After a very strong start of the year, the Thule Group said that it grew at a slower pace in the second quarter. In constant currencies, the Swedish-based company's revenues grew by 3.0 percent from the year-ago period to 2,311 million kronor (€219.7m-$247.1m), hampered by currency headwinds. Its operating income totaled SEK 558 million (€53.0m-$59.6m), corresponding to an increase of 6.6 percent. Adjusted for exchange rate fluctuations, operating income declined by 0.6 percent. The company's net income improved by 8.8 percent to SEK 419 million (€39.8m-$44.8m).
By region, sales rose in Europe & Rest of World by 3.2 percent in constant currencies, reaching SEK 1,667 million (€158.5m-$178.2m), with most markets delivering stable growth. However, a number of key customers in the Nordic region and Russia faced what the management described as general challenges, impacting sales. The company says it is already seeing an improvement in the Nordic region, but expects continued challenges in Russia for the remainder of the year.
Thule's sales of its roof racks were lower than expected, as the company said it underestimated the number of older roof racks that distributors and retailers had in inventory prior to the launch of its new generation of products. A decline in sales of products to RV manufacturers was experienced at the end of the quarter, and Thule expects a weaker market during the second half of the year, since RV manufacturers and retailers are selling off their inventories of older motorhome models.
The Active with Kids category continued to do well, mainly driven by a broadened offer of strollers and the strong growth of bike trailers. Sales of luggage and sport bags were said to have been strong.
The company finally recorded some growth in the Americas region, despite sluggish sales in Latin America and the impact of tariffs amid President Donald Trump's trade war. After a strong April and a stable May, the rate of growth declined in June in the U.S. as store owners became more cautious due to an additional 15 percent tariff on Chinese goods announced in May for implementation in August. In the end, there will be no further increase in U.S. import duties from China as the two sides have agreed to resume their negotiations.
Overall, the group's sales increased in the Americas by 2.3 percent in local currencies, building up to a level of SEK 644 million (€61.2m-$68.8m) in constant currencies. They inched up by 0.3 percent excluding the recent acquisition of Tepui, the American supplier of rooftop tents, and the negative effects of the previously announced phaseout of less profitable products.
The integration of Tepui has been completed and sales of rooftop tents went up organically year-on-year. As of 2020, the group will sell these products under the Thule brand. Meanwhile, most of the emerging markets in Latin America continued to have very challenging economic conditions, with lower sales during the quarter. However, Canada was a bright spot, making a return to healthy growth, while Brazil continued to develop well. The newly introduced categories of luggage and strollers grew rapidly during the quarter.
Across the group, the gross margin declined by 0.1 percentage points to 42.1 percent, due to the effects of the tariffs introduced in the U.S. on imports from China and the under-utilization of the group's own manufacturing facilities due to production volumes that were slightly lower than planned.
Moving forward, the management said that in June, it began showing new products for the outdoor industry and will continue to present them in the third quarter. These include new luggage, cycling products and strollers that will appear in shops next year.