growth in the future. Moving on to page 15. If you just look at most of our key markets and look at the bottom line of figures, you can see that we've been in double digits in like-for-like currency in nearly all markets, with the exception of China, which I've explained, and Germany, where we've had—
It's a very big market, and we've moved well ahead of the average for the market for the last couple of years. I think that's not surprising. All the other markets, as I said, really have got a lot of momentum and continue to really push the business forward. If we move on to page 16, again, as I've explained on a number of occasions, the company not only has some exposure to the large developed markets, but we also have very strong positions in growth markets such as Russia, Thailand, Indonesia, Turkey, Brazil. As I said, a lot to go after. Markets which are coming up, small markets like the Philippines. If you look along that line, you can see again, many figures which are closer to 20%, 30% than anything else.
I'm now going to hand over to Ramesh, who will comment on some of the acquisitions we've made and in a bit more detail on some of the other elements to our performance this year. Ramesh?
Yeah. Slide number 18. I'm going to talk a little bit about the recent acquisitions that we have made. The first one which we acquired was Lipault. It's a French chic, a very youthful luggage brand. It's very popular among the French Parisian women, more particularly. We acquired this business for a value of around EUR 20 million, more or less approximately. The net sales in 2013 were EUR 6.5 million. At this stage, we have fully integrated the back end of the business into Samsonite.
We are now preparing a complete new product portfolio with which we believe this brand should offer us opportunities not only in additional markets in Europe, but also opportunities to expand it further in Asia and America over the next couple of years' time. The next one is Speck. Speck produces a range of slim protection covers and laptop covers and tablet covers. This is a category.
We acquired this business for around $85 million. 2013, it had sales of $104 million, and this year it is estimated to do about $140 million. Just to give you the perspective, the largest brand in this category does a sale of over $1 billion, and Speck is number two. This would then express the kind of opportunity that we see in growing Speck, not only in the U.S., but then utilizing Samsonite's resource, operation excellence, and a well-established distribution network in other parts of the world, including Asia, Europe, and Latin America. We believe Speck offers us one of the biggest opportunities of growth over the next couple of years' time. The third acquisition which we made this year is Gregory. It's an iconic technical outdoor backpack brand. It's very well respected in the active outdoor category.
It also has a very active footprint in the lifestyle segment in Japan. We acquired this business for around $84 million. It had net sales of about $34.9 million. Of that, more than 50% of it is in Asia. This again, is a brand which we believe will be a perfect complement to our High Sierra, which is another backpack brand which we acquired in 2013, which operates in the mid segment. We believe that Gregory, together with High Sierra, will be a perfect combination for us to expand our distribution within U.S. and thereafter then grow it internationally. Some of the progress that on the brand that we acquired in 2012, High Sierra. The sales grew by around 22.5% in the first half of this year as compared to last year. High Sierra, the design, sales, and management is operated out of Chicago office.
It's the same office which will also manage Gregory. We will manage High Sierra and Gregory from the same management team. The sourcing and distribution and the back-office operation of High Sierra has been completely integrated in Samsonite. We've also increased our advertising spend to help us to expand the brand in other parts of the world. The brand was test marketed in few Asian countries, more particularly India and Korea, with very, very encouraging feedback. Based on that, we're now preparing to launch it in other parts of Asia as well as test market them in Europe and Latin America in the second half of 2014. Hartmann is a brand which we believe offers us one of the biggest growth opportunities over the next couple of years. In 2014 first half, we have been able to completely redesign and line up a product assortment and also a new retail concept.
By now, we have opened about five flagship stores in different parts of the world, one in Beijing, one in Shanghai, today we have opened a store in Cheongdam in Seoul. We're opening a store next week in New York and Madison Avenue. We're opening four stores of four point of sale in Japan next week. By end of this year, we believe we should be able to have 25 point of sales for Hartmann. With increased advertising spend, we believe that Hartmann is a big opportunity over the next couple of years' time. We have seen strong sales growth in all our brands. Samsonite on constant currency basis have grown by 11.8% and across all geographies. Asia have grown by 15.4%, North America, 9.7%, Europe, 8.7%, and Latin America, 29.1%. We've also seen a very strong growth in American Tourister, 17.5%.
Asia, 18.3%, Europe, 19.1%, North America, 8.6%, and Latin America, 69.3%. As Tim told before, we are lining up a very aggressive rollout strategy in Europe. In this summer, we have test marketed the new American Tourister strategy in Europe, in Spain and Italy, with very encouraging feedback. We are now preparing to launch in other European countries. As many of you must be knowing it, American Tourister is almost as big or even bigger than Samsonite now in Asia. I feel there's no reason why in Europe it could not also do similar business as we do with Samsonite, though currently it is a very small part of our business. High Sierra sales grew by 22.5%, mainly coming from North America, but we've also expanded it into Asia, mainly in India, and a small test marketing in Latin America.
We're also preparing to launch the brand in Latin America and Europe in second half of this year. Hartmann sales have grown by 13.1%, but mainly in North America. The distribution is taking place in Asia in second half of 2014, and we should see some significant sales coming out of Asia, Europe and also through expanded distribution in North America in 2015. Other brands, which are basically the brands that we operate in Latin America, Saxoline , Xtrem, and Secret, have more or less remained flat. On slide 23, you can see some of the Samsonite key products. On right-hand side, you can see Samsonite RED, a brand which has been doing extremely well in North Asian markets, more particularly Korea, China, Taiwan, and now even in Hong Kong.
On slide 24, you can see some of the key product assortment of American Tourister sold in different parts of the world. The line Bon Air, which is on the left side corner of the page, is a line which has been now test market in Europe, with extremely encouraging feedback in Spain and Italy. Page 25 contains High Sierra key product assortment. These are mainly back-to-school and some hiking and hydration packs, which are sold mainly right now in North America. But we are getting encouraging distribution and penetration in Asian market. Later half of this year, we'll do so in Europe and Latin America as well. Hartmann key product assortment on the next slide.
These are the new product assortment, which are completely new, which are now getting launched in Asia and also in the U.S. The first feedback from our stores in Beijing, Shanghai, and Korea, the feedback has been very, very encouraging from this new collection of Hartmann, which is now making debut in many of the new stores. Slide 27. These are the Speck products. These are the mobile phone covers and tablet covers. As I told you, this is one category, which is one of the most buoyant category and is estimated to be far bigger than the category of luggage where we have been an active player so far.
Lipault, the French brand, which I said it is a very, very Parisian brand, and we are revamping its product assortment and preparing for its distribution expansion in Europe and in other Asian countries in second half of 2014 and more particularly in 2015. Page 29 contains some of the key product assortments of Gregory. These are the existing product assortment, which we have acquired. We are now putting in place a new design team to work on an Asian collection because we see Gregory to be offering one of the biggest opportunity of growth in Asia, beyond the current market in the U.S. There's strong sales growth across all major product categories. Travel had grown by 11.2%.
Casual has grown by 28.1%, primarily driven by Samsonite RED in Asia and High Sierra in North America, and continuing strong back-to-school sales of Xtrem, that's our backpack brand in Latin America, and Secret ladies' handbag brand, which is in Latin America again. Business has grown at a very moderate pace of 2.3%. As Tim said, it is partly due to the one-time B2B orders that we have received in the first half of 2013, which we're expecting to occur in the second half of 2014. Also there's an influence of, that there is a casualization of business bags, which is now getting classified by us under casual bag segment. The accessories sales have grown by 52.4%, mainly due to acquisition of Speck. But even excluding Speck acquisition, the accessories sales growth have been 23.5%. We have continued to expand our point of sales.
We've added almost 2,000 new point of sales in North America wholesale channels, primarily in sporting goods retailers for High Sierra, but also in discounters, department stores, mass merchants, and consumer electronic retailers. Almost 350 new point of sales have been added in Asia. Of them, 150 is in India, 129 are wholesale, 21 retail. In China, we have added 80 new point of sales, 71 wholesale, and nine retail. In Europe too, we have added 200 new point of sales. 99 of them have been in Germany wholesale, 93 in Russia, and we have also added 16 new company-owned stores in Europe. We've added 150 new point of sales in Latin America, mainly in Brazil. Separate to physical point of sale, the wholesale sale to e-retailers have also increased 33% year- on- year, and direct-to-consumer sales through our own e-commerce platform have also increased by 35%.
Sales through these two channels are now approximately 6% of our sales, up from 5% last year. On Page 32, these are some of the pictures of some of our new stores. As I mentioned, we have opened a store in July in Beijing, our Hartmann store. Below that, you have a store in Taiwan, which was also opened in July this year. On next page, number 33, you see some of the stores that we have opened, a Samsonite store that we opened in France. We have an American Tourister store that we opened in Korea. Below that, we have a Samsonite RED store that we opened in Singapore. On left side corner, we have an Xtrem store that we opened in Chile. Advertising spend during this period has increased by $5.3 million or about 8.2% from $64.1 million to $69.4 million.
The advertising spend in percentage terms has marginally come down from 6.5% to 6.3%, but we intend to be increasing our advertising spend in the second half, and more or less, our advertising spend would be maintained in the region of around 6.5% because we are increasing our advertising support to drive American Tourister in Europe and also to launch Hartmann in Asia and North America. Page 35 shows some of the brand and product advertising in Asia. On left side, you see Samsonite RED. It's a campaign which has been endorsed by Kim Soo-hyun, a popular TV artist in Korea, which has been doing a lot of good to our brand there. On right side, you see Firelite, a campaign which we have run in Japan. Below that, we have Samsonite business campaign with Chen Daoming, which we're still running in China.
In the middle, we have American Tourister campaign, which we are running right now in Australia. Slide 36. This is our product advertising in North America. We have been investing behind each of our brands. On left side, we have High Sierra. In the middle, we have Samsonite, American Tourister, and also we have started spending money on Hartmann as well. Slide 37 contains some of the product advertising and brand advertising done in Europe. Once again, we have been investing behind Samsonite, High Sierra. On left side corner, you see the American Tourister campaign that we have now launched in Italy and Spain with very, very encouraging feedback. Slide 38. This is about our advertising in Latin America. In Latin America, we have some more specific brands that we operate there. Secret is our handbag brand. Saxoline is our mid-end luggage brand, and Xtrem is our backpack brand.
We have been investing behind all these three brands in these markets. Now I'll pass it on to Kyle, who will take you through the financial highlights. Thank you, Kyle.
Okay. Thank you, Ramesh. Hello, everyone. Just to repeat some of what Tim said at the start, are quite happy with the sales growth and growth in our EBITDA, which was up 14%. Our EBITDA margins continued to improve. We're up 30 basis points to 16.9%. As you'd expect, our adjusted net income rose generally in line with EBITDA 14%, both in dollars and earnings per share. Our net cash position has decreased, largely from the acquisitions we've done. In the half we've completed Speck and Lipault. Our net cash position, which is still positive at the end of June, $106 million, is down a little over $100 million, primarily from these deals, and a little bit of an investment in working capital, which I'll cover in a moment. Net working capital efficiency is 16%. We would label this temporarily high, from our target levels of around 14%.
Really, the drivers to that is increased inventories ahead of our summer shipments. July and August, as most of you know, are big months for us. They were, again, big months for us this year, and we had built some inventory ahead of that. We also have some of the initial inventory levels from the acquisitions, primarily Speck. The company paid out cash distribution, $80 million. As you all know, July 2014, more than double what we paid last year. Our capital expenditures is up $14 million. These are from the projects we started last year. Our Hungary production facility and warehouse in Belgium are the primary drivers for the increase in CapEx. Then, in the half, we were able to expand our credit facility, which was an easy project and important for us to continue our strategy. We took our credit facility from $300 million to $500 million.
Equally as important, we took the terms out for five years. We've got a facility that gives us a good runway. At the end of the year, or at the end of the half, we had drawn $80 million to fund the Speck and Lipault deals, and prepare to do the dividend at the beginning of July. On slide 41, we continue to be very excited about a strong balance sheet. You can see our net cash position. We still have cash of $200 million, net cash position of $106 million at the end of June. Our net working capital is up around 38%. Again, the acquisitions added around $27 million to the working capital. And also, prepping for the summer sales on the inventory side. Again, the line of credit expanded. Our balance sheet, other than these points, has continued to be in a very strong position.
Slide 42 gives you a picture of our working capital. Again, our targets are around 14%. We closed June at 16%, and we'd call that a temporary high. I think by the end of the year, we'll get back close to our target levels. Our inventory days increased from 105 days to 116 days. The largest driver of that was just us prepping for the summer selling season. Also the acquisitions, as I said, and there's a bit of extra inventory in Latin America as we shifted those to a direct market. We took some inventory back from the distributors that we're working through, as Tim mentioned on Latin America.
Trade receivables slightly up, really mix of business in Brazil as that's moved into a direct market where there are slightly longer payable terms. That was probably the biggest piece of the days moving up a couple of days, but not much.
Then trade payables, which we typically run around 100-105 days, because of timing, that was sitting at around 97 days at the end of the quarter. We're quite happy with how the teams are managing working capital. Again, I think we'll be back to target levels by the end of the year. I've covered CapEx. I guess the points I would make here is we continue to invest in retail. All in all, we opened some 67 doors in the half, and we spent around $9 million, and we'll continue to focus and spend money on retail expansion. As you'd expect, it's Asia, followed by Europe and North America. Latin America with $1.2 million, and my sense is in the coming years, you'll see us increase our spend on retail expansion in Latin America as we take a more direct approach to that market.
Then on the production facility, I've covered that. The biggest pieces of the product development increase is the Hungary facility and the Belgium warehouse. With that, I'll hand it back over to Tim for outlook and strategy second half. Thank you, everyone.
Okay. Thank you, Kyle. I think we are doing what we said we would do, our strategy remains pretty consistent and is producing results. We are no luxury brand dependent on a topsy-turvy growth of a single market. We are a business that focuses on a market segment. Looks to achieve growth in terms of efficiency. Looks for complementary brands. Looks to build its worldwide distribution platform. I think we now have a balanced portfolio. We have plenty of scope for growth, not only in the businesses that we've acquired, but American Tourister has a lot of room for growth, both in Europe and in Asia. Hartmann, we have ambitions to build into a serious luxury brand in travel goods, and we're well on the way to doing that. All of the acquisitions we've made, we are well ahead of our plan for integration.
I think following Hartmann, High Sierra, we've gained enormous experience and know exactly what to do with the brands that we've taken on board. I know that we won't be content with just retaining the same kind of efficiency we have. We think we can go further. We can become better at sourcing. We can become better at logistics. We can find ways of becoming more productive in our marketing efforts, and we can find ways of better controlling our working capital. Despite these fantastic results, we are by no means pleased with ourselves. We think there's a lot more that we can do. This is a segment that still has some very interesting opportunities to add on brands, but also to build up a stronger portfolio of retail channels. That is, again, an area that we will pay very close attention to.
There's a great organic growth story to our business, which is based on the underlying growth of the travel and tourism market. We think we can go further, we think there are still opportunities to enhance our gross margin and our overall growth contribution in our business. Last but not least, I'm absolutely thrilled to announce that Ramesh will succeed me as CEO at the beginning of October. We could not have a better qualified person to do this. Ramesh has spearheaded the enormous success of our Asian business. He knows the luggage market back to front. He's been operating in it for over 20 years, he's also a brilliant businessman as well. Those are qualities that I think will serve the company extremely well in the future. I'd like to congratulate Ramesh. I think this is a promotion well earned. I will stay on as non-exec chair.
I'm still heavily invested in the business, so I've got no intention of going anywhere, and I've got no intention of selling any shares. Although the role will change, the team that runs the business and works together, with a few new additions, will be pretty much the same. I think we've got continuity, we've got expertise, we've got understanding, and we've got leadership. I thought just before we close, it would be just an opportunity for Ramesh to give us a few of couple of your thoughts, and then we'll throw the floor open to questions.
Thank you, Tim. I'm really delighted here to have this opportunity to serve as the next CEO of Samsonite. In our last five years under Tim's leadership, our group has delivered exemplary performance, and I see my role as doing more of the same. I do not see that there's any need for us to change the strategy or change the course. It's just doing more of the same. Probably do it faster and do it more vigorously. As Tim has already enumerated, we see there are some very clear opportunities to our business that we have been working on it over the last couple of years since our IPO days. We've always spoken that, beyond the luggage, we see a big opportunity into a non-luggage segment of our business.
Today, almost 70% of our business is contributed still from luggage, and I believe the non-luggage component, which is only 28% of our sales right now, can be further grown. So the recent acquisitions that we have made is a step in that direction. As we have spoken about Speck. Speck is $140 million sales, but the biggest brand in America, and Speck is the number two brand, is doing a sales over in excess of about $1 billion. That's only in North America. Whereas we believe that with the help of Samsonite, Speck can be grown not only in North America to be a much bigger business, but we can then leverage the distribution platform of Samsonite and its operational experience operating in different geographies of the world to expand Speck further.
Similarly, there are other opportunities for some of the new acquisitions that we have made, and I believe most of our acquisitions are in line to help us to grow the non-travel component of our business. In the second area where, again, it's not something new, which we have been doing it, we've been talking since our IPO days. We do see there's an opportunity for us to further reinforce and grow the component of our direct-to-consumer strategy, which includes both brick-and-mortar sales as well as e-commerce. As we have explained in the beginning of the presentation, Tim has said very appropriately that we see in each of our regions, the growth in our retail and e-commerce have been faster than our wholesale channel.
Today, our direct-to-consumer contribution is about 20% of our sales, and it's Tim's vision that we will try and grow that component over the next four to five years to about 1/3 of our sales. Beyond these two things, I see also that one big opportunity that we have always talked about it and time has come for us to open up that opportunity is Latin America. It is one of the biggest markets, especially markets like Brazil and Mexico, which offers us tremendous opportunities. I intend to be focusing on Latin America. These are a few of the things, but I see there's nothing new in any one of them.
It is what we have been talking and what we have been doing in the last five years under Tim's leadership, and I believe it's the same strategy that we would be continuing to implement it over the next couple of years' time. Thank you.
Brilliant. Thank you very much, Ramesh. William, I think now is the time for questions.
Thank you. Now we will begin the Q&A session. We will take the questions from the callers online first. Thanks.
We will now begin the question- and- answer session. If you wish to ask a question, please press star followed by the number one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star followed by the number two. Your first question comes from Karim Salamatian from Credit Suisse. Your line is open. Please go ahead.
Thank you. Good afternoon, gentlemen. First off, I guess congratulations, Ramesh, and also congratulations to you as well, Tim. I've just got a couple of questions. First on China. You've seen a nice pickup in the growth rate in China. What's your view on that going forward? Can that continue to expand or pick up pace? In order to do that, I would imagine the Samsonite brand has to start growing faster than 2%. Can you talk a little bit about what you think is going to happen in China, and can you get Samsonite growing faster than 2%? Second question for Kyle on the margins in North America. We saw the margins in North America come off. You said that it was largely due to integration cost of Speck. Should we expect something similar in the second half with Gregory?
If that's the case, when do those margins start to improve?
Ramesh, do you want to answer part one and then Kyle take on part two?
Ramesh?
Hi. Sorry, so this is the operator. It seems that Mr. William Yue's line is disconnected. If you please bear with us, we'll just get them reconnected.
Okay. Thank you.
Do you want me to take number two while we're waiting?
Yeah. Why don't you do number two, and then I'm sure Ramesh will be back.
Yeah. Okay. Actually, Gregory will be a little bit different story for the second half. Gregory is a nicely profitable margin business. Speck is a business, as you know, off the results that we put out that needed some back room fixing, which we're very focused on. Our sense is it'll take us a good part of the year to get everything sorted out on Speck. I'd expect similar EBITDA margin pressure from Speck for the back half. That'll be slightly offset by Gregory, which is much smaller than Speck from a size perspective. I think your margins for North America for the back half of the year will continue to be slightly down from a year ago. Then really going into next year is where we'll start to see some of the benefits. We're seeing some of them now.
It just takes a little bit of time to get Speck set up the way we want it. In line with our expectations is nothing. We're quite excited about what Speck's doing actually. On the sales side, the performance is probably slightly ahead of our expectations on Speck since we've closed it.
Ramesh, are you back with us?
They're still trying to be reconnected. They're not back yet.
Okay. Should we take another question and then come back to the China question?
It's not a problem. The next question comes from Erwan Rambourg from HSBC. Your line is open. Please go ahead.
Yeah. Hi, everyone. I'd like to add my congratulations to Tim and Ramesh. Good luck for the future. Following on to this margin question, I was wondering, question for Kyle, if you believe that H2 can be similar to H1, meaning slight improvement in gross margin, slight improvement in EBITDA margin. Or because of the integration of the acquisitions, do you believe EBITDA margin will be flat or slightly down in H2? That's one question. I had two other questions. One relating to M&A. I understand from your closing statement that you're still open to looking at opportunities. I'm just wondering, given everything you have to do with the recently acquired brands, do you still have that appetite for the short term or is this more of a long-term statement?
Thirdly, I was wondering if you can give us a sense of how the important months of the summer have been. If your growth is in line or slightly better or slightly less exciting than in H1. Thank you.
Okay. Tim, you want me to take all three of them?
Yeah, might as well, Kyle.
Okay. I think on the EBITDA margin side, you'll see something that's more like flat for the back half of the year, for two reasons. One, we'll get a little bit of effect of these, particularly Speck margin for the back half of the year. That'll put a bit of a strain on, they're still great numbers, but a bit of a strain on North America. We're also, as Tim and Ramesh said, we're going to put a little bit more back into advertising. So as the businesses continue to perform very well, you'll see us put some more into advertising, particularly to support American Tourister in Europe and also to get all of these new brands kind of moving along.
On balance, we will probably slightly exceed the dollar expectations on EBITDA is how I would think about it, but we will be, from a margin perspective, looking a bit more flat to the prior year. As far as acquisitions go, we're still looking. Our pipeline is, I would probably say, just as full as what it was six months ago, and we're evaluating. There are some things we're looking at that have a bit more of a retail feel to them. We're looking across markets like Latin America and Europe. I would say we're still active, but as we've always said, it's hard to judge when you'll actually get these things done. I'll tell you there's nothing closing tomorrow, but there's plenty of things we're looking at. July and August have been very good. These are big months for us. They're typically our biggest months of the year.
I'd probably characterize them as slightly ahead of our own expectations. July and August have been good months. We've got a very good start to the back half of the year, we feel quite good about it.
Excellent. Thank you very much.
Thanks, Kyle. Ramesh, are you back on the line?
Yes. I'm back on the line now.
Okay. We missed a question about China, which is really, we've seen some pickup in growth in China, but how do we see the near term and medium term future now in terms of growth?
Yeah. Sorry, I just got kicked out. China, I was just trying to say is, we do start to see a growing momentum to our sales. The second half of 2014, I believe we should be able to deliver somewhere in the region of around the mid- to high- teens in China. As it was rightly pointed out, the growth is coming in from American Tourister, but also from Samsonite RED, and together with Samsonite core brand. We have repositioned Samsonite. We have been now targeting the mid-end of the market with Samsonite, and that is helping us to get additional growth, even with our core brand Samsonite. Beyond that, we have become more active than we were before, and focusing more on some of the new emerging channels, which is primarily TV home shopping and e-commerce.
These two channels have been rapidly growing, and we have also taken advantage of the consumer preference moving away from department stores to shopping in the retail, that is shopping malls and the company-owned stores. These are the three channels which are seeing now much more buoyancy, which is retail, e-commerce, and TV home shopping. These three channels and a higher emphasis on American Tourister, Samsonite RED, and the mid-end of Samsonite, is giving us a comfort to say we should be able to grow anything between mid- to high- teens in the second half of 2014 in China. Hello? Yeah.
Yep.
Okay.
Okay.
All right, your next question comes from Aaron Fischer from CLSA. Your line is open. Please go ahead.
Thanks everyone. I'll limit my questions to two because we're already probably running out of time. The first one is for Tim. Tim, good luck with your next endeavors. I guess the number one question that I think we're going to receive tomorrow from investors is probably around your semi-retirement, if that's what we want to call it. I guess given your career history, we had expected that at some point that you would move on to other endeavors. I guess I'm wondering, why now? Do you feel like you achieved what you wanted to achieve at Samsonite? Or, either you've got something else that you really want to focus on? Maybe you could provide a bit more color about the timing of your change in roles. That's the first question.
Secondly, sorry to keep going on about China, I know in the slide presentation, you sort of talk about China in different ways, by brands and also by segments. It is hard for us to understand why China would be one of the slowest growing markets for Samsonite given the emerging middle class, blah, blah, in China. I'm just wondering whether the slower growth in China was really because of the slower sales for gifting purposes. Is there a way where you can sort of describe what the sales would've been excluding the sales for gifting customers, if you like? I don't really know how you can provide an answer on that, I'm just expecting that the weakness in China was really because of the slowdown in gifting sales. Actually, I'll slip in a third quick question, I know you talk a lot about.
You're making a lot of acquisitions now, which is great. When you talk about each of the brands, you talk about opportunities to leverage the distribution platform and the sourcing opportunities and cost savings, all the rest of it. That all sounds great, I was wondering whether you could actually provide any anecdotes or stories about how you've been able to leverage certain brands into your existing distribution platform, or what you've done on the sourcing side to try and reduce unit costs. Just maybe a couple of stories around what's happening there. Thanks.
Okay. I think we'll take, because there's quite a lot to the second question, so should we take that first, Ramesh, whilst it's still fresh in the mind?
Yeah. Okay. I'll try to summarize it in a sort of way because the Samsonite sales, the Samsonite brand sales in China have been slower in the first half, and also it was slower in 2013. Primarily because we have been focusing Samsonite brand business, when I'm using the word Samsonite, I mean Samsonite brand business, in the price segment, which was $500+. We were primarily focused on the department store sales. This was our focus. What we have done, remodeled our businesses there, we have done two changes. What we realized was that department stores are anyway losing traffic for a variety of reasons. Also, the sweet spot in the price point for our brand, we saw it, the $300 was a much more active price point.
What we have made a difference, and which is allowing us to now see a bigger growth in second quarter of 2014, which gives us confidence. As Kyle said, our July and August number, which we already have at home now, is a very, very strong growth in China, almost in the region of around 25% actually. What is happening there? First, we have moved down our assortment in our stores. We are populating $300 price point, and when I'm using this price point, I mean by the carry-on luggage size. We are populating more in the region of around $300 price point, which is helping us to get more because these are the price point which is mostly used by consumers for self-consumption.
Second is that instead of focusing all our energy to try and grow our sales in department store, which anyway is losing the traffic and anyway losing the market share to retail. If you see in China, even in the first half, our retail comp in China has been 12%. We have been re-emphasizing to grow our business more in retail and also on e-commerce. There has been a shift in our focus on the channel, and there has been a shift in terms of the price point that we have been operating more actively in China, which in turn makes us confident that we should be able to grow at a higher clip in second half than in first half. As Kyle already said, we already have a view in July and August, which are the two biggest months even for China.
We have actually been able to do in China much better than our own expectation. We believe the momentum is going to be continuing. Besides that, there also is a growth which we are getting in China is from Samsonite RED, because we did not realize, but Kim Soo-hyun is also equally popular in China as he was popular in Korea. Then there is still a very robust growth in the American Tourister. All put together, we are far more optimistic about our business in China in the coming months than what we have delivered in the first half of 2014.
Okay. The first question, I guess there are sort of three elements to this, three parts to an answer. The first is that I have quite a strong view that it's undesirable for anyone to lead a large organization for more than six years, which when we've got time over a beer, I'll explain to you all the reasons why CEOs shouldn't hang around. Secondly, I think that my skills are very much such as they are, taking businesses on and creating a platform for future growth. I'm no luggage specialist, I feel that now the time has come to really hand over to somebody who really has a lot of in-depth and very detailed experience in the market. Lastly, I don't have any plans to do another turnaround project.
In fact, from November, I shall be taking over as chairman of the National Trust, which is a very large charity in the U.K. I suspect that and carrying on as chairman of Samsonite will more than keep me busy [inaudible]. I'm not going anywhere. I believe strongly in the long-term growth prospects of the business. I think now is really the right time to make this transition. It will be in the long-term interest of all investors.
Sorry, Tim, just on that point, if you can still hear me. In terms of your shares, you said that you're not going to sell any shares, do you have any lock-up on those shares?
No. I never have done, as a matter of fact, at least not after a year after the flotation or whatever it was.
Okay. Actually, for my third question, maybe we just cut that question and give the other guys a chance to ask their questions.
Okay.
Sir, there are currently no more questions at this time.
In that case, can you put Aaron back on line, please, so that he can ask his last question?
Yes, sir. Aaron, your line is open.
Okay. Yeah, I was just sort of asking because I guess what I meant before is you're acquiring a lot of brands now, and we all understand the idea of the synergies and the opportunities about leveraging the distribution platform and also cost savings on the sourcing side. But I was wondering whether you can provide any specific anecdotes about how you've been able to drive, say, Hartmann into some of the channels you're dealing with or maybe some of the other brands.
Well, I think. [crosstalk] Yeah. Go on, Ramesh.
Yeah. I can just quote a few of them because 2014 has actually gone by in trying to integrate High Sierra. If you see our High Sierra growth, we have been able to deliver 22% growth, and it's primarily coming only from North America. What we have been able to do is that we are dealing, one of the biggest growth that we see in High Sierra is from Costco. We have a long, deep relationship with Samsonite, with Costco. We have been leveraging our relationship with Costco to grow our business in North America. We have now completed our test marketing in India. We're basically trying to deal with the same channels which we were dealing with Samsonite to really gain distribution for High Sierra.
I think it's these kind of relationship, both on the distribution side, but at the same time, today, our supply team in the Orient, which have been working with Samsonite, is now working for High Sierra. One of the challenges which High Sierra has faced in the past was that they were not been able to get on-time delivery of the stock because there's a back-to-school season, which is a very tight window. If you are delayed on that, then you just not only have the missed sales, but you may also have the back charges coming from some of these big box retailers.
I think we have, this year, been able to execute 99% on-time deliveries to all the big box retailers of High Sierra in North America, which is primarily because we have leveraged our own experience of managing the relationship and managing the supply in the Orient for those kind of products. Likewise, mainly right now we have done for High Sierra, but we're now getting ready to launch Hartmann in the same way our design team for Samsonite have been busy in trying to create a new range of products. Once as the products are getting ready, we are ready to now roll out the new distribution. Like in Japan, we have been able to secure 20 new point of sale for Hartmann. I think for any new brand, this would have been impossible.
It's just that we have high credibility with our departmental store partners in Japan, that they have been ready to trust us to open up and give us 25 new point of sale within a span of six months in Japan. Now, that cannot happen unless until you already have a longstanding relationship with those partners.
Okay. Thanks very much for the detailed answer. It's very interesting. Also congratulations on the new role and good luck as well.
Thank you.
Hi, sir. This is the operator. We've had two more questions come up, and one is from Anne Ling from Deutsche Bank. Your line is open. Please go ahead.
All right. Thank you. Hi, management team. I would like to check with you regarding the e-commerce business. Now currently about like 6% of the sales. Based on your estimate, in three years' time, what potentially the sales mix will be? Is there a breakdown in terms of geographically, where is this growth in the first six months coming out from, and where are the potentials in the future? That's my first question, yeah.
Tim, you want me to answer that?
Yeah, please.
Yeah. The e-commerce, our contribution right now is about 6% of our revenue, and it's been growing at a faster clip than our average growth rate in all the geographies, in all the regions. I believe that over next three years' time, we should be able to increase the contribution of e-commerce to around 10% of our revenue. Now today, already there are geographies where we are achieving a high contribution of e-commerce, which are Korea, Japan. Korea, it is already around 12% of our revenue. Japan is close to around 8%. U.S. is around 8%. There are pockets where we are doing more. Like U.K., we're already around 10%, but there are other markets where our share is much lower.
Right now, there is an emphasis on not only growing in the markets where we have a high contribution from e-commerce, and that generally the consumer seems to be much more open to the idea of shopping luggage, even on the e-commerce platform, but also getting all countries started. We are also investing a lot in terms of reinforcing our platform, both in terms of ease of shopping online, but at the same time, our ability to execute the delivery within 24 hours. I can give you an example, like we were executing or fulfilling all our orders in U.S. from our warehouse in Jacksonville. At this stage, we are now working to open up our second distribution center on the West Coast so that we can cut down our lead time to delivery to less than 24 hours.
We will then consider also opening another distribution center in the Northeast part of the U.S. market. Basically, we are investing behind the technology and the platform, which can help us to grow the e-commerce. I think there's a natural buoyancy in that segment. China today, one of our fastest-growing channel is e-commerce. The growth rate in China on e-commerce in excess of around 40%. Of course, still it is a smaller part of our business, but growing very rapidly. I believe that in three years' time, we should be able to aim for around 10% of our revenue to come from e-commerce.
All right. May I know what is the sales mix within China in terms of e-commerce?
Today, practically 99% of it is American Tourister. Because we have been somewhat hesitant to sell Samsonite on e-commerce because bulk of the e-commerce sites have been on discount. They have been actually, they run promotions and Samsonite is sold in China, as seen more as a full-price brand. We've been kind of hesitating. As we are talking this month, we are experimenting for the first time with Tmall for a full- price Samsonite e-commerce site. We will see how the results come by. As we speak right now, it's almost 99% of it is American Tourister sales.
I see. It is around 5%, 6% of China sales or it's lower?
It is about 6% right now.
About 6%. Okay, thanks. My second question is on Latin America. The contribution in the first half came down. I wanted to check, is there any one-off, for example, taking some inventory from in Brazil, maybe that impacts the margin a little bit? What is the outlook in the second half? Will we be expecting a better outlook in the second half or it's still pretty much similar as compared to first half?
Do I take this question, Tim?
Yeah.
Okay. Latin America, you're absolutely right. It is basically because we changed the model in Latin America, in Brazil, more particularly. We were operating through distributors, and we have now decided to go direct, which is helping the sale. At the same time, we took back the inventory, and when we took back the inventory, we realized that a lot of inventory was very old inventory, and we believe that Brazil offers us one of the biggest opportunity to grow. Right now, we are at this stage. We have been liquidating all the old inventories, which is affecting our margins. I would say that the second half of 2014 will also go by cleaning up of the inventory. It will not see any significant improvement on the margin front in Latin America. Part of the margin erosion is also because of the currency devaluation of Chile.
Right.
I would say that, once we are done in 2015 onwards, you will see a strong rebound on the margin side in Latin America. Other than also, we are working on a full potential plan for Latin America, which should also help us to see some very robust top-line growth as well as margin improvement in Latin America. 2014, right now, we can see it will be more or less same in terms of the margin in second half.
Okay. Thank you.
Your last question comes from Paul Jeffries, a private investor. Your line is open. Please go ahead.
Hello, gentlemen. I have four questions for you. First of all, I would like to say a hearty congratulations to Ramesh on taking up the reins as CEO. Strikes me from a distance, having been an investor since day one of the public life of this company, that that's a very well-deserved promotion. Secondly, I'd also like to say that since the company's darkest days pre-IPO around about 2009, Tim, you've done an absolutely a mighty job in helping turn around this company and bring it to the incredibly healthy state that we see today. Thank you very much for everything that you've done because it's really been remarkable. My first question is a tack on to the e-commerce question that was just asked.
I was just wondering if you would be prepared to lift the lid a little bit on the margins that you see on your e-commerce sales relative to your retail sales. We might take, as a demonstration market, North America in that regard. Secondly, if I recall correctly, at the time of the 2013 full-year results, you mentioned that in that year you'd spent $30 million paying liabilities with respect to U.S. pensions, $20 million of which were discretionary. I'm wondering if we're likely to see a recurrence of that in full-year 2014. Thirdly, in respect of the seasonality of your sales, I just wondered if you could give us a ballpark indication of what percentage of total sales for the full year you think will occur in the second half of this year relative to the first.
Finally, in 2013, you spent $57 million in CapEx, which is up from $31 million in the prior year. I'm wondering for full year 2014, and that's probably a question for Kyle, is whether you think the full-year CapEx number will be significantly north of the $57 million spend that was seen in 2013.
We should do it normally.
Kyle, do you feel that you can take most of those questions?
I can. Yeah, I think they're probably all in my camp.
Yeah.
As far as e-commerce goes, and we think about margins for e-commerce, and I'll use North America, for example. It's not that different than what our overall retail margins are, and I think we've given color for that in the past. You end up with a decent, this is on our direct-to-consumer e-commerce. You end up with a very healthy retail gross margin and an EBITDA margin that's close to, if not slightly over 20%. Half of our sales in the U.S. on the e-commerce side are going through wholesale channels, which doesn't look that different than our overall business. On a blended basis, it's probably not that far off from our blended margins in the U.S. As we grow the direct-to-consumer e-commerce, we should get some larger benefit over time. That, I think, should answer your question.
The mix is different around the globe, but the story is about the same.
Yeah. Thank you.
Okay. The U.S. pension plan, we will fund some more money to that this year. All part of a strategy of getting the plan into a position where we can make a decision, to potentially, what we call terminate the plan, but basically put it out, to an insurance provider with an annuity. We are in the mode this year of continuing to fund the plan. We will be just under 100% funded after the contribution that we'll make to that plan, which we're doing very soon, actually. You'll see $14 million, $15 million this year, and then we'll be making a decision as a company on, do we want to pull the trigger and get it off our books altogether? There won't be a huge ongoing funding requirement because we've got the thing fairly well funded.
There'll be a cost to exiting the plan and we'll be kind of evaluating that and probably messaging to shareholders over the next six months or so what we want to do there. The reason we'd want to do that is, one, you've got the overhang and the risk, even though we've kind of hedged as best we can the asset to liability. The reality is it still costs you money. It costs us anywhere from $1.5 million-$2 million a year to have this plan largely around pension, PBGC premiums and the such. There's real merit for just getting the thing off the books and I think as we've said over the last three years or so, is we're heading towards that path. I would say we're one step closer to that and probably at the point where we need to make the decision on pull the trigger.
Not atypical to what a lot of U.S. companies are doing at the moment. That's where we're at on that. The short answer is you'll see $15 million, $14 million this year, and then next year, we'll be making a call on getting rid of it altogether, I think. As far as seasonality of the business, to be honest, I don't have the number right in front of me, but we're slightly weighted in the back half versus the first half. It's probably something like anywhere from 105%-110% back half, if you know what I mean. We're up higher. We've got the big July, August period, and we also get the holiday sell-in. Our sales levels are typically higher back half to first half. I apologize, I don't have the numbers right in front of me. You will see weighting back half versus first half.
From a CapEx perspective, the number this year is going to be about $60 million. Not that different than what we spent last year. As we go to the next year, we've always said our kind of run rate CapEx is around $50 million. One of the things we'll be evaluating as we do our budgets, particularly with the push in Latin America, which will have a little bit heavier retail mix, we'll be somewhere between $50 million and $60 million probably for next year's CapEx spend, with a bigger proportion coming from retail expansion, and less coming from internal infrastructure spend that we've been doing in the last two years. On balance, still, I think a very low CapEx, when you view the whole business, and as a percent of sales, it's quite low, actually so—
Kyle.
—hopefully that.
Thank you very much. That's a very thoughtful reply. Just very quickly, if you'll indulge me one final question, which is, in April, at the time of the 2013 results, as a management team, you expressed a great deal of confidence in your ability over the next four to five years to double both the top and bottom line of the company. Do you still hold to that degree of confidence today?
Well, I think the person to listen to most carefully or two people are Ramesh and Kyle, but I'm certainly very confident in our ability to do this. I know the guys have been working on a plan that has a fair amount of detail. As we've explained, not only are we confident in the organic growth prospects, but we see more additional opportunities stemming from acquisitions. Ramesh, better hear it from the horse's mouth.
No, absolutely. We still hold that view as what Tim just said, that we should be able to double our business over the next couple of years' time. As we have been talking, this has been our persistent and a constant view that we've been holding to our business, both on the basis of the organic growth, underlying growth in the travel industry, but also as I told you before, that we see a great opportunity in the non-travel segment. Even now, the luggage contributes around 72% of our business, and non-travel is only 28% of our business. If you've seen some of the new acquisitions that we have made, whether it's Speck or Gregory or High Sierra, all of them are in the direction of trying to expand our business into the non-travel segment.
Non-travel, as we would like to remind ourselves, is almost twice the size of the travel segment. We have been working on details, and we still hold very much that view, that both on the basis of organic growth and inorganic growth, through the category expansion, in the adjoining categories and, not to forget Latin America. I've just come back from Latin America, and we always held that view that Latin America is probably one of the biggest, untapped opportunity or underexploited opportunity by us. Brazil, according to me, should be of the size of business. Today, the luggage is expected to be or estimated to be same size as India. Today, our business in Brazil is very small. We know what to do, and we have a plan to activate our Latin America full- potential strategy.
I think all put together, I'm very confident that under Tim's leadership, we should be able to still double our revenue top line and probably improve our profitability better, because we should be able to then leverage the top- line growth and our fixed- cost structure to be able to deliver somewhat better profitability.
Thank you very much.
Great. Good. William, have we come to a natural point at which to close the meeting?
I think so, yes. Thank you very much everyone. This will conclude the earnings call tonight.
Thanks, everyone.
Thank you.
That does conclude today's conference. Thank you for your participation. You may all disconnect.