Samsonite Group Stock

Good day, and thank you for standing by. Welcome to Samsonite 2026 Interim Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the call over to your first speaker today, Mr. [ Alvin ] Concepcion, VP, Investor Relations. Thank you. Please go ahead.

Thank you. Welcome to the Samsonite Group Interim Results Conference Call. On the call with us today are Kyle Gendreau, Chief Executive Officer; and Tom Pizzuti, Chief Financial Officer.

Before starting today's call, we would like to remind you that any forward-looking statements made on this call involve risks and uncertainties that are subject to the company's provisions as stated in the disclaimers in the company's press release and earnings announcement and that actual results can differ materially from those described in the forward-looking statements.

I will now turn the call over to Kyle.

Okay. Thanks, everybody, for joining. We're excited. We have a lot of things to talk about, including news that we put out earlier in the day today that I think many of you would have seen. I'm on Slide 5. So whoever is managing the slides, I'm going to start right in.

So Importantly, we're making strong progress on our key growth pillars that we've been talking about, and we're executing against, which is helping drive resilient sales in this business. We're focused on amplifying and elevating the awareness of our iconic and consumer-centric brands. We've increased the advertising spend, as we signaled, in the first half of the year. And we're really investing and continuing to invest behind our brands to push the business.

We're very focused on being the clear winner in digital to further support not just our own DTC e-com business, but our multichannel approach to growth in the business. In our first half, our DTC e-com business grew faster than any other channels in our business, led by double-digit growth in Asia and Latin America and strong growth across the business. And importantly, our share of digital business, both in our own direct-to-consumer e-com and our broader DTC e-com and our wholesale e-retailer business, both increased as a percentage of our business.

We continue to go after the white space opportunities in lifestyle bag. That business in the first half continued to grow. And we saw penetration increase in our business as well in these lifestyle bags, led by strong performance across all of our brands, but particularly Samsonite, Gregory and TUMI had really strong results within that space. And we continue to resonate with globally -- we continue to drive the business with products that resonate globally. And so, we had some really successful launches at the end of last year that continued to right into this year and some new launches this year. I'll cover them in the deck, but products like Samsonite NEXIS are off to a tremendous run. A relaunch of Alpha -- in TUMI, Alpha 4 has been really well received. And Samsonite PARALUX just continues to grow and will continue to fuel growth in the back half of the year.

And then lastly and excitingly, we announced last night or early this morning for those in Asia, a definitive agreement to acquire BÉIS. BÉIS is a fast-growing digitally native lifestyle brand that broadens our access to younger, predominantly female consumers and really helps expand our presence in the higher-growth lifestyle bag categories and importantly, strengthens our own digital capabilities in the business, and a business that's coming with a really terrific management team, I'll cover a little later in the deck. So we're excited about that. All of these areas that we're focused on, particularly the pillars, are driving resilient first half performance.

When I think about our performance, excluding Middle East and India, and we're all dealing with the conflict in the Middle East, our first half sales on a reported basis were up 3.1%, and on a constant currency basis, up just shy of 1% despite the headwinds. In Q2, the underlying net sales -- and importantly, Q2 is the first quarter that we have the full impact of the conflict -- Our business continued to be resilient. So excluding the Middle East and India, our business was largely flat, as we navigate softening travel demand and some softening consumer sentiment really off the back of the inflationary impacts, particularly in the U.S.. And I'll cover that in more detail as we go through the regions.

Our margin continues to expand. Our gross margin on a reported basis for the first half is 60.5%, up from 59.2%. But in that number, we have some tariff refunds that came in for a lot of companies. If I exclude that, we're still up 30 basis points year-over-year for the half, 59.5%, and I would say an improving trend as we go into Q2. Again, reported Q2, 62% versus 59% last year. But excluding the tariff refund, our gross margins are 60%, up 100 basis points to the last year, driven by some favorable sales mix as Asia is moving -- the underlying Asia business is moving well and disciplined execution across our businesses and all of our brands.

As we signaled, we delivered sequential improvement in adjusted EBITDA margin. Importantly, for Q2, our EBITDA margin on a reported basis, 16.1%. If I take the tariff out, the EBITDA margin is 14.1%, up 100 basis points to last quarter, so sequential improvement, and that's despite a 150 basis point increase in advertising. So we're pushing the business. We're leaning in on our pillars of growth, and we're delivering operating leverage within our EBITDA margin. That should continue really strongly in the back half of the year.

On Slide 7, our core brand performance reflects underlying strength despite a full quarter of headwinds. You can see, our Samsonite business -- and the callout boxes on the top are excluding the impact of Middle East and India. So we're down slightly for Samsonite, 1%, with the headwinds we've talked about. I think that's a very strong result. TUMI, a little less, down just shy of 0.5 point across the globe. That's really off the back of growth in Asia, growth -- really strong growth in Latin America, but a more subdued North America and a bit more subdued Europe, down -- North America down around 5%. Europe down around 2%, really off the back of the headwinds that we're seeing from the conflict.

Luciano has been on board for 3 months, doing a great job as he kind of starts to reset the TUMI business. Particularly in North America, we're focused on enhancing the DTC experience. We're prioritizing product innovations that support full-price selling for this brand, and we're strengthening the brand storytelling and consumer engagement. All this will have benefits as we move into the back half of the year, but importantly, as we set up '27 for a strong TUMI result.

And then, American Tourister, underlying trends have been improving for the last 4 quarters. If you take out the Middle East, you can see, for Q2, we're up 6.2% with strong growth in North America, a little bit of timing of orders being placed with the wholesale customers, and growth in Europe. Asia, if I adjust for Middle East and India, delivering growth of 3.5%. So the American Tourister business has kind of moved into a trend that's more positive than when we were exiting 2025.

On Page 8, we have stable performance in geographies not directly involved in the Middle East. I have a whole section on Asia following this, but I just want to give you a sense for what we're seeing and where you see impacts of conflict. And so, in Asia, particularly, you can see the impact of Middle East and India. But the callout boxes talk about the underlying trend. You see 3 quarters of sequential improvement in overall Asia, excluding Middle East and India. You can really see the impacts in North America on the inflationary pressures due to the conflict, softer travel demand we started to see in North America and some weaker consumer confidence off of inflation, off of a year of tariff, followed by a year of real inflation from the conflict. And we've seen some more cautious purchasing from our wholesale customers. That's driving much of the North America dip that we've seen in Q2.

Europe has been stable is what I would say. Our business is roughly flat for the quarter. It's been running roughly up 1% for the last couple of quarters, and it really speaks to the underlying strength in the business despite the headwinds that we're seeing. And we're really seeing pressure in Europe is softening retail traffic. Our wholesale business has held up, and our e-com channels have been very strong within Europe. And Latin America continues to deliver positive growth. We saw a little bit of a softer traffic trend in Brazil and Chile, but our Mexico business continues to be positive, and our outlook for the back half of the year is positive for Latin America as well.

The next 2 slides, I wanted to break Asia down because we have really strong underlying momentum in Asia. And I wanted to call out the countries that are really driving some strong results. So the first column is Asia excluding Middle East and India. So you can see, we've had 4 really strong consecutive quarters of growth, and that's continued into Q2. China has been very strong. Our business, as we kind of execute against our strategies -- we executed against a digital e-com channel that's outperforming, probably the strongest pocket of e-com growth in our overall business. You can see our China business up close to 9% growth in Q2 and really strong momentum continuing in that business. Across all brands, particularly brand Samsonite, very strong. And Gregory, I'll cover in a slide, really capturing a good moment within our China business.

South Korea has been strong. This is, again, 4 really strong consecutive quarters, and it continues, and it's across all of our brands and channels. We've seen very strong e-com TV home shopping. We launched a very successful American Tourister lifestyle bag collection that's delivering for us and a Samsonite Red collection that we've launched exclusive on Musinsa, which is really a fashion-forward digital channel that we're really executing well with that brand there, that sub-brand. Japan has held up well. We've seen consistent growth in Japan, a little bit softer in Q1 and Q2, really off of some reduced traffic from Chinese consumers. But the underlying Japanese business continues to deliver a strong growth profile.

If you go to the next page, you can see the impact within the Middle East, okay? So here, you can see conflict starting. In Q2, our Middle East business down 50%, okay? So that's a huge impact, as you'd expect. Our India business was also directly impacted just from a consumer sentiment perspective. We shifted from double-digit growth last year to down around kind of 8% to 10%. We expect that to improve a bit in the back half of the year, and we're managing that business well. Australia is a bit unique. Australia, you have consumer sentiment that's under strain. But Australians tend to travel to Europe through the Middle East. And I think with the disruption we've seen in the Middle East, we've seen a softer travel number in Australia as well.

And then, the last slide, it captures everything else, the rest of Asia. And here, 4 really strong quarters of sequential improvement. These are markets like Indonesia, Singapore, Thailand, Taiwan, all continuing to deliver growth. So the underlying kind of momentum, taking out really the 2 countries that have been really impacted by conflict, really speaks to an improving Asia story for us.

In the next section, I'm going to go through the pillars. And just a reminder, and I led with these, but we're really focused and the entire organization is focused on what are the pillars to help us drive long-term growth. This elevation and amplification of awareness for iconic brands, enhanced storytelling behind the business. I'll give you some examples of what we're doing there. Being the clear winner in digital across that whole ecosystem, we're winning here, and we continue to push that, and I'll talk you through what we're doing on that front. This white space opportunity in lifestyle bags, really seizing the opportunity. In the last earnings call, I showed what the market size was and what our share is. And we have tremendous opportunity to gain share in this space, and we've had some really success -- strong success across our brands there. And then, we've got some really amazing product. We always have, but we've got products that are resonating globally, and we're leaning behind from a marketing and messaging perspective to move the business. And here, you have a picture of PARALUX, and I will talk you through what we're doing across brands from a product perspective.

Importantly, we're continuing to advance our first 2 growth priorities with the global marketing and e-com office that we've established. We're beginning to fill that team out a bit more. And our GMEO continues to establish us as a key partner across the organization, helping to accelerate brand growth, strengthen our digital capabilities and improve marketing efficiencies. We're driving consistent global brand execution through impactful storytelling. You'll see some examples in here what we're doing there that balances our global scale but with local relevance. And that's really one of the powers of our business is we're touching consumers locally, but we're leveraging our global scale in a different way. We're working with teams and advisers like the [ Lions Advisory Group ] to help elevate our brand storytelling capabilities across all the regions. [ Chris ] is bringing people together to get everybody synchronized here.

We're enhancing our digital marketing coordination by streamlining processes and improving speed to market by region, harnessing the scale of our business to execute in a different way, and accelerating our commerce capabilities across all digital channels, not just BTC digital. We're seeing great results there. And we're improving our marketing effectiveness through stronger ROI measurements, through greater transparency in the data and disciplined investment allocations. We continue to work with Deloitte on the MMM tools to drive efficient and effective spending. And I think the GMO is helping scale best practices globally across the business to harness the power of the consolidated business to drive long-term growth in portfolio. So, that lays this foundation for Pillar 1 and Pillar 2 that we're leaning into.

I'm on Slide 13. And here's a good example of what we're talking about, elevating the Samsonite brand in China to target second half growth with a new brand ambassador, William Chan. William Chan is a leading single, actor, entertainer with more than 20 million followers. He was appointed as the brand ambassador for China really at the end of Q2. Just in the month of July, the campaign generated 42 -- and the campaign was around the NEXIS collection that we've launched, and we launched in China in the middle of Q2. In July, 42 million impressions, 5 million engagements.

The strong consumer engagement translated into commercial results. The NEXIS collection ranked #2 -- or #3 in China best-selling collections. And this is after just launching for 6 weeks in this market. The campaign also drove significant traffic and awareness across all of the digital platforms. So the halo effect of this launch really matters. And it really speaks to our ability to continue to invest in culturally relevant brand ambassadors that enhance storytelling, engage consumer engagement and allow us to drive long-term brand growth that we can execute tactically within regions. So really a terrific success story.

On Page 14, this is looking at what we did with NEXIS in Europe. So NEXIS launched very strongly in Europe. This was a 360 campaign integrated across the entire region. It really speaks to NEXIS as a flagship innovation platform. This is really next-generation product for us that's driving really enhanced brand visibility and scale. We delivered a full 360 campaign, out-of-home, premium retail environment, TV, social, digital, creator collaborations and content partnerships. And we leveled this multichannel activation to really move the needle. And NEXIS very quickly became a #2 bestseller collection in Europe in Q2, and it really drove brand strength across the entire region. And this is just getting going because this is really launched in China, as I said, in the middle of Q2, and Europe in Q2, and we're launching across the rest of the regions in Q3, and I expect a really strong result for NEXIS. You won't be able to miss it if you're following or you're traveling.

Our DTC e-com business, Slide 15, was our fastest-growing channel, up 6.4% for the half. You can see our own DTC e-com on the charts below, went from 11% to 12%. We continue to move the needle there. And if we look at that whole ecosystem that I said at the start of my presentation, our overall DTC e-com and the e-retailers that we can measure, so the likes of Amazon that we're measuring that business, was up 60 basis points, almost 21% of our business coming from these channels and driving a growth story across all regions. Our overall DTC business increased by 1.6%, benefiting from the focus on our DTC e-com channels.

Slide 16, our digital capabilities continue to drive consumer engagement across, what I would label, multichannel growth. What makes us a bit unique is, we can touch the entire ecosystem for digital on our own direct-to-consumer sites with wholesale partners that reach kind of global consumers and residents, the likes of Macy's, Nordstrom, our leading e-retailers like Amazons and Mercado Libre and many more that allow us to really play in scale across the entire ecosystem, mobile platforms, and really making sure that we're able to capture those consumers clearly there. We're playing that perfectly. And more recently, marketplaces and social commerce channels are gaining important growth and traction, and we're focused there. And I think our ability to leverage scale to play against this entire ecosystem, we can touch the consumers where they want to be, and we're doing that well across all regions, and more to come. The GMEO is laser-focused on how do we harness our scale to win here across all regions.

We're accelerating digital leadership through strong e-commerce momentum in China. China really led the way here. Our DTC e-com business in China grew 14% in the first half, demonstrating this continued focus momentum in this market. We had exceptional performance in the Gregory brand in both DTC e-com and retail within China, and our net sales more than tripled in quarter 2 2026 to the previous year, highlighting the effectiveness of brand-led digital engagement and really targeting consumer activation in a category that's moving in China right now, and we're executing really well. Our DTC e-com channel in China represents 22% of our sales in China. Chinese consumers have shifted here, and we're capturing this really well. And as you know, our overall DTC e-com is 12%. So China is leading the way on capturing consumer demand within these channels. And it continues to be -- China continues to be a strategic priority to driving overall growth, and you could see that in the numbers I talked about for China in the second quarter.

On our lifestyle bag positioning -- I'm on Page 18 -- this continued to grow, 2.4% growth. Importantly, as a percentage of our sales, it continues to grow. It's 37%, almost up 100 basis points to last year in this category. And it really speaks to what we're doing to focus on driving this category. I'll talk to you about what the initiatives are in a second, and it's coming across all of our brands importantly.

On Page 19, what does it look like? What are we focused on? Just a couple of snippets here. When you think about brand Samsung, the Better Than Basic collection, a U.S. collection that's really delivered tremendous growth. Within TUMI, this TUMI Alpha, which has luggage components, but a lot of what I call lifestyle bags, this Brief Pack continuing to resonate really well with consumers. And American Tourister Take2Cabin performing in Europe really well as consumers shift to what they carry on to plane, and American Tourister is playing here. These hero collections are resonating across multichannels and brands and consumer segments. And our laser focus on optimizing our reach within this category is delivering.

We're partnering with advisers to strengthen product development, merchandising and go-to-market capabilities. We're bringing in advisers to look at globally and within regions, how do we execute on this, both from a product development side and distribution side, to really make sure that we're maximizing our opportunity here. And we continue to evaluate opportunities. And the BÉIS acquisition is a good example of that. And I've been signaling there's opportunities here to expand how we execute in this space. And BÉIS delivers a really wonderful story within this space as well.

Just a quick callout on Gregory. If you remember, this is a business we acquired, if you've been watching us long enough, more than 10 years ago. When we acquired, it was something like $25 million in sales. It will be north of $100 million in sales next year. It's delivering overall growth 9.1% in the first half, led by Asia, 15%, but growth in both North America and Europe. It's well positioned to capture this white space opportunity in lifestyle bags, both with performance and technical bags. But as these bags shift off the mountain, there's real opportunities to grow. And we're seeing that across all of our regions. The outdoor and wellness trend in China has been tremendously explosive, and we're capturing that really well. As consumers are prioritizing travel, exploration and experience-led spending, we're capturing that with tremendous momentum within China, and I would say, within Greater Asia, and it's helping really reinforce the Gregory brand positioning as a premium player, but with the ability to capture consumers that are more lifestyle focused.

And then on BÉIS. And for me, when I think about pillars in the context of pillars, BÉIS is delivering on Pillar 2 and 3, our ability to win digitally. This is a brand that's done, I think, one of the most amazing jobs in this space. along with the ability to capture lifestyle bags, and about half of this business is lifestyle bags. We entered the agreement yesterday. As I said, it's really a fast-growing lifestyle and travel brand with a really loyal, engaged consumer following. This is a digitally native brand. It started 8 years ago with an amazing leadership team that's created a differentiated luggage and lifestyle bags, really authentic storytelling. I think it's one of the strengths, and I would label a best-in-class digital marketing and e-commerce platform. We're excited about this.

It has significant growth runway, supported by Samsonite's global distribution, sourcing, innovation and logistics capabilities. Imagine the brand which the team will continue to run. They'll continue to run this from Los Angeles. But they get the benefit of scale that Samsonite can bring in the background to help them kind of achieve their full potential. It's really led by a very strong and energized team. We've got to really -- we've really got to enjoy meeting and getting to know this team. It's led by brand CEO, Adeela Hussain Johnson, and a super-talented team around her that's delivering, and importantly, a founder and somebody who will continue to be the Head of Creative and Design, Shay Mitchell, who has really guided this brand's creative and product vision and will continue to do so under our watch and allow this brand to reach its full potential, both in North America, but I think there will be opportunities to expand this brand against our international platform in a meaningful way.

And then on Pillar 4, just continuing to win with products that matter. We've always been here. This is a business that makes products, but we're focused in a different way here to make sure that we're getting the full scale and benefit of products that touch consumers across the globe. We're leading the future with innovation and sustainability over 115-year legacy of real innovation. NEXIS is a good example of what comes to bear when we're able to do this. We're focused on lighter, more flexible, durable and sustainable materials. We're doing this at a scale that nobody in the industry can to really bring next-generation products. This focus on centralized product and marketing coordination, GMEO, enabling global consistency, will move -- continue to move the needle for us. And then, as I said, broaden the assortment to adjacent categories of lifestyle bags. We have real opportunity to win here with products that touch the globe in a more meaningful way.

Just a few examples. Samsonite PARALUX continues to build. We were so strong as we launched this at the end of 2025 that we're chasing inventory. We're back into a full inventory position as we get to the end of Q2 and as we lean into Q3. This has become a #2 bestseller collection in the first half of 2026 as a collection. And we're launching new colorways. This Dusty Pink and Blue Fog is off -- recently launching and off to a really strong start. And this is a collection that has won Red Dot Awards. It's innovative. It's sustainable. It's a really good story, and it's resonating importantly with consumers across the globe.

Page 24, we're about to launch a color that I think is amazing. This is a luxurious colorway, and it's a wow when you see it in person. It's tagline, [ Brewed for the Bold ]. This is a really exciting colorway extension for this collection, and I think continues to elevate brand Samsonite in a meaningful way. And this will be launching in the fall of this year.

I've covered NEXIS a lot. You saw some of the marketing messaging, but there's something really unique about this product. It's really, I would label, next generation of premium innovation and shows what we're capable of doing as a company. It's a differentiated product using our Roxkin technology, which is ultra lightweight, ultra durable and resilient product. It features silent suspension wheels, things that consumers are watching for, organized packing. It's delivering a different experience when you travel with this product. It's got this tremendous value proposition. It's got sustainable materials. It's got advanced security features. And it is resonating with consumers. This is another one wow when you get it in front of you. And there's more to come. This is -- for the markets that we've launched and leaned in, it's delivered. It's moved into a top 5 collection worldwide. And we haven't really launched it yet in North America and the rest of Asia and Latin America. So there's a lot to come with this collection as we move into the back half of the year.

And then, on Slide 26, the Alpha 4. TUMI Alpha is a collection that kind of put TUMI on the map, and it continues to deliver. It's a #1 collection across all regions, obviously, #1 collection for TUMI overall. This was a relaunch with premium materials, elevated functionality, innovation, designed for today's traveler, and this continues to move. And it really reinforces TUMI's ability to consistently develop products that resonate globally, while supporting its premium positioning and long-term growth aspiration. And it's been a tremendous success from a launch perspective.

So with that, hopefully, you can feel the things that we're doing to push the business and how they're helping us deliver resilient sales. I'm going to hand off to Tom for a financial overview, and then I'll come back for an outlook at the end.

Thank you, Kyle, and hello, everyone. I am starting on Slide 28. We're pleased to report solid momentum in our margins, and I'll talk about these margins excluding the benefit of U.S. tariff refunds. We had disciplined execution in the second quarter that drove higher profitability relative to the first quarter. And along with our scale advantages, this enabled us to invest in our long-term growth.

Recall that last quarter, we said relative to Q1 2026, we expected Q2 2026 adjusted EBITDA margin to improve over the course of the year, and that happened. This was driven by a 100 basis point improvement in gross margin relative to Q1 as we successfully managed cost increases, supported by favorable geographic and channel mix, as Kyle referenced earlier. At the same time, we invested in our key growth pillars to amplify and elevate awareness of our iconic brands ahead of the summer travel season and to be the clear winner in digital. Accordingly, marketing spend as a percentage of net sales increased by 150 basis points in Q2 relative to Q1 at 7.2% of net sales. This included flexing our marketing spend down just a little bit versus what we were planning to do in light of the continued headwinds on our net sales, while still leaning in a bit.

Distribution and G&A expenses as a percentage of net sales fell by 120 basis points relative to Q1, reflecting disciplined cost management, as we mentioned, and operating leverage from a seasonally higher net sales base. This led to a 100 basis point sequential increase in adjusted EBITDA margin relative to Q1, and we expect this momentum to continue into the back half of the year.

On Slide 29, where I'll now discuss our Q2 results relative to last year. And again, I will reference margins that exclude the benefit from U.S. tariff refund. In Q2, reported net sales fell by 1.6%, or by 1.7% on a constant currency basis, due largely to impacts from the Middle East conflict, which were more significant than we expected in our Q1 outlook. It's been 5.5 months of the conflict. Recall that we assumed the impact would not materially worsen relative to what we had seen through early May as it was very difficult to predict what would happen one way or another. But as Kyle mentioned, consumer confidence and air travel demand softened in Q2, particularly in the U.S., which impacted our net sales. That said, underlying performance was resilient, and Kyle referenced that earlier.

Excluding the Middle East and India, reported net sales were up 0.6% and constant currency net sales were approximately flat in Q2, down 0.2%. North America, however, experienced a more significant constant currency net sales decrease from Q1 to Q2 due to softening in both consumer confidence and air travel relative to other regions, as well as cautious buying by wholesale customers.

Gross margin was 60% in the quarter, reflecting disciplined execution, supported by favorable geographic and channel mix, as mentioned. As we look forward, there are still some uncertainties in the cost environment due to the conflict in the Middle East, but we are well positioned to continue to manage them well. We have forward-bought inventory. We are reengineering products to reduce costs, and we are evaluating pricing actions that are appropriate. We continue to feel confident that we will maintain our strong gross margin profile for the remainder of 2026.

Marketing expenses as a percentage of net sales were 7.2% in the quarter, which was up 70 basis points from the same period in the prior year as we invested in marketing to elevate our iconic brands, enhance the storytelling and support, importantly, the e-commerce sales channel. Our distribution expenses were 33.6% of net sales in Q2, an increase of 200 basis points from the same period in the prior year, which is similar to what we experienced in Q1. The increase was mainly due to continued pressure from inflation, selected new store openings and higher outbound freight costs on slightly lower net sales versus Q2 of '25. G&A expenses were 7% of net sales in Q2, an increase of 90 basis points from the second quarter of 2025. The increase was primarily due to increased professional fees, salaries and benefits, and cloud-based ERP system implementation costs.

Overall, we're managing costs with discipline as we invest for future growth and operating leverage expansion. We remain focused on investments in marketing, expanded digital capabilities, life style bag growth initiatives and global product innovation, along with selective store openings, all of which are key to securing long-term brand growth opportunities, as Kyle mentioned in his presentation. Looking forward, we continue to focus on offsetting cost pressures through productivity gains and tighter control of discretionary spend.

Adjusted EBITDA margin was 14.1% in the second quarter, down from 16.3% during the second quarter of '25, reflecting continued investment across our strategic growth pillars, as mentioned. Looking forward, these investments position us to improve net sales growth as we enter seasonally high net sales period and help drive improved operating leverage relative to Q2. As a result, we continue to expect adjusted EBITDA margin levels to sequentially improve, excluding the benefit from the second quarter U.S. tariff refund.

On Slide 30 now, we show our first half '26 results. Similar to what we just walked through on Q2's performance, we made great progress on advancing our growth pillars, which enabled us to deliver resilient underlying net sales performance in light of softening consumer confidence in air travel, due in part to the conflict in the Middle East. Excluding the Middle East and India, net sales were up 3.1%, or 0.7% on a constant currency basis. We expanded our gross margin, while investing in marketing and our strategic growth initiatives. We expect EBITDA margin improvement to continue in the second half of '26.

Now, going to Slide 31. Our balance sheet remains healthy with a net debt position of about $1.069 billion at the end of Q2, which is a decrease in debt of approximately $30 million from the end of '25. Our total net leverage ratio was 1.8. And we had a strong liquidity of approximately $1.5 billion as of June 30, 2026. We also continued to invest in our long-term growth with capital expenditures of $19 million in Q2, which was in line with the second quarter of '25. We continue to enhance our distribution center in Europe, which will support future growth, especially in e-commerce.

We delivered strong adjusted free cash flow of $58 million in Q2, an improvement of $5 million from the same period in 2025. Our healthy balance sheet enables us to return cash to shareholders, paying $140 million dividend on July 15, 2026. And we also completed a $50 million share repurchase in mid-June. This reflected disciplined capital allocation. And speaking of capital allocation, I just want to add a few additional comments on the BÉIS acquisition. As Kyle mentioned, we're extremely excited to add this amazing brand to our portfolio. BÉIS has delivered rapid profitable growth, generating $210 million in net sales in 2025 at attractive margins.

The acquisition is expected to be broadly neutral to our consolidated profitability with additional margin improvement opportunities in supply chain and logistics as this comes into the Samsonite platform, as Kyle mentioned, over time. We also expect this to enhance our overall net sales growth profile, and there will be continued sales growth for the brand in 2026 under our watch when the deal closes. The transaction's enterprise value was -- will be $210 million, and we'll be purchasing 85% of the business. Shay Mitchell, Founder and Head of Creative and Design, will retain half of our ownership in the business and continue to inspire the brand to grow to the next level. We expect to close in Q4 of 2026, subject to the receipt of regulatory approvals and other customary closing conditions.

In summary, our business has been resilient in a challenging demand and cost environment, and we've been able to deliver stable underlying net sales performance, along with gross margin expansion. We invested in our long-term growth, and we'll be able to continue to do so as our adjusted EBITDA margin profile also improves from these levels. We improved adjusted free cash flow. And our healthy balance sheet allowed us to return a sizable amount of cash to shareholders. As a result, we believe we are well positioned to successfully execute the near-term challenges and accelerate growth over the long term as we continue to execute on our key growth pillars.

I'll now turn it back to Kyle for the outlook.

Okay. Great. Thanks, Tom. Outlook, I'm on Page 33. I'll go through this, and we'll open up for questions after. So from an outlook perspective, when I think about constant currency growth, I'm going to focus on Q3. I think Q3 will remain stable and be in a similar range to what we saw in Q2 as the conflict continues. Although the situation in the Middle East remains fluid, we expect continued progress on our key growth pillars that we spend a lot of time talking about on this call, which has and will continue to enable us to navigate the pressures and continue to deliver resilient underlying net sales growth.

We believe that our scale advantages and our relationships with suppliers and the actions we take to navigate macro conditions and inflationary pressures will allow us to continue to maintain the gross margin profile. We have a very strong track record of delivering gross margin profile. And even in this environment, we've been able to step up our gross margin. So I'm highly confident on that front.

We're going to continue to invest behind our brands. We're investing in marketing. For the full year, you should expect us to spend around 6.5% on marketing and advertising spend, which is allowing us to drive much of the pillars that we've talked about today. Relative to the second quarter, and we look at EBITDA margin, and excluding the tariff, you should expect us to continue, as Tom just covered, adjusted EBITDA margin expansion from a margin perspective in the back half of the year, just as you saw in Q2 of this year. As we navigate, as we manage cost structure in the business and we go into a seasonally stronger back half of the year selling period, our EBITDA margin will continue to step up. As Tom just finished, we remain focused on disciplined approach to capital allocation, commitment to returning cash to shareholders through dividends and opportunistic share repurchases and smartly investing behind the business to deliver long-term growth.

From a listing perspective, we continue to be in a ready position, and we continue to closely monitor the macro and market -- macroeconomic and market conditions. In light of our view of improvement in our business, we intend to complete the dual listing in 2026 if conditions improve. We need some conditions to improve a bit on trading, but also the backdrop of the conflict, I think, really is a factor for us as we watch. But what I would say is, we're ready to go when we see the window.

And lastly, we continue to be confident in the long-term tailwinds that support our business, including continued growth in travel demand, as well as the ability to execute our strategic priorities to accelerate growth. Hopefully, you're feeling that from our presentation. We've added in this deck -- and we're not going to cover it today, but we've added in this deck additional context that really speak to the long-term tailwinds supporting our business, the scale advantages that we have as a business that we're leaning into. You can feel the things that we're pushing in this business speak to leveraging scale advantage and the growth pillars that we're focused on to drive long-term growth in the business, supported by a tailwind in the industry that I think continues to look bright.

And to sum it up, I think our underlying net sales growth were resilient in Q2, and we expect to remain stable in Q3 despite many unknowns and the impacts from the demand from the conflict. Our gross margin expanded and our EBITDA margin sequentially improved in the quarter. We're highly focused on actions to leverage our competitive advantages and scale to enable us to deliver a strong and improving margin profile in the back half of the year. We're highly confident on that. And hopefully, you can feel we're playing in offense again in driving this business, investing both organically and inorganically to drive long-term profitable growth.

We're focused on progressing our key pillars, which has resulted in durable organic performance in the first half. The BÉIS acquisition will expand our demographic reach within North America, aligns closely with our growth pillars through its strong lifestyle bag portfolio and digital capabilities. And I might add a really strong leadership team that will continue to drive this business. And it will add more than $210 million of our sales to our business with an attractive growth profile and a margin profile that will just continue to add to ours.

In closing, our teams have demonstrated, year after year, they are nimble and steadfast regardless of the environment. And for me, it was in full display in the first half of this year as we navigated the business with headwinds around us to deliver, what I would label, a strong result, considering headwinds. This is what gives me the confidence that the investments we're making and the push that we have against our pillars will continue to bear fruit and position us for an accelerated long-term growth story and continue to generate shareholder value as we move forward with this business.

So with that, I'll open it back up for questions. And thanks, everybody.

Thank you, Kyle and Tom. [Operator Instructions] Operator, we can go into Q&A now.

The first question comes from the line of Dustin Wei of Morgan Stanley.

First question related to TUMI. Like with the new TUMI management team on board, like anything that you or management see sort of either lower-hanging fruits or something to improve for the brand, especially for the U.S., like we have seen the headwind to the overall U.S. market for quite some quarters already? I noted the macro headwind, which is still like TUMI is really having the potential globally and in the U.S.

And second question is on BÉIS, and congratulations on the deal. So like how do you plan to scale up the BÉIS sales? I think versus like 10 years ago, your company also acquired a number of sort of smaller to medium-sized brands. Like what makes you think that this time could be different and really make BÉIS sort of another maybe [ fourth ] largest brand in the portfolio? And would there be any other sort of acquisition in the pipeline?

Okay. I think Luciano is doing a great job settling TUMI. And in many ways, we're in the midst of a reset with this brand. And I covered it a bit when I was on the TUMI slide, was focused on DTC execution. The need to kind of continue to invest behind elevating kind of the awareness for this brand. Its real potential is around broadening awareness. And I would say, the tactical execution of driving that business with products that continue to elevate its positioning. Luciano is in the midst of resetting some of the team members. He has been on for 3 months. I think he is doing a great job. And I have full view to what I think TUMI's full potential is. That hasn't changed. I think we continue to have an ability to double this business over the next 6, 7 years as we continue to drive growth. It's delivering growth in Asia. It's delivering growth in Europe. And the U.S. is feeling the same headwinds that I think the overall U.S. market is feeling. So I think in that backdrop, I think it's a moment in time versus, I think, its long-term potential. And I still have full visibility. I think Luciano is highly engaged and I am on what's TUMI's full potential.

From a BÉIS perspective, base has got many things going forward. One, the underlying growth in the U.S. market, I think, just continues to be an opportunity. That's where we'll be focused as we settle this business in and get it going. It will get the benefit of scale from a sourcing, logistics infrastructure piece. That was all outsourced by the owner of BÉIS that was providing the back-office structure. This team will get energized off of what it can get from the scale of Samsonite, while still running and driving the business within the core team there that I think is amazing. The real additional growth drivers for BÉIS is, how do we target countries that make sense. I think we'll be careful with that. We'll still be evaluating that, but it's international opportunities, and BÉIS has visibility to it. But what will be different is, they get scale of our structure to do that. And I think that will provide medium- and long-term growth for this business.

What makes it amazing is, it's got a good mix of lifestyle bags. It's got a terrific, very clear travel offering. It really plays in this digital ecosystem in a way that I think will have halo benefits, not just for the BÉIS business touching the rest of the world, but for our overall Samsonite business. So, that knowledge transfer that can come both ways, I think, will add fuel to not just BÉIS but our overall business. And I think it's got tremendous opportunities. And I think we've done a lot of smaller deals over the year that have kind of not moved the needle, but this has got scale. This is a business that's moving. That's the 2005 numbers. The 2006 numbers will be bigger than what Tom talked about in his presentation. And so, momentum, scale and getting to leverage this organization will allow us to do some great things with a really, again, super strong leadership team. And the energy and the halo benefit that Shay brings to that brand -- and she'll continue to be the Head of Creative and Design -- will continue to deliver a great story for this business. So we're very excited and that team is very excited, and we'll close that in Q4.

From an acquisition perspective, as I always say, Dustin, we're always evaluating and looking. There's nothing that we're cooking right now, but we have plenty of inbounds and reasons to continue to look. And we continue to look in the space around the adjacent category of lifestyle bags. I think there's opportunities there for us. But we'll be focused on what we got in hand to make sure that's well bedded in here and moving as we move forward. So those were good questions, Dustin. Thank you.

Next question comes from the line of Anne Ling of Jefferies.

My question is on the third quarter-to-date performance. If you can share with us a little bit of the update. I understand that third quarter, you just mentioned that you expect that the sales level in local currency term will be more or less similar. But maybe you can give us a little bit more idea in terms of -- or some color in terms of like different markets' performance. For example, like markets in the North Asia like still continue to do strong -- very good growth. Markets like China, we have seen a very bad weather, not sure whether this impacted the sales so far. So how are you seeing like in different markets, how they are performing?

What I would say, and I'll kind of stick to what I said for Q3, I think we're seeing a stable environment. And it really looks similar to what I just walked through for Q2 across Asia and across Europe. I think stable Europe. I think North America, I might say, in the back half, has some opportunities as wholesale customers' inventories levels have come down. I think there'll be some opportunities in the back half of the year for North America just from a timing perspective with wholesale customers that are buying cautiously.

Within Asia, I think China's momentum -- and weather always has impacts, I would say, across the world. The weather dynamics have been strange. You felt tremendous heat in Europe, which impacted inbound tourism. You have kind of the disruptions of weather in the U.S. and really some amazing weather in Hong Kong and China, I think, with the storms that have come through and really record heat. But those aren't really enough to drive kind of a different story in the trend. I think the world kind of has adjusted to that. And so, we still see a strong China for Q3. The team is executing really well. Across all those channels, we continue to see momentum. As the conflict wears on, I think it continues to weigh on consumer sentiments, but that's why I'm guiding, I think, a stable situation for Q3 versus Q2. So not so different than what we just walked through is what I would say.

Our next question comes from the line of Carol Xia of Daiwa.

So firstly, you mentioned that you will keep looking for opportunities in the lifestyle brands for M&As. And then, I want to ask like for our existing brands like TUMI, Samsonite, American Tourister, like Gregory, how -- what are the key drivers to drive the lifestyle part of our existing brands? And which brands do you think are -- have more opportunities [ exposed ] to the lifestyle?

And secondly, I want to follow up on your cash usage priorities like for M&A, reducing debt, dividend and buyback, which are your priorities?

Okay. From a brand perspective, I think all of our brands have opportunities to expand here. And when we look at -- I gave some examples when I was on that page of what that looks like for brands, like the collection that I covered, this Better Than Basics bag in North America. And if you've been following and you see the campaigns that we're putting behind that with Olivia Culpo on Chocolate Mauve and what we're doing to move the needle, every one of our brands has opportunities. But when we really peel into the lifestyle bag lens, it's around creating products that resonate strongly within a region or across regions. It's around understanding the distribution channel and the way we message and allocating dollars to the messaging. So you're starting to see and feel us talk differently in our storytelling as it relates to lifestyle bags and our real ability to move the needle there across brands. But every brand is delivering.

The growth that you've seen in the last 5 quarters in our lifestyle bag business is coming from our core brands, and they will continue to deliver. So I think that's the way to think about it in every brand. We're about to launch in the U.S. a nontravel or lifestyle bag collection for American Tourister, which we haven't had in the U.S. yet, learning off of what we've been able to achieve in Europe, in Asia, the U.S. business, leaning in on that. And that collection has been really well received. That will sell digitally, but importantly, to our wholesale customers and tremendously successful. So there's a lot we can go at. We can deliver really strong underlying growth in the lifestyle bag business with our core brands.

Acquisitions will just be some fuel for additional opportunities, maybe getting into a consumer demographic like BÉIS is able to do that we're not able to get to quickly with our brands. Those are the things that we're thinking about from an acquisition perspective. But we'll continue to push our core. We'll clearly continue to push BÉIS base and allow BÉIS to kind of get to the next level with some scale with us. And then, we'll continue to evaluate. But again, as I said on Dustin's question, nothing kind of in the immediate future, but there's plenty of things that show up on our doorstep is what I would say.

From a capital allocation perspective, we have a long history of returning cash to shareholders. I think that's an interesting piece of our story. This is a tremendously strong cash-generating business with a really asset-light model. So the amount of CapEx we need to push this business -- we can convert a lot of cash to the ability to invest in the business. So you can see us leaning in on the investment side, while still delivering operating leverage. But you should expect us to continue to return cash to shareholders through dividends. Share buyback has been interesting. We've been opportunistically buying back. I think as we get to a U.S. listing, you'll probably see share buyback work into a rhythm for us. I think it makes sense in this marketplace. And acquisitions are part of our strategy, but they're not drivers of our strategy. So we'll always evaluate an acquisition to make sure it lines up with our pillars of growth and strategic priorities, and we'll lean in there as well. And we have capacity to do all of that. This business has a long history of, again, generating cash, and we can do all 3 of those pieces from an allocation perspective and still be in a liquidity position that's tremendous.

And I would just add, Kyle, that -- Carol, thank you for your question on the capital allocation. Of course, when we look at acquisitions, we size all of the things that Kyle mentioned that are strategic and lines up with our long-term growth pillars. We'll also look at the financial profile of it, and we evaluate that thoroughly to make sure it lines up also with our long-term objectives of optimizing returns.

Our next question comes from Perry Yeung of UBS.

I just got 2 questions. One is related to the economics of BÉIS. You mentioned it is a fast-growing brand, and it's going to penetrate a segment where we have relatively low presence, which is a young female market. I'm curious in terms of the growth for this brand, how does it look like historically? And going forward, how should we expect organic growth for this brand?

And secondly, your longer-term growth drivers really -- because we've been undergoing different kinds of macro challenges and external challenges over the past few quarters. But going forward, organically, what are the growth drivers for Samsonite as a whole? And I guess, is it through channel expansion? Because you talked about a lot -- you talked a lot about the multichannel expansion. Is it through product? And what -- can you also provide some sort of road map in terms of where we will be in the next few years?

Okay. I'll jump in. I think the economics of BÉIS are tremendously strong. This is a business that we should expect some double-digit growth. They have a track record for doing that. They're achieving that this year. What makes BÉIS really interesting as a digitally native brand, its profit profile is very strong. The way this management team executed delivering growth with a margin profile, that allows it to be neutral to us. It comes in at a margin -- earning a margin similar to our own business and really able to invest behind its growth story is tremendous. So I think that continues. And I think as we kind of carefully broaden its reach internationally, I think it could be a really strong driver of us. And importantly, it's in this category of lifestyle bags that there are tremendous opportunities, and these guys are hitting it out of the park on the product offerings, the messaging, the collaborations they're doing, tremendously successful. So we'll be empowering that team to kind of run and continue to execute that story while bringing some scale to them. So I feel very strong about it. They're energized, and I think they've got a long runway for them.

As far as long-term growth drivers of the business, I think I want to point you to what we added to the back of the deck because it talks about the underlying dynamics of the industry. The world is facing some headwinds and some turbulence today, but the underlying growth drivers of travel fuel our business, and travel has a historic trend of growing at close to 4%, and we've outpaced that growth when you look at our historical growth trend. We've been in a weird moment with tariffs last year and then the conflict this year, but there's no reason why we don't correlate to kind of that underlying growth in travel. And we're the industry leader. And so, how do we grow more than that? It's around leveraging our scale to gain share.

When I look at where consumers are shifting to, it's no surprise that we're focused on being the clear winner in digital because consumer landscape is changing. Maybe they're not buying there, they're starting there. And that's rapidly changing. And in our space and our scale, it gives us tremendous opportunity to win there. And so, we're focused there. We need to invest behind the iconic brands that we have. So, that lean in with GMEO and being more effective on our marketing is a growth valve for us. To gain more consumer awareness -- brand Samsonite has high awareness, but other brands in our portfolio have tremendous rooms to grow. And how do we continue to deliver products that resonate with really strong marketing that we continue to lean into that will continue to allow us to drive share?

So underlying growth dynamics that are strong, and then our desire to overachieve those dynamics because of our scale is the way to think about the drivers of our business. And I think our pillars help you understand kind of what we're focused on. They're all things that we have scale advantage to, from product innovation to opportunities from a distribution perspective to be able to perfectly source and distribute products across the entire globe. Nobody has the scale that we have to do that. And when we leverage our investments against the pillars, we can continue to drive share gain. And so, that's how we think about the business. I think organically, our historic trend of growth, there's no reason why we can't think that organically get out of the headwinds, we can't do something similar to that. And then I think acquisition really allows us to do something a little more.

Again, we're not an acquisition shop. We're not sitting here lining up acquisitions. But when we see something that's strategic and lines up to the pillars of where we can win or where they give us the opportunity to expand in the space differently than maybe our core brands can, those are the things that are interesting to us. And I think we have a good history of showing that we're capable of doing those when we find the right acquisitions.

So that's my view on that. Tom, do you want to add anything?

I was just going to add, Kyle, Perry, maybe you want to look at Pages 50 and 51 of the deck. Kyle referenced it. That will talk to a little bit of the long-term drivers of our business. And then, Slide 46 of the deck will show you the growth over the historical long term. And so, that's why we included that. So thank you for asking that question.

Our next question comes from Chris Gao from CLSA.

I have 2. So firstly, regarding the GP margin, we're very impressed on the GP margin resilience that you showed in the second quarter of this year. So I just want to confirm with you that with regard to the raw material fluctuations linked with the oil price movements, so when do you expect to see the raw material price movement impacting your P&L? And do you have the confidence that you can actually pass over this fluctuation to the end customer? Or you have other ways to digest this part of the fluctuations?

And my second question is regarding the tariff refund, which is also another strong help to the margin profile this quarter. So my question regarding this is about, do you need to, in turn, share the tariff refund to any of your upstream value chain who shared the tariff pressure before like in the past year? If you need to share this refund to your upstream value chain, how will be the impact in the following quarters?

Okay. I'll jump in, and then Tom can fill in. On the gross profit margin, this has been one of our historic strengths, and particularly coming out of COVID, our ability to manage margin. And I think I'll use the word impressed that -- we have real strong capabilities here. I think when we think about inflationary pressures, we're watching that. And we often lead the industry as far as taking actions to ensure we maintain margins. We have multiple avenues. One, the scale of our relationship with our suppliers, with suppliers that I have personal connections with and the whole organization is deeply involved with. We work together to manage, and so we can manage that way. We have the ability to engineer products to hit margin profiles with some scale. Like we're in and out of these factories in such a way that we can be engineering to manage. And then, there'll be some pressures. And I think importantly, we're navigating -- we can see pressures. We buy forward enough that we have time to react to it, and we can take actions. And so, some combination of working with suppliers.

I would maybe label some modest price increases as we move into the end of the year and next year really just to offset the pressures to deliver margins, but our teams are highly focused, and we're running a little ahead of our own expectations on margins to speak to the strength of how we're managing that. I think that helps. You got a little bit of mix in the business that helps as well. And so, as we push the DTC piece that has a higher margin profile, that helps move the needle a bit. And as we focus on these globally resonating products, and we're focused on products that are delivering, those have margin profiles that are helpful as well. So all of that leads to some real confidence in our ability to manage margin. But we won't hesitate to take the right steps along the way to ensure that we manage that, which is what you've been seeing from us for the last 4, 5, 6 quarters. All the way coming out of the pandemic, we've really overdelivered on margin. So I'm highly confident there.

From a tariff reform perspective, we're managing that. We've kind of managed what we booked in line with some of the thinking around the question around where we are. But I would argue the tariff environment is still volatile. We just shifted from 19% to 10%. We're expecting the administration to do something different with tariffs like a lot of companies that are navigating. So we've never taken our eye off the ball on kind of where tariffs might end up for the back half of the year. And so, we're managing the business to that. And I think in that context, when you think about refund, it's just a blip in the midst of a tariff discussion that I don't think is fully done. And so, we've always kind of been riding the line of uncertainty to manage carefully. And we're acting that way with the refund as well, managing carefully.

And the only other thing I would add, Chris, is that we recognized the net tariff refund in our reported results, and we spoke to results that excluded that refund. So we will continue to be transparent about that. But we don't -- when Kyle spoke to the rest of the year gross margin profile, we don't have any tariff refund impact in there. This is completely organic.

Okay. Great. That concludes our Q&A session. I appreciate you for your interest, and thank you for joining the call. Take care.

Thanks, everyone. Have a great day.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to the Samsonite Group 2026 First Quarter Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to hand the conference over to Mr. Alvin Concepcion, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you. Welcome to the Samsonite Group First Quarter Conference Call. On the call with us today are Kyle Gendreau, Chief Executive Officer; and Tom Pizzuti, Chief Financial Officer.

Before starting today's call, we would like to remind you that any forward-looking statements made on the call involve risks and uncertainties that are subject to the company's provisions as stated in the disclaimers in the company's press release and earnings announcement and that actual results can differ materially from those described in the forward-looking statements.

I will now turn the call over to Kyle.

Okay. Thanks, everyone. Thanks for joining. And I'm on Slide 5, ready to roll. So we're excited to report net sales growth continued into Q1 despite the conflict in the Middle East. Our net sales were up 4.1% on a reported basis, up 0.4% on a constant currency basis Net sales growth across North America and Latin America improved sequentially relative to Q4. Europe remained positive, and Asia grew despite a challenging environment caused by the conflict in the Middle East.

Importantly, excluding Middle East and India, the markets that we're seeing the most effect from the conflict to date, consolidated net sales grew 5.9% on a reported basis or 1.6% on a constant currency basis year-over-year, with sequential improvement overall versus Q4. Net sales growth for Asia, excluding the Middle East and India, was up 8.4% on a reported basis and 5.1% on a constant currency basis year-over-year.

We continue to see success in our D2C and our lifestyle bags category as D2C and lifestyle bags outperformed our performance. Our strong portfolio of new and innovative products supported growth in our direct-to-consumer business, and our lifestyle bags grew as well. Lifestyle bags grew almost 4.8%, close to 5%. And our D2C overall grew 4.2%, with our own directly operated e-commerce channels growing over 11%.

Our gross margin remains strong, 59%, reflecting disciplined execution across all of our brands, channels and product categories. We're focused on elevating our iconic brands via world-class storytelling. We're increasing our marketing spend as we signaled in the past.

We spent 5.7% of marketing spend in Q1, up 40 basis points from last year as we invest in delivering sustainable growth. This supported successful new media campaigns such as Samsonite's Nexis launch, I'll cover it later in the deck; and also Tumi's Mediterranean Escape, both very successful launches in the first part of the year.

We generated very strong cash flow. We have a history of generating strong cash flow. We're up $68 million versus the prior year from a cash flow perspective in Q1. Tom will cover that in a bit more detail in his financial update.

And we're poised for improved net sales growth in 2026 overall. We believe we've managed the business well through the current conditions. And as we execute our strategic road map and strategic pillars, we expect low single-digit growth in net sales for the full year. This assumes -- importantly, this assumes potential impacts of the conflict in the Middle East and India do not materially worsen.

If we go to a look at the brands, all brands delivered positive growth adjusting for the Middle East. You can see Samsonite sequential improvement continuing Q3, Q4 and into Q1, 1.4% growth. That was supported by sequential improvements in North America, down 3.1% in Q1 versus down 6% in Q4 and positive growth in Asia and Europe and accelerating growth in Latin America, helping the Samsonite story.

Tumi continued to deliver positive growth, down a bit from what we saw in Q4, but still positive territory, up 1.1%. Asia was particularly strong, 6.2% growth. And if I adjust for Middle East and India, Asia, Tumi up 8.8%. Europe continues to grow. 5% growth in Latin America, which we've seen accelerated growth with Tumi up 14%.

We saw North America down slightly, 4.6% down largely due to the macroeconomic uncertainties impacting consumers in the U.S., particularly impacting retail traffic that we've seen across our U.S. business, coupled with a reduction, and I would say, a planned reduction in wholesale net sales to off-price retailers within the brand as well.

I'd like to, while I'm talking about Tumi, take this time to acknowledge and welcome Luciano Rodembusch, who's joined our team. I mentioned him on the last call. He's been 1 month on the job, and I am confident he will help drive global Tumi sales to its full potential as he settles in. And so welcome aboard, Luciano.

And American Tourister, adjusted for conflict, grew close to 4% sequential -- meaningful sequential improvement from what we saw in Q4. In Asia, particularly where American Tourister is a big driver, if I adjust for India or Middle East, up almost 4% for the quarter as well.

If we go to regions, I think a page [ 7 ], a similar story is what we see from a growth perspective across the board. Asia, as I said, up 5.1%. We saw meaningful growth within China and sequential improvement in China, up close to 8% in Q1 from up 3% in Q4, a strong trend carrying into Q2 for China. And Korea, another important market for us, up 8.5% versus up 5.4% for Q4.

But overall, Asia has terrific momentum. It's the one market where we're seeing the impacts largely because of the Middle East and India, where both of these are reported in our Asia. Despite -- even despite those, we're still delivering positive growth for Asia.

You can see the sequential improvement in North America, continuing to move. People are still moving and traveling in the U.S. I think they're more cautious in their spend. We feel that. The other thing I would point in our North America business is we saw a nice improvement from Q4.

But within Q1, if I exclude our wholesale e-retailers, our net sales growth was 5.3% in Q1 versus negative 1.7%. And that's largely impacted by one of our larger wholesale e-retailers changing their inventory position. And so if I adjust for just that one e-retailer or our e-retail business, our North American business trends are actually very strong, almost matching what we're seeing in other regions in the business.

Europe is steady. Europe, when I think about markets that are feeling the impact of conflict in the Middle East, we can see it. Within Europe, you can see some of the impact of consumer sentiment, but still delivering positive growth in Q1, plus 0.8%. And there's plenty of pressure there, but the consumers are still moving.

What you see in Europe is maybe inbound traffic, not as much, inbound traffic from the Middle East, inbound traffic from Asia, we've seen some falloff there, but the underlying consumers within Europe are continuing to travel.

And Latin America had a nice rebound, plus 4.5% growth in Q1 versus slightly down in Q4. Nice rebound in Mexico with business driven by larger wholesale customers that started to buy back in and a meaningful shift there and a new leader in Latin America or in Mexico is doing a great job as he starts in the business.

The next slide talks about, and I covered this on the last call. And I have a few slides to talk about what we're focused on as far as strategic pillars. These are the priorities as we think about how we push the business. Even in this environment, we continue to push the business against these pillars. They're the right things to be doing.

The first one is around amplifying and elevating the awareness of our iconic and consumer-centric brands. This is enhanced storytelling and leading in with advertising and spend to continue to drive all of our brands and particularly our 3 core brands.

Our second pillar is around being the clear winner in digital, right? I think the word be clear is important, not a leader, the leader in digital across all of the portfolios that make up digital, all the channels that make up digital. I'll cover that in a second, too. We're very focused here and driving further support of not just our digital business, but the whole multichannel effect that happens on the business.

In pillar 3, I think there's tremendous opportunities in this business in the lifestyle bag space. There's what we call white space opportunities. It's a huge market. I'll give you a view to what -- how we view the market and what our market position is and why we think we can continue to deliver. And as I just said, we are delivering here. This was close to 5% growth in the quarter, and it's continued to outpace the growth in our business as we execute against the strategy.

And the last one, and I think how I described it the last time on the call is you would expect this from us, but importantly, to continue to win with products that resonate globally. PARALUX was on the page here in the picture. We talked about that last time. I'll show you a little bit more update on PARALUX. It's a good example of when we get behind global collections on a global basis and focus, we can move the needle. And we'll give you some examples of that and what we're doing as we roll into this year.

Importantly -- I'm on Slide 9. Importantly, as we really advanced our first two growth pillars, we created a GMEO, a global marketing and e-comm office. That's off to a good start. I would say, a running start and working really well across the organization.

What is it focused on? It's around strengthening consistent global brand execution with local flexibility and driving high-impact storytelling to elevate brand awareness and perception. And as we lean into the advertising spend against this important aspect of what we're doing on the marketing side of the business, we're seeing early signs and really laying foundation for really tremendous forward growth.

We're centralizing the digital and marketing coordination to reduce duplication that will create efficiencies in the business, but it will also enable regions to respond faster and more effectively to local consumer needs against the backdrop of a well-supported global marketing and e-comm office.

And lastly, as we lean and invest, we're embedding ROI-based decision-making, performance transparency and stronger oversight to increased marketing investments deployed with greater measurable impacts, the likes of [ MMM ] tools and the tools that we use around the business to properly evaluate and lean in, in telling our story.

Mediterranean Escape on Slide 10, this is a good example of -- on the Tumi lens around how do we tell the story. This was introduced in March of this year. It introduces meaningful newness that customers can feel for brand Tumi, a color palette that's exciting. If you haven't seen it, take a look, but I'm guessing you've seen it if you're following this at all, across luggage, women's bags, non-traveler lifestyle bags, really doing amazing work.

It brings this sense of travel and joy. And this is around the storytelling, this is the lights under pillar 1. There's a product piece to this, too, which I would say is part of pillar 4, but it's around the storytelling that we're able to do in an elevated way. And I think the team has done a great job, and it continues, and it will start launching across the globe as we enter Q2.

On Page 10 (sic) [ 11 ] , this is an exciting campaign that we've just launched in North America. This is around elevating brand Samsonite in North America with new media campaigns with Olivia Culpo. And it's Chocolate Mauve, is what it's called. If you really look online, you can't miss it. And this is part of our overall campaigns within the U.S. "It's not just the bag, it's a Samsonite."

This is off to a great start. This is a colorway that we've matched across our 3 best-selling collections, Outline Pro, Elevation Plus and Better Than Basic, which is effectively lifestyle bags that tie into these collections. It launched in April, tremendous success for [ Lureal ] across all methods of distribution, and it's a fan favorite of my house, my family loves the collection, usually a good temperature of something is off to a good run. So we're very excited about that. Lynne and team, great job.

The second one is on D2C, okay? And I covered this at the start, but D2C is our fastest-growing channel. D2C directly operated DTC, up 11.3%. Our direct-to-consumer overall mix moved from 38% to 40%. Our overall D2C sales were up 4.2%; D2C e-commerce, 11.3%, but our retail increased by 1.4% on the back of 11 well-placed company-operated retail stores over the last 12 months and a slightly lower same-store sales growth, down 1.5%, but modest improvement.

We're seeing improvement as we step out of Q4 into Q1 on the comp side as well. Overall, very happy with the direction that we're going on not just our digital piece, but the overall direct-to-consumer piece of the business.

On Slide 13, when I talk about digital, and we tend to point out in the last slide we focused on our direct-to-consumer e-commerce. But when we talk about being the leader, it's around all of these platforms, being the leader on not just our own sites, but mobile platforms that allow access from the go, wholesale customers that have global reach and presence that we're deeply involved in making sure that we're -- the way we show up matches the way we show up on our own sites, and we're properly supporting them and importantly, across the globe, partnerships with leading retailers.

And the scale of our business is we touch the entire globe from this footprint. Anywhere in the world where somebody is digesting digital, we can execute relevant to each one of those markets, but with some central coordination with the GMEO that I think is going to deliver amazing work. And so the teams are very focused there with great results.

On Slide 14, significant white space opportunities in lifestyle bags. It's an industry that sitting in 2025, around $67 billion, growing at a CAGR growth that's similar to luggage, 3.5% CAGR growth. Over the next 5 years, it will be almost an $80 billion market. And we have a 3% share here. There's tremendous opportunity to move share here.

And let me tell you what we're doing on that front on the next page. We're building a really market-leading strategy. We're focused on casual and duffles, that's kind of natural for us. We're expanding into women's lifestyle bags. You can see Voyageur here in the middle.

And American Tourister and all of our brands expanding beyond travel, traditional travel bags. When you think about travel, you think about luggage, but the world and the consumers are moving. This is an [ underseater ] picture here with American Tourister. It's a huge driver in Europe, and it has reach across the globe.

And when you think about it and think about some of our most successful collections, the picture on the left is Ecodiver. That's a top 5 collection for Europe, and we continue to invest in that. Next generation of that bag is coming out in the fall. Voyageur, and you can see here the Mediterranean Escape collections in the middle. And Voyageur is a meaningful piece of business for us. You'll see a full relaunch of that as we go into next year. And as I said, Take2Cabin is what this is called for American Tourister.

We're partnering with advisers. We have deep know-how in-house, but we're bringing advisers to help us properly assess the market, assess what the opportunity is, assess what the playing field is, where is it distributed? Where is it different than what we do today? Things we've been doing, but I know we can do better. So we're really leaning with advisers to make sure that we're executing against this opportunity.

And we continue to evaluate acquisitions that will bolster our portfolio here. I think there are opportunities here. You've heard me say it on other calls. And as we lay more foundation here, I think we can continue to deliver outsized growth in this space.

If you look at Slide 16, you can see the growth. So we've gone from 36% lifestyle bags to 38%. As I covered, it's close to 5% growth across all of our brands, and we continue to be excited and push the needle here in the nontravel space or lifestyle bag space.

You'll notice we've made a shift. We -- for a long time, we called it nontravel. We've shifted the lifestyle bags because I think it's a proper representation of what we're actually going after when we reassess the opportunity in this space.

And then lastly, on the pillar is continue to win with product that has global resonance. We get scaled benefits to the brand and to the products that we sell when we get products that touch the world, touch a couple of big regions, get behind it, support it properly with advertising.

We'll lead the future in innovation and sustainability, building on our 115-year legacy. We're focused, as you know, on lighter, more flexible, durable and sustainable materials. We centralized product and marketing coordination to enable global consistency.

It was a little bit of a shift. We're really empowered decentralized organization, but we're putting our minds together to execute against this in a different way. And we're broadening the assortment in the adjacent categories, lifestyle bags. And here's just a few examples of products that fit that bill.

On Slide 18, this is Nexis. If you're in Europe, you've seen it. If you're in Asia, you're about to see it, in the U.S. as well. This is -- it's a collection that launched towards the end of Q1. It very quickly became a top seller collection in Europe. This is an amazing product, built in our facilities in Belgium and Hungary.

It's next-generation hardside, designed as the ultimate future-proof travel product. It's really an amazing product. It brings material leadership to life, showcase strength, lightness and resilience that is bold and modern narrative. I think when you see the campaign and you get in front of the product, you'll feel exactly what I'm talking about.

And just lastly, before I hand to Tom, just another collection that's been tremendously successful, we talked about at the end of last year. PARALUX has been a home run. We continue to push it. We're back in stock across the globe. We sold through this very quickly at the end of last year when we launched it.

We're launching new colors. Blue Fog is really an amazing color. The coordination of color between travel and lifestyle bags, you can really start to feel it. So that's launching. And coffee and copper, another fan favorite at the [indiscernible], launching in the fall, really an on-point color palette.

And when you get in front of this product, the pictures on the screen doesn't do it justice. It's really an exciting product with technical features and packing features and sustainability features in this collection that's made it one of my favorite products to travel with.

With that, I'll come back right after Tom for an outlook, and I'll turn it to Tom.

All right. Thank you, Kyle, and hello, everyone. We are on Slide 21, and you already heard a brief recap of this from Kyle. I'll go into it a little bit more on the Q1 results. In Q1, reported sales grew 4.1% and on a constant currency basis, grew 0.4% despite impacts from the Middle East conflict. Excluding Middle East and India, which are the most impacted regions from the conflict, constant currency sales grew 1.6% in Q1, which would have been a sequential improvement from Q4.

We saw improved sequential growth in North America and Latin America in Q1 relative to Q4, while Europe had stable growth and Asia continued to grow year-over-year despite softness in the Middle East and India, as we mentioned.

Gross margin was solid at 59%, reflecting disciplined execution across brands, channels and product categories. As we look forward, there are still some uncertainties in the cost environment due to the conflict in the Middle East, but we are well positioned to manage them.

We have a highly experienced team and deep and long-standing relationships with our suppliers and have many levers we can pull similar to how we managed tariff increases last year. This includes forward buying of inventory, reengineering products to reduce costs and focus on the margin we want to attain and evaluating pricing actions that are appropriate. We're taking actions to navigate through this well and feel confident that we will maintain our strong gross margin profile in 2026.

Marketing expenses as a percentage of sales were 5.7%, as you heard from Kyle, up 40 basis points from last year same quarter as we continue to invest in elevating our iconic brands to fuel future growth. G&A expenses improved as a percentage of sales, though our distribution expenses increased due in part to inflationary cost pressures. I'll provide more color on that in a minute.

Adjusted EBITDA margin was 13.1% in the first quarter, down from last year due to the higher operational expenses, as I mentioned, as we made investments to drive long-term growth.

So turning to Slide 22, I want to provide a little bit more color on our operating expenses. Overall, we are managing costs with discipline as we invest for future growth and operating leverage expansion. We remain focused on investments in marketing, digital and selective store openings. As you heard Kyle mentioned, these are all very key to securing long-term brand growth opportunities.

Our marketing expenses increased, which is consistent with our strategy to invest more in our brands to fuel future growth. G&A expenses, as mentioned, were 7.5% of net sales, down 20 basis points from the prior year, reflecting this ongoing discipline in our expense management.

Distribution expenses, on the other hand, as a percentage of net sales were 34.3%, up from 32.2% of net sales in the same time period last year. This increase was mainly due to inflation, think of wages, rents and other costs. It was also due to selected new store openings and higher outbound freight costs as e-commerce was a more significant portion of our mix, as Kyle had mentioned.

Looking forward, we are working to offset cost pressures through productivity gains and tighter control of discretionary spend. Our efforts to mitigate operational expense increases, along with our ability to benefit from our scale and likely favorable channel mix shift allows us to invest in our key growth drivers, as we mentioned.

These investments position us to improve net sales growth as we enter seasonally stronger sales period and drive improved operating leverage relative to Q1. As a result, we expect adjusted EBITDA margin levels to improve over the course of the year.

That said, Q2 will be peak marketing spend for the year ahead of the important summer travel season, which should position us well for the back half of the year and beyond. So relative to Q1, we expect a more modest sequential EBITDA margin improvement in Q2 and expect to be well positioned for significant sequential improvement in the back half of the year.

So moving to the next slide, 23, our balance sheet remains healthy with a net debt position of about $1.07 billion at the end of Q1, which is an improvement of $29 million from the end of Q4. Our total net leverage ratio was 1.79x, and we had strong liquidity of approximately $1.5 billion.

We delivered strong adjusted free cash flow, as Kyle had mentioned, of $27 million in Q1, an improvement of $68 million from the same period last year, which was mainly driven by favorable changes in net working capital.

You will recall that in Q1 of 2025, our -- we were gearing up for the tariffs and Liberation Day. And so net working capital impacts, the cash flow were a little bit less favorable then, so more favorable in Q1 of '26.

Our balance sheet is healthy, and it enables the return of cash to shareholders. A dividend of $140 million was recommended to shareholders on March 19, representing a payout ratio of approximately 48% of 2025 adjusted net income. And today, we announced a $50 million share repurchase program, allowing us to repurchase shares opportunistically based on market conditions and capital allocation priorities.

So in summary, we're happy that sales grew in a challenging macro environment. Our EBITDA margin was intentionally lower as we invested in future growth in a tough market. These investments will bear fruit in the back half of the year as we expect both sales growth and adjusted EBITDA margin to improve from the levels experienced in Q1.

Adjusted free cash flow improved significantly, and our healthy balance sheet allows us to return a sizable amount of cash to shareholders. So there's a lot to be excited about as we look towards the future, both the near term and the long term.

I'll now turn it back to Kyle for the 2026 outlook.

Okay. Thanks, Tom. Okay. Outlook. We continue to be confident in the long-term tailwinds supporting our business, including continued growth in travel demand, which we continue to see in much of the world as well as our ability to execute our strategic priorities to accelerate growth, our pillars of growth.

Further, as the industry leader, we expect to benefit significantly from renewed customer demand for luggage and travel over the next several years following a recent period of more moderated growth after the revenge travel surge 2021 to '23. We talked about this in prior earnings calls, we're seeing -- we're starting to see the benefits of that, and we can see it in the numbers today.

Looking at the nearer term, in Q1, we performed as indicated on our last earnings call. Sales came in a little bit better than what we said due to our product innovation and our efforts to elevate the portfolio of our brands, the profile of our brands.

Recall, this includes increased spending on marketing, as Tom just covered and I covered earlier, select opening of stores and investing in our business, particularly around the pillars, all of which we delivered on and as expected, impacted our adjusted EBITDA margin relative to last year.

As we look forward, we expect momentum from Q1 to continue with a constant currency net sales growth in Q2 to be approximately similar to what we're seeing in Q1. And imagine Q2 is a quarter feeling the full impact of conflict, and we think we're going to deliver the same growth profile that you saw in Q1. We're off to a good start in April.

We expect the full year numbers to be low single digit on a constant currency basis, sequential improvement, as I said earlier, to 2025. These view assume the impact of the conflict in the Middle East do not materially worsen. We haven't assumed any sort of miraculous recovery, but we have assumed it does not get worse. There could be upside if it recovers sooner.

As we indicated on our last earnings call, we expect to main a strong gross margin profile in '26 and beyond. And you've seen us deliver that in Q1, as Tom covered in his earnings. And my sense is we're in a good position to manage this really well for the rest of the year.

We're focused on investing in marketing to secure long-term brand growth opportunities across our core brands and all of our brands. We expect to spend marketing spend of approximately 6.5% this year. That will be just shy of a 1% increase versus last year. And this will peak in Q2 as we invest in ahead of the summer travel season. And that's our normal time to be leaning in. That will be about an 8% spend on marketing and advertising in Q2 as we support the summer travel season.

Relative to Q1, we expect adjusted EBITDA margin to improve over the course of years, as Tom just indicated. And as we enter seasonally stronger net sales periods, aim to improve our net sales. And as you heard from Tom in the back half of the year, we're expecting that off the actions. And the actions to mitigate costs, we feel that, that will be a benefit to us on the margin as we progress through the year.

As previously indicated, we'll continue to invest in our strategic pillars, the right thing to do, including marketing, while leveraging our scale advantages to drive sustainable growth, resulting in margin expansion in the future.

Also, as Tom just covered, we remain committed to returning cash to shareholders. $140 million dividend we put to shareholders in March, that will be paid in July, 48% payout ratio. And earlier today, we announced a $50 million share repurchase program, allowing us to repurchase shares opportunistically based on current market conditions and our capital allocation priorities.

And lastly, we're in a ready position for potential dual listing of the company's security in the United States. Our Board of Directors, myself and our management team firmly believe a dual listing will enhance shareholder value and creation over time. We continue to monitor the macroeconomic and market conditions carefully, so we get the timing right. And with the continued improvement in our business, we intend to complete this dual listing in 2026.

So with that, those are our planned comments. We're very happy to shift to questions.

Thank you, Kyle and Tom. [Operator Instructions] Operator, we can go into Q&A now.

[Operator Instructions] And our first question comes from the line of Perry Yeung from UBS.

My first question is really on the cost. So we understand opening store, we are focusing on the growth. So is it like to expect the SG&A expense to sort of accelerate just the growth rate? For this quarter, it seems that it is higher than expected. I'm not sure if you could provide some guidance for the rest of the year in terms of the SG&A expense.

So Perry, thank you for your question. This is Tom speaking. So for the rest of the year, we're looking to take out a meaningful amount of costs. This is not a restructuring, but just think of it as very disciplined cost management. So we entered the year with a budget that assumed a certain level of net sales growth.

As the impact of the conflict has muted that sales growth, as you've heard, we are reacting to it and we are clamping down on expenses. We're taking it out across all regions and corporate, and it covers every part of our expense base beneath gross margin.

I think importantly, too, just we're consciously leaning in. I think we guided at the year-end results that we'll be leaning in on advertising. So when we think about the full year, I think the biggest impact you'll see the full-year margin -- EBITDA margin last year to this year would be about a 0.8%, 0.9% increase in the advertising spend to what we had last year.

So when you play out the full year, I think that will be the biggest impact you'll see on a full year basis from an EBITDA margin perspective. And that was by design. We intentionally are leaning into advertising.

As Tom rightly says, we had good momentum going into the year, and the conflict has caused a ripple. And we're doing the right thing and just quickly assessing and being very disciplined on discretionary costs around the business, generating some meaningful opportunities on the SG&A side. And you'll see and feel that as the year progresses in the EBITDA margin.

I see. And if time allows, can I also follow up another question, which you highlight that the that is the white space opportunity? And you also mentioned that the company is evaluating acquisition. I'm not sure if you could share what types of companies or characters would you be interested in? And what kind of scale of acquisitions should we expect, if any?

I'll just give you kind of the high-level theme. There are plenty of bags that are just solely lifestyle bags. I think I've used backpack brands like Eastpak, JanSport, things that are interesting to us that would be well in our hands. We've talked about those in the past. That gives you an example of that.

But there's other businesses that have some travel product, but meaningful lifestyle bag component of what they're doing. And so those are the things that we're most interested in. I don't necessarily need another travel luggage brand, but something that's in this space in a meaningful way and has brand heat in this space. That's really important as we look.

And we've done a lot of acquisitions. I've done a lot of acquisitions in here. Something with scale, something north of $150 million, $200 million in revenue that's really strong in 1 or 2 regions that has opportunities. We have inbounds all the time. We're just evaluating the marketplace.

And as we work with advisers to really assess kind of what are the opportunities that we can really execute well, that will fit into kind of our arena. And the definite of lifestyle bags is everything but fashion handbags. That's not what we're looking at, just to give you a sense for that.

Your next question today comes from the line of Dustin Wei from Morgan Stanley.

First question regarding the U.S. market. So how would you describe the consumer demand or the competition in the U.S. market now? I think it's good to see the sequential improvement quarter-over-quarter. But really Samsonite brand and Tumi brand still kind of in the negative territory, while American Tourister grew strongly in first quarter. So how do you assess that kind of market situation?

Especially, I think the macro backdrop seems to be fine, the travel market or GDP growth kind of thing. And also, you called out this impact from the e-tailer inventory reduction. Is that kind of one-off for just the first quarter or it could impact on the second quarter as well?

And my follow-up question is regarding the GP margin. Like you sound very confident about managing about 59% GP margin. That's fantastic. But the backdrop is that the cost inflation is there. And also, I think the U.S. dollar is sort of depreciation this year, that might traditionally hit the GP margin a little bit. But the good news is that you're still confident. So could you elaborate a little more of the drivers?

Sure. Let me talk about customer demand. And the reason I call kind of taking out e-retailer is I think it gives some indication of underlying kind of demand. We do see U.S. consumers traveling. We see them spending a little bit more cautiously.

Our business and the reason you see the American Tourister swing in North America, particularly in the Samsonite American Tourister side, has a meaningful wholesale component. And these wholesale customers are buying a little bit lumpy. So you see this kind of American Tourister moment off of a low Q4 and then a big step-up in Q1. That's the lumpiness that we talk about.

When you peel into brand Samsonite and you kind of adjust out what we're seeing in [ EVTOs ], the underlying growth for Q1 looks to be closer to 5%. There's good consumer momentum. They're buying more cautiously. I would say as you move into the upper price points where Tumi is playing, we've seen significant retail traffic down. And so when we're looking at what's going on in the Tumi business, that's really around the traffic into the store footprint.

There's plenty of reasons in Q1 around weather. Let's not forget the TSA disruption in the U.S. that caused people to stutter step on travel. We've seen some improving trends, but we're still kind of feeling some of that within the U.S. business. So I think consumers are resilient, but they're cautious on their spend. And I think that continues. It continues in Q2 in North America. But it's trending positive from where we were. It's clear the consumers are moving.

And then on the -- I think on the e-retail side, that's a bit of timing as well. I can't quite predict kind of the inverse of that. But when somebody is making decisions around how they're managing inventory levels, that can cause disruptions that are timing based.

Our general sell-through at our wholesale customers generally has been good, a little softer than maybe what we started the year. I think in the midst of going into April and May, we can feel a little bit of softness in sell-through, but it's still positive. And I think that's an indicator of what you're referring to, Dustin, which is the U.S. consumer continues to be pretty resilient.

On the gross margin, gross profit side, we have a lot of confidence. Tom said it rightly, we have a long history of managing this really well. Just look at what we did last year with tariffs. We never missed a beat on gross margin, and we had tremendous tariffs on top of us. It's around the ability to manage with our suppliers. These are strong relationships. We work together.

We buy forward a lot of inventory. So we're -- in many ways, we're brought forward 6 to 9 months. In the U.S., we're almost 9 months forward. So we can manage -- we have plenty of time to manage impact. We're watching the cost of plastic, we're watching kind of things that move. If there are movements there, we'll be able to manage that.

We'll be able to co-manage that with our suppliers, if we need to shift on price. We're not there yet because we have plenty of room to decide that. And this is what we do. We have a very good record of managing margin. And I think one of the pieces that will stick out is our ability to manage that, and we saw that last year for sure, is better than our competitors. Because of our scale, we can manage through this really well. And it's all in front of us. We're managing it well today. We're already in discussions for what the back half of the year looks like, but we have plenty of time to get that right.

So I have a lot of confidence. I actually think you'll see gross margin expansion during the year. 59 is kind of the low watermark for us. And that's often that Q1 season is that. When we go into the high selling season, the margins can creep up. And that's how we feel for the year.

Your next question today comes from the line of Akshay Gupta from HSBC.

So my first question is basically on the U.S. tariffs. If you can update us on the situation on the ground as to how much visibility you have around the timing and the magnitude of recoveries? And what could be that upside?

And second one, following up on the lifestyle backpacks, if you can talk about the margin profile of this category? Is it same below or higher compared to the luggage category?

From a tariff perspective, it's fluid situations. What I'd say we started to see some stuff come in this week, small levels. We're navigating that well. There's a lot of work to do on what happens as that comes in. There's plenty of noise in the U.S. Almost every morning headline is tariffs and the end consumer and the wholesale customer and the importer of record. So there's a lot of work to do on the tariff side.

But the positive news is we started to see some of that come back in. The challenging part of that is kind of how does that navigate and what do we do. What I would say is there'll be some net upside to us, obviously. But we're not in a position to really talk about what that is yet because we're still evaluating with our, I would say, end customer or wholesale customer kind of environment.

So we're carefully navigating that, and it's early days. It's just started. It just started this week. It started yesterday and again, trickling. And it will take some time to see how this plays out.

From a lifestyle backpack and just generally lifestyle bags perspective, for the lane that we want to operate in, those gross margins look very similar to our own margins of our business. There's plenty of low-end backpack business. That's not us. We're going to be looking for the backpack business, lifestyle bag business. There's a lot to this that matches the margin profiles of our business. And that's what we'll be focused on.

And it looks -- and it's healthy. When you get out of kind of the entry-level pricing, you can -- and with our scale abilities on the sourcing side, we can really deliver things that we've kind of have looked at. We know we can shift margin profile.

Just going backwards, way backwards in time, when we acquired Tumi, we grew their gross margin by 1,000 basis points just because of our sourcing capabilities. So as we look at things, we'll have opportunities to not just look at things that are in the right price zone, but to have margin expansion that can get it in line, if not better, than some of our existing gross margins is how we think about it.

We will now take our final question for today. And our final question comes from the line of Simon Cheung from Goldman Sachs.

I just wanted to get a bit more sense about the gross margin that you highlighted earlier that you feel very comfortable at 59%. Other than, I guess, the fact that you carry on or you forward buying a lot of the raw material costs, any other initiatives that give you that sort of comfort?

The reason I'm asking is because we have been seeing quite significant increase in all the raw material costs across the board. And you, at the presentation also highlighted that the shipping charges also gone up as well. So I wanted to get a bit more details as to how you feel so comfortable about the margins. I appreciate.

Yes, we're watching this closely. These prices kind of moved up dramatically. They shifted a little. There's plenty of uncertainty is what I would say. I think there's three things to think about.

One, the raw material component of our products, if I think about plastics is 20% to 25% of our business. So kind of we -- and that's really where we've seen the most meaningful shifts. Again, we have time to monitor that, we have time to react to that. But that percentage of kind of the overall product cost for us, we can manage well.

We have a lot of aluminum in our product. We've watched aluminum make some strange changes, and we're watching that. That will be an impact to us. That's a smaller percentage. Our ability to kind of look at that, make reactions on how we're producing product, as we use more sustainable products, for example, we haven't seen those costs ripple through the sustainable product materials.

If you remember, almost 40% of what I sell, maybe a bit more than that today, use recycled materials. Those aren't having as much of an impact. Not saying that it doesn't catch up and there's some challenges there maybe next year and the year after, but there's a benefit there. Our ability to work with our suppliers to manage that cost. And so a lot of suppliers probably dial into this call. We were in this together. So we manage that really well.

And if we have to, we'll move on price in a careful way. We're conscious about it. We'll do everything we can to mitigate the impacts, and then we'll manage price to get to margin in a careful way. And you saw that in the pandemic -- not in the pandemic, but in tariffs last year, really well managed, carefully managed. And because of our scale, we also can reengineer product to get back to price points that deliver on the value that you'd expect from our brands.

And so we can use all the kits in our toolkit, all the levers that we have to be able to navigate this. And our teams are laser-focused on it. I've been so impressed with our sourcing teams particularly our U.S. sourcing teams, but this will have impacts across the globe on how we mitigate against what we see from margin pressure.

And actually, with commission, I think you'll see it creep up. Mix matters for our business. As Asia is moving at a faster clip, that can pull margin up. As Tumi gets back on a more normal course in North America, that brings gross margin up. As we elevate our positioning, as we elevate the storytelling of our products, of our brands; that has benefit.

And importantly, and this is what you really felt coming out of pandemic, the level of promotion and discount has dramatically transformed in this business, and we remain disciplined on that because often, you can lose margin that you're kind of leaning in and you get more promotional and leaning into discount more than you should. And we reset that in the organization. We have tremendous discipline in managing that as well.

So I think the combination of all of that is why we feel confident. And we're seeing good results. I can feel it even as we're into Q2 as we stepped into Q2. We're doing everything that I'd expect us to be doing. We've been watching freight cost inbound freight containers.

That's -- we've seen some [ duration ] there, but it's in line with what we budgeted. We're actually right in line with what we'd expect because we're conscious about that because freight is a big piece of our story. So we're watching freight carefully as well. But because we contract a lot of that out and we can manage that well, we'll manage that impact as well if that increases over time.

Okay. Was there a second question? Or was that just that? Yes. Good. Thank you very much. Thanks, everyone, for dialing in. Appreciate the questions, and I appreciate your support.

Yes. Well, that concludes our call today. Thank you very much for joining.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to Samsonite Group 2025 Annual Results Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Alvin Concepcion, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you. Welcome to the Samsonite Group Fourth Quarter Conference Call. On the call with us today are Kyle Gendreau, Chief Executive Officer; and Tom Pizzuti, Chief Financial Officer.

Before starting today's call, we would like to remind you that any forward-looking statements made on the call involve risks and uncertainties that are subject for the company's provisions as stated in disclaimers in the company's press release and earnings announcement and that actual results can differ materially from those described in the forward-looking statements.

With that, I'll now turn the call over to Kyle.

Okay. Thanks, Alvin. Thanks, everyone, for joining us. We're sitting here in New York in our TUMI offices, and we're happy to talk about Q4. I'm on Page 5 of the deck. In Q4, we returned to positive net sales growth for our business. Our net sales increase on a reported basis, 2.2% and approximately 1% on a constant currency basis.

The chart to the right of the page, you can see the sequential improvement that we were talking about as we exited Q2 into Q3 and then meaningfully accelerating to positive growth in Q4. That was driven by many things, but importantly, innovative products. We had some terrific products that launched at the back half of Q3 and Q4 and strong execution across our teams across the globe.

In particular, we had a strong portfolio of new products, as I said, and we had very strong growth in our DTC business and our non-travel business despite headwinds were the key drivers for improving -- were key drivers for improving to positive net sales growth in Q4.

Additionally, we saw sequential improvements in our travel category, driven by continued strength in global travel and again, global operating execution. Despite tariffs, our gross margins expanded for the quarter. Q4 gross margin, 6.3%, a 10 basis point improvement over last year due to regional mix, brand strength and really strong mitigations of the tariffs that we saw in the United States.

We continue to be focused on our key strategic growth pillars. We will continue to execute the pillars and the road map to leverage our scale advantages and product innovation, increased marketing spend and enhance consumer engagement to drive our net sales in 2026.

On Page 6, another lens of what we're talking about. We talked about the net sales growth and sequential improvement really from exiting Q2, strong improvements in Q3 and again, back to positive growth on a constant currency basis for Q4. You can see the gross margin improvement, not just from last year, but from Q3 to Q4, very strong. That has to do a bit with mix and channel mix as our D2C business accelerated and also our higher brands delivered a meaningful improvement.

You can see on the EBITDA side, our EBITDA in dollars was flat to last year Q4 and as a margin percentage in the 20s, 20.3% for the quarter. If I go by brand on the next page, you can see all brands delivering performance. Meaningful improvement, I said, strong sequential improvement in our Samsonite business that was driven across Asia, North America and Europe and meaningful improvements from Q3 to Q4, just about positive for the quarter.

TUMI, held strong. We had a very strong Q3 and a very strong holiday season, and it's another quarter where all 3 of our major regions were positive in Q4 for brand TUMI. We saw some improvement in American Tourister. So I'd say a sequential improvement in Q3, Q4. But importantly, our -- I mean, our Asia business was back to positive growth. Asia is a big driver for American Tourister. And we saw 2.3% growth in Q4 versus minus 3.6% in Q3, so meaningful improvement in American Tourister.

And on Page 8, if we look at regions, you'll see this steady movement in Asia. Asia meaningfully improved. This was a region that started to show meaningful improvement in Q3 and reached 5.1% growth on a constant currency basis in Q4. We saw meaningful improvements in China, Korea and strong performance in India and Japan, and these are big markets that really move the needle for Asia. And as they started to move back to strong growth positions, we had a great result for Asia.

You saw a tremendous shift in North America, it's still negative, facing tough prior year comparisons, but meaningful improvements in both U.S. and Canada in both our direct-to-consumer and our wholesale businesses. And then I would label Europe as steady, 1% growth both quarters. We saw a very strong DTC performance, particularly in Q4 in Europe. Overall, 5.6% growth, D2C retail up 4.4% and our e-com was up over 9%. So strong and steady improvement performance in Europe.

And then Latin America looks like it took a dip in Q4. If I exclude Mexico, Mexico, for much of this past year, we were talking about the wholesale customers being impacted with trade imbalances, particularly with the U.S. If I exclude Mexico for Q4 plus 8.2%. And encouragingly, as we get into the first quarter of 2026, we're seeing Mexico back to strong growth as these consumers, these wholesale customers are buying. So Mexico is -- Latin America is in a good place for us, particularly as we step into Q1.

On Page 9, you've seen this slide before, I think the important pieces here is our net sales growth has historically tracked well with travel. As you remember, in the -- coming out of pandemic, we had surged in gross to 2021 to '24, we grew 6x the industry. We see the travel continuing to grow as we step into '24 and '25 and importantly, as we get to Q4 return to growth and really, I expect this business to continue to correlate to travel really well. But a bit of the dip that we saw at the start of this year was really off the back of really strong, strong performance coming out of COVID -- the few years coming out of COVID.

And you can see our performance versus travel on the left of the page, global passenger miles up 109% or 9% to the 2019 levels, and our business is up 24% to 2019 levels. We saw tremendous progress in our DTC e-commerce business. It's our fastest-growing channel, leading to significant increases in our D2C mix, so if you look at Q4 of last year to this year, our D2C is now 45.1% from 43.1% last year. D2C e-commerce overall was up 12%, and our D2C blended was up 5.2%.

We saw a slight increase in our retail business, 2% growth, with a comp that was slightly negative, but we've had store openings as well that is feeding a good direct-to-consumer combined business. Wholesale is still a decline, down 2.3%, but we saw a sequential improvement from the prior quarter, which was down 4.5%. We still have customers within the U.S. channel buying in a lumpy way. And that's part of the pieces that we've been seeing all throughout 2025, I mean, that carried a bit into Q4 as well.

But overall, I'm moving in a good direction, both wholesale and for sure retail. We've talked a lot about the opportunities in nontravel. We've been steadily growing here. In Q4, we saw a non-travel category grew 6.7% versus the prior year. And you can see as a percent of sales, this continues to move for us, 37.6% of sales versus 35.5% last year.

So continuing to move in a direction that we'd expect. There's a slight decrease in travel, 2.2% versus the prior year, but sequentially improved from the negative 5.3%. So as we continue to see travel growth, and we start to get past the inflection point of revenge travel, and we see consumers leaning in and buying on the travel side as well.

Page 12, just in one page, clearly spells out the strategic priorities that we're focused on as a company across the entire company to drive accelerated growth. We really characterize these in 4 buckets: Amplify and elevate the awareness of our iconic consumer-centric brands. I'll cover each of these in just a bit on the pages to follow. Be the clear winner in digital to further support our multichannel growth. And when I talk about digital, it's our own D2C e-com, wholesale, e-retailers and across the network that help feed the entire channel growth for the business. Seize the white space opportunities in lifestyle bags and accessories, what I just talked about.

We continue to grow there, and I think there's tremendous opportunities to grow more than when we look at the market share in that channel compared to our luggage channel, we see meaningful opportunities to evaluate and grow further, which we've been doing consistently for many years. I think we can do more and then continue to win with products that resonate globally. And I'll show you a few examples of that as I go through the deck. And this is a meaningful effort on our part to be more coordinated in our product development and to have big winners across the globe on the luggage side.

Elevating -- I'm on Page 13, elevating our iconic brands via world-class storytelling. We're very focused on elevating the level of storytelling. We've been doing this for a while, but we've added a new global function, global marketing and e-com office, led by our new VP Marketing and E-com to coordinate enhanced global brand building and digital efforts across the globe. We're very focused on amplifying our iconic consumer-centric brand strengthening global brand consistency while ensuring regional flexibility for local relevance, which we've been doing for a long time, but harnessing the power of the global organization.

Drive higher impact storytelling across channels to elevate awareness and brand perception. And importantly, related to this, drive marketing efficiency and impact. We expect to increase our marketing spend. I think I talked about this on the last call, you should expect me to step this up. We're planning and targeting 6.5% of net sales in 2026 to be deployed with greater consistency and impact across all of our brands.

We're leveraging scale and experience to become the clear winner in digital. And what do I mean by that? This is really focusing on digital executed strategy, drive engagement, conversion and customer lifetime value. We're investing in a more unified digital experience with personalized user journeys across both D2C and e-retailer channels.

We're promoting e-commerce excellence through the newly created GMEO resources, and we're leveraging data-driven capabilities to align digital marketing strategies across channels and brands. Everything with an enhanced focus as we move to be a leader, the clear leader in digital.

As I said, there's tremendous opportunity in what we label the white space of nontravel within our business. We have exciting new products that we've launched in this cycle, TUMI Alpha, Alpha 4 is a top collection. I'll cover it in another page. We launched this in January 26 with very good reception, and this backpack is a driver for the TUMI business and is really well received and off to a great start.

We've talked about Samsonite PARALUX in our last calls. This is an award-winning design, 2 in 1 backpack. This continues to perform. In Samsonite Ecodiver, you can see the bag on to the right, that's a top collection, within the top 5 of our Europe overall collections continuing to grow, and we're expanding the offering. And I think importantly, a space, we plan to take a deeper dive into defining the opportunities within this lifestyle bag space with resources dedicated to exploring the full potential.

On the product side and products that have global resonance, I have a few examples in the pages here. This is Nexis. launched in Q1 in Europe. It will launch in Q2 across the rest of the world, and it's off to an amazing start exceeding our expectations. This is a product that's evolving lightweight with Samsonite materials. It's really one of the next global collections. It looks and feels like Samsonite, it's crafted using our Roxkin technology, one of our most advanced shell materials, manufactured in our European facilities, and it really combines exceptional strength with ultra-lightweight performance. And you'll start to see this across the globe as we step into Q2. And again, it's off to a tremendous start.

And then last year, we talked about PARALUX. And PARALUX has been a really amazing global launch. We launched this in Q3 of last year. It was so successful in certain styles. We ended up out of stock by the time we stepped into the start of'26. We're in the midst of replenishing right now, and I expect this to really capture pent-up demand and be a big driver of our sales for the year. It's generated $18 million of sales in a very short order in 2025.

And this is a collection that demonstrates success in combining award-winning innovation, designed with all of our designers across the globe with high impact cohesive media campaigns, and we brought both of those together and it speaks to what we're capable of doing when we get products that have global recognition. We're adding new colors here, and we're adding new collections on the non-travel piece for this as well. I expect this to be a big driver for us in 2026.

And then we're messaging with younger consumers. This was an exciting -- I don't know if you're a Stranger Things fan, but I'm a Stranger Things fan, and in Asia, we launched expanding your stranger side, a collaboration with the Stranger Things, both pieces really interesting. My son is traveling with the blue one there and get comments all the time. And it really drives and captures the imagination of a younger consumer with brand American Tourister. And this was really well received, well placed within Asia. And talks about the capabilities across all of our brands to really message to the consumers we're looking for.

And then lastly, on the product, we introduced the next-generation Alpha 4 collection. This is a meaningful collection top collection within our TUMI's portfolio. And it really speaks to our ability to launch these collections. It's a more streamlined product, streamlined pocketing, silent magnetic closures, intuitive access points and really engineered and I might even say, engineered with a lighter construction, it's really noticeably different, both on the travel pieces and the backpack.

And it's off to a good start, particularly in the backpack side, well, well received across the globe. And you can see campaigns -- 2 campaigns. We have our global ambassador, Lando Norris on the left. And Asia-Pacific brand ambassador, Wei Daxun that we've added and both have been well received as we launched this product. You couldn't have missed it in Q1 of this year.

And just lastly on sustainability, there's 2 things. One, we're being recognized, okay? And I won't go through all of what we've accomplished. Our ESG report will come out next month. And I always tell people read the ESG report, you get a lens into our business. And what we're capable of doing from an innovation perspective and from a sustainability perspective. And we're recognized, I think, importantly, we're recognize in TIME as World's Best Companies in Sustainable Growth '25 and '26, we were #74 out of 500 and #6 in retail, wholesale and consumer goods. That is a meaningful recognition of what we're doing.

In PARALUX, which I covered earlier was a winner of 2 Red Dot awards, one on sustainability design and one an overall design, speaks to what we're doing in this space. And then from a ratings perspective, my view is right where we want to be, from an MSCI rating at AA, that's a step-up and CDP, we continue to be a Climate Score B, which is exactly where we want to be.

We're being recognized. We're getting special mentions across many industries or many lenses on what we're doing on the sustainability side. And again, last pie before I hand off to our new CFO, Tom Pizzuti, definitely take a look at the report, it will be out in April.

So I'll hand it off to you, Tom, and I'll come back for some outlooks at the end.

Thank you, Kyle. While it's only been 7 weeks since I joined the company, I've served as an adviser for the past several years. Over those years, I became impressed by the strength and resilience of the company with a team that has stepped up no matter how challenging the environment. I'm thrilled and grateful to be in a position to help the company enter into its next exciting phase of growth.

I'm sure someone will ask about my initial observations and what my priorities are. So I'll go ahead and address those now before reviewing the financial results. It's clear to me that this is a very well-run organization with a large runway for continuing its profitable growth track record. The company is in a good position to capitalize on the strong consumer demand for travel with our iconic and innovative brands, as Kyle mentioned, as well as continuing to grow in the underpenetrated nontravel category with stylish and functional lifestyle bags and accessories.

The empowered local teams across the globe do a great job leveraging our advantages in product innovation, market leadership, platform and scale. And these teams are nimble and decisive, which is a big reason why financial performance has been so resilient regardless of the macro environment.

The organization is brimming with highly talented and motivated employees around the world and is hyper focused on successfully executing on the strategic growth pillars that Kyle described earlier. I've been impressed by the quality, dedication and professionalism of the global finance team and the company's commitment to maintaining a strong control environment and robust corporate governance.

This is empowered by our local teams in coordination with global leadership and oversight. All these reasons are why I'm highly confident that we'll be able to create significant shareholder value over many years to come. And with the potential dual listing in the U.S., we're excited about the prospect of more investors being able to join us on this journey.

As for my priorities, I'd like to ensure that we take a balanced approach towards driving sustainable sales with a robust margin profile; two, leverage our asset-light business model to invest in growth, return cash to shareholders and further deleverage what is already a very healthy balance sheet; three, continue to evaluate strategic acquisition opportunities that align with our long-term value creation goals. And lastly, to underpin all of this promote continued discipline of the global finance function, a strong control environment and good corporate governance while ensuring continued investment in best-in-class systems for our finance colleagues across the world.

So with that, I'll now go into the financial review. Starting on Slide 23. This will be just a brief recap, as Kyle has already covered a lot of this in his review. So constant currency growth in Q4 improved sequentially from Q3 to nearly 1% growth despite a sequentially tougher prior year comparison. Overall, we saw broad-based improvement across our regions and brands in the second half of the year compared to the first half of the year as the market returns to a more normal growth pattern.

Gross margin was 60.3%, up 10 basis points despite comparing to a strong Q4 margin last year. We're proud of the discipline that we've had on promotional activities to drive net sales and benefited from favorable geographic brand and channel sales mix, as you heard from Kyle earlier.

We also effectively mitigated U.S. tariff impacts, thanks to the teams across the globe who managed things so well all year long. And as the U.S. tariff landscape continues to evolve, I'm confident we will continue to manage it well with our highly experienced teams in deep and long-standing relationships with suppliers.

Distribution expenses as a percentage of sales were 30.3% in the fourth quarter, up from 29.1% last year. The increase was primarily due to the addition of 31 net new company-operated retail stores added in 2025 as well as increased salaries and employee benefits.

Marketing expenses as a percentage of sales were 5.7%, in line with the prior year. G&A expenses as a percentage of sales were 5.7%, down 30 basis points from the prior year. As a result, adjusted EBITDA margin was 20.3% in the fourth quarter of 2025. Q4, as you know, is typically a strong EBITDA quarter for us, and we clearly delivered on that, while still investing in opportunistic new store openings to help us elevate our brand presence and drive long-term sales growth.

Adjusted net income was $106 million compared to $116 million in the prior year. Overall, we're happy that we were able to maintain an efficient cost structure while finding smart opportunities to invest in our long-term growth in an environment where many consumer businesses were pulling back. So with a return to sales growth combined with a robust margin profile, I think these were good results for the quarter.

Moving to Slide 24, we present our full year 2025 results. The first half was challenging as you heard earlier with Kyle, as we faced weakening consumer sentiment due to significant macroeconomic and geopolitical uncertainty, we remain focused, however, on launching new and innovative products with impactful marketing campaigns. We improved our sales mix towards higher-margin regions in the direct-to-consumer channel.

We successfully mitigated tariff cost pressures and we invested in our business for long-term growth. As a result, in the second half of the year, constant currency net sales growth improved sequentially and gross margins expanded year-over-year. Adjusted EBITDA margin was solid at 17.3%, which is normalizing from 2 higher-margin years in 2023 and 2024, reflecting the normalization of the adjusted EBITDA margin adjusted net income was $293 million, down from $370 million in the prior year.

Moving to Slide 25. We provide a few other highlights that showcase our ability to navigate a challenging demand environment and invest in our long-term growth while also generating solid free cash flow and strengthening our balance sheet. We generated operating profit of $528 million in 2025 compared to $629 million in 2024, as we strategically invested in 67 and 31 net new company-operated retail stores in 2024 and 2025, respectively, which increased distribution and G&A expenses by 2.8% to $1.3 billion.

This increase was partially offset by a reduction in advertising spend from 6.3% of sales in 2024, to 5.9% of sales in 2025 as we flexed our spending in light of lower net sales on a reported basis while still ensuring adequate marketing investment to drive future sales.

With this financial performance, we delivered strong adjusted free cash flow of $246 million for the year. And in Q4, it was $170 million, which is an improvement of $35 million from the same period in the prior year.

The balance sheet remained healthy with a net debt position of approximately $1.1 billion at the end of the year, which is a leverage ratio of 1.8x EBITDA -- adjusted EBITDA. And that's after returning $193 million to shareholders via a dividend of $150 million and $43 million of share repurchases during the year.

As we detailed in our last earnings call, we successfully executed a comprehensive refinancing of our senior notes and senior credit facilities. We significantly extended debt maturities across all tranches, increased available liquidity and significantly reduced near-term refinancing risk.

Speaking of investments, turning to Slide 26. We continue to invest in new stores, as you heard, remodels as well as in our strategic initiatives. Full year 2025 capital expenditures were $93.8 million, down from $111.5 million in the previous year as we were more selective on strategic store openings and remodels.

We plan to increase capital expenditures to a range of $135 million to $140 million next year as we invest in a multiyear project to enhance our European distribution center, make ERP and e-commerce software additions and add 30 to 40 net new company-operated retail stores.

That said, we will be nimble and flexible in our spend and spend appropriately based on the changing market conditions. So in summary, we returned to sales growth in Q4, effectively navigated uncertain trade policies and delivered solid margin performance.

We also continued to generate significant cash flow, we derisked and strengthened our balance sheet, and we continue to invest in the business while returning a sizable amount to shareholders.

So with that, I'll turn it back to Kyle for the 2026 outlook.

Okay. Thanks, Tom. I'm on Page 28. We continue -- we are confident in the long-term tailwinds supporting our business, including continued growth in travel as well as our ability to execute our strategic priorities and accelerate growth. Further, as the industry leader, we expect to benefit significantly from renewed consumer demand in luggage and travel bags over the next several years, following the more recent period of moderated growth off the back of revenge travel that we saw in 2021 to 2023.

Nearer term, we expected a continuation of our net sales growth momentum during Q1 of '26, prior to the onset of the conflict in the Middle East. But as the conflict continues, we now expect Q1 to be approximately flat on a constant currency basis compared to Q1 of '25. We saw a strong momentum as we started the quarter, and we saw our impact as we get to the middle of March.

We believe we have an opportunity to achieve sequential constant currency net sales growth as '26 progresses. However, inherent uncertainties around the duration and potential impact of the conflict makes it impractical for us to provide a specific outlook for the full year. We do believe our scale advantages, our supplier relationships and our ability to effectively navigate through uncertain geopolitical and macro environment conditions will continue to enable us to maintain strong gross margin profile in '26 and beyond despite the uncertain conditions in the market.

FY '26, our marketing spend as a percentage of sales is expected to increase, as we lean in our strategic priorities, I plan to bring that up to 6.5% to make investments to elevate awareness of our iconic brands and to drive long-term growth.

With that said, we continue to maintain flexibility and can adjust that, if needed, but I have a high intention to continue to push the business in the back half of the year. We're focused on continuing to leverage our asset-light model, as Tom just went through. With an investment in growth, returning cash to shareholders and further deleveraging our balance sheet as we go forward, while continuing to evaluate strategic acquisition opportunities that align with our long-term value creation goals.

Our preparation for a dual listing in the United States continues. Our Board of Directors and management firmly believe that dual listing will enhance shareholder value creation over time, and we'll continue to improve in our -- with the continued improvement in our business, we intend to complete our dual listing in 2026, while being conscious of the current market conditions around us.

So with that, I'll turn it back over to you, Alvin, and we'll take some questions. And thanks, everybody.

Thank you, Kyle and Tom. Operator, we can go into Q&A now.

[Operator Instructions]. First question comes from Anne Ling from Jefferies.

And I have 2 questions here. First, Kyle, thank you very much for sharing the year-to-date performance and also the first quarter update. And if you could share a bit more in terms of performance by market, how we are seeing the trend by different markets, whether there's any other market that is more resilient? So that's my first question.

Secondly is on the cost side. Given the current conflicts in the Middle East, oil price increase. If you could share with us like the cost -- some of this in the raw material price. Is there any risk that the margin might be under pressure because of this short-term product -- raw material volatility? And how are you able to mitigate that? So that would be my second question.

Yes. No, 2 good questions. I would say we're seeing sequential improvement across all of our business as we were going into Q1. And where we saw some immediate impacts in our business was largely in the Middle East. Middle East is around 1.8% of our sales, so a pretty small piece, but we saw a meaningful decline as we stepped into March, as you'd expect.

We saw a bit of a halo of that in India. So we saw our India business impacted a bit more than other parts of the region. But we saw a strong growth, and we talked about it in Q4. We saw continued strong growth in the markets of Japan, Korea and -- Japan and China, I mean, did I say China? Japan, China, Korea were very strong. And Southeast Asia continued to be strong. So we saw some resilience in Q1 across those impacted by what we saw and as you'd expect, the immediate impacts of that.

Our Europe business is generally steady in Q1, and our North America business was, I would say, sequential improvement is what we're seeing as we went through the quarter. So it's a bit early to tell, right? I think as we step out of Q1 and in Q2, that's really where the uncertainty comes. But there are real pockets of resilience. But I don't think we've really -- and the consumers have really felt or reacted to the ultimate impact.

And as I said, the duration of the conflict and resolution, it's hard to predict today what that looks like.

From the cost side, we saw some early indications, as you'd imagine, anything tied with fuel. So we've seen some short-term kind of impacts on shipping costs pretty quickly. They're in kind of a range that won't really affect us. They're in ranges that we typically anticipate. And as you know, on shipping, we enter into forward arrangements and agreements on that. And so I think we're in a very good place there as of now.

I do think there'll be some impacts on things like plastic costs. We saw some meaningful increases in India fairly quickly. But the reality is that takes just a bit of time to pass through. And as we faced this in past crisis, we'll be working with our suppliers.

We're working with our sourcing teams on that relationship. We typically have 5 to 6 months of inventory to manage. So we have plenty of time to navigate that. And our intentions would be to navigate that and do the best we can to maintain margins. And that's what we're focused on. But again, it's early to tell the impacts. And so we've seen some of the early indicators on the areas that you'd anticipate. And we'll react to that as we manage the business with the suppliers along with the positioning of our products.

Next, we have Akshay Gupta from HSBC.

I have 2. The first one, you mentioned about Q1 sales expected to be around flat in constant effects. Maybe can you share some color on the margin expectations for the quarter? And second is on the store expansion plan. So you mentioned about adding 30 to 40 stores this year. If you can talk about which markets will be the key focus for the year?

Sure. Our gross margins are generally holding strong. If not for conflict, I would tell you that our margin profile for the full year would continue in the ranges that we've got. And as we were looking at the quarter, it looks like it was holding there. I'd expect not a meaningful impact in Q1 on margin profile. Mix will have some piece to do with that, but I think it will be in a consistent lane to what you saw for 2025. For the back half of the year, it's hard to predict on that front.

But as I just got done saying, we would be looking to mitigate impacts that we might see. And again, we have a strong history of managing that. As far as store expansion plans, they're kind of in line with what we've been talking about. We have opportunities within Asia and Europe.

We have opportunities within TUMI. We've been actively looking at TUMI locations and expanding on the TUMI side. And I would weight that within Asia and next Europe, and there'll be a handful of stores in the U.S.

[Operator Instructions], Next, we have Perry Yeung from UBS.

Congratulations, Tom, for the new role. We look forward to hearing the insights in the coming quarters. And I just have 2 questions. So one is related to the revenue trend. So I hear Kyle has mentioned that we've seen a broad-based growth momentum coming through in Q1, but there's been some disruptions coming through due to the Middle East conflicts.

But more specifically, I'm not sure if you can provide some color in terms of the trend in North America. Obviously, we know one of the biggest threat last year is really the wholesale channel. Do we see the appetite or the sentiment has changed across our wholesale customers in North America? That's my first question.

And my second question is related to shareholder return. And I guess, during the call, we made a lot of emphasizes on the shareholder return and also the strong free cash flow generation. After the shareholder listing, what sort of expectations we have, especially given that it might be more tax efficient for the share buyback. What sort of size or scale or the ballpark that we should expect in terms of the future shareholder return?

Okay. Revenue trend for North America. I think wholesale customers are still buying a little bit lumpy. What we can see in North America is sell-through is strong, but particularly off the back of kind of the recent tensions, I think wholesale customers are buying in a careful way. So like what we were experiencing last year, it's a bit lumpy and that continues.

Our North America business, excluding TUMI, looks like it's trending to be an improving trend. What we saw in North America in Q1 is our TUMI business was a little bit softer. And we saw our other luxury players, particularly as we get into February and March, and there's a little bit of weather. We're a bigger retail presence, that has some impact. But a softer trend for TUMI North America and our TUMI Samsonite business, an improving trend, though lumpy. So blended, it looks to be in a consistent level to what we saw in Q4 for North America is what I would say.

As far as shareholder returns, we'll have a dividend program that kind of lines up with what we've historically done. We have a typical payout ratio of around 45% of adjusted net income. That will be the case as we step into this year. And we're still evaluating shareholder buyback. I think in the midst of working on our dual listing, we're not actively in that market. But once we get to the other side of that listing we'll come back and evaluate the blend of shareholder buyback or share buyback versus dividend.

I think we'll have a foundation of a dividend policy. We've had a long history of dividend since we've listed the company. and you should expect that to continue and then we'll be added on share buyback once we get to the other side of the listening is how I'm thinking about it. We have plenty of cash flow capacity to do both.

Thank you. At this time, we will conclude our Q&A session.

Okay. Alvin, anything to add?

That's it. Thank you, everyone for taking the call.

Good. Thanks, everybody. Appreciate it. Have a great morning, afternoon, evening. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to the Samsonite Group 2025 Third Quarter Results Conference Call. [Operator Instructions]. Please note that this event is being recorded.

I would now like to turn the conference over to Mr. William Yue, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you very much, operator, and thank you very much, everyone, for joining the call. We have the pleasure today of our CEO, Kyle Gendreau; and our CFO, Reza Taleghani with us, and our CEO, Kyle Gendreau, will start off with a few remarks. Thank you very much.

Okay. Thanks, William. Thanks, everybody, for joining from Hong Kong. I realize we have a time change. So sorry, this is at 10:00 New York Time, if I'm getting the times right. But thanks for being with us.

So I'm on Page 5. And I think the way I would start with title sums up really well, strong momentum in the business supported by innovative products, which you'd expect from us. But importantly, all regions in our core brands -- actually, all of our brands are delivering sequential improvement in Q3 versus Q2. We've seen clear sales momentum in Q3, our net sales decline for the quarter. Constant currency is 1.3%, coming off of the Q2 that was down 5.8%. Encouragingly, net sales growth was positive in the month of August, September and October in all regions and brands, as I said, are seeing sequential improvement in constant currency growth Q3 versus Q2.

If I take one lens, the one market that's continuing to have some challenges on the wholesale side with wholesale buy-in, consumer sentiment and lower inbound tourism in North America. We'll cover North America in a little bit of detail as we're going through. Our net sales would have increased in the quarter by 0.3%, just adjusting for North America.

Our Q3 benefited from growth in our overall direct-to-consumer business and both our -- and also our non-travel sales had positive growth -- noticeable positive growth. Clearly, sequential improvement on those, and we continue to see sequential improvement on our travel net sales. Our direct-to-consumer sales consolidated up 3.5% period-over-period. Our DTC e-commerce was up a little over 10% -- our owned company stores were up 1.1% off the back of store openings and building momentum.

Our DTC mix today is -- in Q3 is 42% versus 38.9% last year. We'll cover that in a little more detail later, but we continue to move in that direction, similar to what we saw in Q2. Our overall wholesale channel net sales declined 4.5% period-over-period, with sales for our traditional, I call it, brick-and-mortar wholesales down around 7% due to more cautious purchasing by a few of our key wholesale customers, particularly in the U.S. that are driving a lot of this.

But this was partially offset by meaningful growth in our e-retailer sales, up 12.3% in the quarter. And then lastly, I talked about non-travel. I've got a slide in my deck, and Reza, I think, has one in his as well, but our non-travel sales were up almost 7% in the quarter as we continue to focus on this opportunity, which is white space opportunity for us, becoming a more meaningful percentage of our overall business, as you know, but really a very strong trend there.

I think one of the real highlights of the numbers as well beyond improving sales trend is the gross margin story. Our gross margins expanded in the quarter with impacts from tariffs really well managed. Our Q3 gross margin was 59.6%. That's up 30 basis points to last year. And importantly, up 60 basis points to the prior quarter. And when you think about the full effect of tariffs going in at the beginning of Q3, it speaks to kind of our tremendous ability to navigate and mitigate tariffs.

Our U.S. business is around 1/3 of our business, but well managed. You can see it in the overall gross margin of the business. I can't thank our sourcing teams enough. What they've done to navigate is tremendous. What our teams on the front end have done and the relationships and the partnership we have with our suppliers really speaks to our scale advantage and the ability to manage the gross margin of this business well. And it trends into Q4 looking just as strong. We do expect sequential improvement in our sales in Q4 relative to Q3.

We believe we're capitalizing on the growth in travel, which continues. We have really amazing products. We'll talk about a few that we've launched in the midst of the quarter, like Paralux that you can see to the right of this page. And we have a positive sales trend leading into Q4. Last 3 months have been strong. The first month of Q4 is a positive growth story. And there's good momentum leading into holiday.

A lot of Q4, as you know, depends on holiday. But I would say the early reads from -- across our markets are feeling good on the holiday story. But a lot happens in the next 4 or 5 weeks, but we're well positioned on that front. And as you know, we're really very positioned really well for profitable long-term growth.

I'll cover it in my outlook as well, but the medium and long-term growth prospects for our business and our competitive advantage on product innovation, real strength on advertising and really being able to capitalize on the underlying growth in travel that continues and seizing the white space on the non-travel opportunities, which we've shown over the last couple of quarters and for sure in this quarter, really underpins kind of the strength and our ability to continue to deliver medium- and long-term growth for the business.

Next slide, from a brand perspective, you can see each -- every one of our brands delivering improvement over last quarter. Importantly, Samsonite improved from roughly down 5% to down 4% in Q3. But when you peel into that, Europe is positive 1.3%; Latin America, positive 8%. Tremendous performance shift in Asia with building momentum in the quarter, down 4% versus down 9% in Q3. And our North America business, again, largely driven by wholesale customers and some of the buying behaviors and cautionary approach was down 10%, just a bit better than what it was in the previous quarter.

A real tremendous shift to TUMI's trajectory. We were performing down 2% to 3% for the first half of the year. Q3 shifted to positive 5%. Importantly, it came from across all of our regions, particularly in Asia, which was up 7.1% and Europe, up 6.3% off the back of initiatives pushing the business, new store openings and a consumer group in this higher income class that has shown more resilience in Q3 than the rest of our consumers. And North America, importantly, was up 3.3% in the quarter.

And if I call out China specifically, where we have a laser focus within our Europe business, that was up 10% in Q3 for the TUMI business. So really solid performance, good trends as we move into the back half of the year. And American Tourister had a really quite dramatic shift. That was at the start of the year, and we talked about this in the last two earnings calls, a consumer group that's under strain more than others, particularly in the U.S. market, but around the globe, that consumer was moving more cautiously.

We saw a really meaningful shift in improvement, largely off of what we've done to shift the product offering within the brand, particularly in Asia, particularly in India, which shifted to positive 3% growth for American Tourister. And as you know, that's our biggest market for American Tourister in the globe and really sequential improvement, noticeable improvement from where we were in the first half of the year. And I think we're set up well as we finish the year and go into the start of next year.

Page 7 is a slide we've looked at before. And I just want to drive the point. And for me, this company is hitting an inflection point that we've been talking about coming. As we exit Q3 and step into Q4, you can clearly see the shift. But importantly, if I go back to this revenge travel period '21 to '23, where our business was up 23% against an industry that was up 3.8%, tremendous growth. We were 6x growth in industry off the surge of travel that came back.

Global air traffic is still projected to grow. This business correlates really well with air travel. I have a slide that you've seen before a little later in the deck. 4% growth in global air traffic really underpins the resilient of consumer spending on travel. Maybe they're not spending the same way. I think that's had some impact on our business, but the sheer travel numbers continue to grow and the outlook continues to be very positive.

We've continued to invest in this business on product innovation, new product innovation, capitalizing on the white space within non-travel and pushing the advertising and elevating the advertising stories of the business. So we're continuing to invest in marketing spend, changing the lens on the way we spend these dollars to really go after not just existing customers from a loyalty perspective, but to deepen our relationships and broaden our relationships with new customers.

And we're seeing clear traction on that front and investing there. I believe we're about to get the benefit of replacement cycle in this industry for the same reason that revenge travel slowed down at the end of '24 in the first few quarters of 2025. I'm certain that we're going to see the inverse of that as consumers continue to travel at a very good pace. As you know, and I presented this, I think, in the past, over 52% of travelers replace their luggage every 2 years.

Non-traveler bags, 73% of travelers replace that every 2 years. And so we're now at a moment in the cycle where we're 3 to 5 years past that surge in travel. And I think we're starting to see the benefit of that in our numbers as well, which I was anticipating. We also believe consumers in this environment in many markets around have shifted towards value and have shifted to e-com. We can clearly see it in our own e-com numbers, both our direct-to-consumer e-com and wholesale.

And I think importantly, because of our scale advantage, we're well positioned to capitalize on that. Our brands can hit price points -- competitive price points across all of our markets across particularly Samsonite and American Tourister, and we've been doing that. That's fueling some of our story. And we -- and as you know, we're investing in this in a strong digital platform, both digitally and importantly, on the wholesale side as well. And it's delivering. And you can see it in our numbers in Q3. And I think we're really set up for medium-term growth on both of these avenues as we move forward.

We're focused on profitable long-term growth. When you think about what I'm focused on as a leader, it's really around getting this business back to its normal growth profile. We have a long history of delivering outsized growth against industry, and I think we're heading there. And importantly, we've continued to strategically invest in our business. Even as we face headwinds, we're pushing the business to really strengthen our competitive advantage in the marketplace from a leadership platform capabilities and scale advantages to continue to move us forward.

We're continuing to win through product innovation. We've got some really exciting stuff that we've launched across all brands, a lot in the pipeline as we move into the start of next year. We're really laser-focused on amplifying and elevating brand awareness. As you know, we're leaders, our three core brands are leaders in the market in their own rights individually. But collectively, we're looking to amplify and really push more efficient, more effective marketing and have a vision to increasing this as we move forward.

And we're really set up to do that to, again, cultivate customer loyalty, but importantly, continue to attract new customers to our business. And so you should be seeing and feeling that in our marketing messages today and as we move forward. We will capitalize on the growth in travel. The forward view for global travel continues to be strong and as a leader with really the most trusted brands in the space, we will capitalize on that growth. I say it again, this white space around non-travel, there's tremendous opportunity.

I've got a slide that talks about market size and what our shares are. We have tremendous opportunity to grow the non-travel business, of which we've been doing consistently for a long period of time. I think we can accelerate what we're doing here on the non-travel side, and you'll hear and see some of that in the numbers that we're showing today.

And we're strategically growing DTC really through enhanced e-commerce platforms across the globe and across land -- brand and really disciplined store openings and expanding our retail footprint in the markets that it makes us -- sense for us to do. It provides this really unique competitive advantage to us that we're executing wholesale, but we're executing perfectly digitally and pushing ourselves on the digital side. And we have a foundation of retail stores, almost 1,300 stores globally that consumers can interact with us.

And these are direct owned stores that we can have this deep relationship with our consumers. And we'll continue to do that. And I think over time, our DTC mix continues to slow but steadily increase in the business at the right pace. And we remained strictly disciplined on overall cost structure. You can see that in our overall numbers. Obviously, gross margin is an art and a scale that we have, and we manage gross margin for a long time really well. But how we manage the rest of our cost structure, Reza will talk through that as well.

Even as we face some headwinds over the earlier quarters of this year, -- the cost structure has been really well managed, and it's well entrenched in who we are as a business. I think this is a new slide. It's a slide that we use internally quite a bit, but we operate in a really highly attractive fragmented global bags and luggage business.

I'm on Slide 9. If you look to the right, global luggage. This is what you typically think of us as when you think about us today. It's roughly 64% of our business is travel luggage. We have a 19% share in what in '24 was a $22 billion business that grew at a CAGR growth of 2010 to '24 by 3%. And that's with the COVID years. The reality is take the COVID years out, it looks more like what the forward indicators are for this industry, 2024 to 2029, 6% CAGR.

And as you know, we have the ability to outpace this growth. And that's the way to think about this space. So we have a growing industry. We have meaningful scale and we have the ability to continue to grow and attract consumers into that -- into our family of customers. To the right of the page is bags, global bags. This is excluding luggage and excluding handbags, which is not us, right? This is the rest of the bag business, what people are carrying around and moving backpacks, duffles, crossbodies, things that we see every consumer in the world traveling with.

That has very similar underlying growth dynamics. You can see the 10% to 24% impacted a bit by the COVID years and the forward indicator is not so different than luggage, 5% growth. And importantly, our market share here is 3%. We've been growing high single, low double-digit growth for a period of time in this space, and we have clear ability to continue to expand with collections that we've launched and been launching.

I think my next page I will show you a few of those that shows that we have tremendous ability to grow share in this bucket. And it's a larger bucket with plenty of opportunity for both ongoing growth and just gaining share. And just as a reminder, in this 2010 to '24 period, if you blend the two, we -- our CAGR growth in that time period was 8.2%. That's including COVID years. That is almost 3x the industry growth that we saw in that same time period.

So it speaks to kind of our ability to leverage our scale to move across these two big categories of the market we operate in. Our growth, we've covered this before, has historically been really strongly correlated to travel. And the outlook for travel remains tremendously strong. If you take a 5-year forward view, travel growth expected to be around 4%. If you shorten that up a little, I think it will actually be a little more.

If you look to the left of the page here from where we are to 2019 levels, call this pre-COVID, we're up 22% in sales against the global passenger growth in that time period, including COVID, that's up 8%. So you can see this tremendous outpace that we have in growing against an industry that continues to grow. The chart on the right, we've shown before, okay? The red line is travel industry. You can see the impacts of COVID. But the real impacts are really where we are now, which is this revenge travel that I covered that we really overperform.

And the forward indicators. The most important page here is the forward indicators for global passenger travel, 4% growth. And we're importantly at this inflection point that we're getting back on course. The history clearly shows we outperformed this industry, and we're pivoting into positive growth again is the way I would describe it in -- at the end of Q3, in Q4 and for sure, in the years to come. And we should do better than what the industry underlying growth is like we have for the last decade.

On Page 11, non-travel category, 14% CAGR for us, 2020 to '25, right? So I just showed you a number where the industry growth was something like 2%, and we had 14% growth here. We've gone from $480 million to $912 million. We've talked about this for several years. There's real opportunity to continue to grow in this space. We delivered close to 7% growth in Q3. And we're focused, and it's across all of our brands, brands like Gregory that are largely non-travel, High Sierra which has a meaningful piece of travel.

But TUMI, Samsonite and American Tourister are all delivering meaningful growth in this space and plenty of opportunity to gain share and continue to grow. As a team, we're laser-focused on really further penetrating what I would label is a big business of us, a $1.4 billion to $5 billion business, but under-penetrated from a category perspective, that I know we can do more. And in this Q3 period, we're up 270 basis points as a percentage of our sales, approaching 36% of our sales non-travel. I think when I started a long time ago, it was something like 12% of our business, right?

So this is really meaningfully moving. And again, in a huge market that's got tons of potential for us. On Page 12, what does it look like? I think you know this. A good example of Samsonite Better Than Basic designed and developed in our U.S. team performing really well. This has a whole collection of backpacks, duffles, cross bodies that is performing tremendously. It's what you see consumers moving with today.

Ecodiver in the middle of the page. This has been a home run, started in Europe. It's a home run all across the globe. The whole collection of duffles, backpacks, more unstructured travel goods that consumers are traveling with today. It's a top three collection in Europe overall, and it's penetrating the rest of the world over the last couple of years in a meaningful way. American Tourister take the cab and underseater.

There's this huge wave of underseater bags within Europe as discount airlines put pressure. This underseater category, we're hitting with all of our brands, and there's so much more to go. And this American Tourister bag has been a tremendous success. And when you think about American Tourist, you think about bright colorful luggage, but this non-travel capacity we have in backpacks and duffles is tremendous, and the teams around the world are doing great stuff. Gregory, you get it. This is Gregory, which is super technical mountain bags.

As we come off the mountain and we really penetrate into everyday bags, that make you feel like you're on the mountain, but you're in an urban setting and more lifestyle approach products with Gregory. Gregory is delivering significant double-digit growth this year for us, and it's got tremendous room to grow. Samsonite Paralux, this is a collection that we launched. I have a slide on it. This is the backpack component of this.

This has been a huge success. This is a 2-in-1 backpack, where you can separate that backpack and you have a bag that you can take with you for the day and the travel component of that backpack that you can use is effectively your underseater has been a huge success, a Red Dot award-winning collection.

And then TUMI's, Celina part of the-- TUMI Voyageur collection, really an amazing bag, big part of TUMI's journey and so much more to go on TUMI from a collection perspective. Think about owning totes and business bags and what TUMI is known for, there's real opportunities to drive further that space, particularly in the women's category. Just a little call out. We were -- and we've been here before, this is -- Business Travelers Award, where Samsonite was rated #1; TUMI was #3 on the list. No surprise, Samsonite is #1.

This is a survey with 95,000 global travelers voting in a panel of 20 experts. And importantly, when you think about scale and the ability for us to innovate and bring products to be recognized as #1 business traveler luggage is meaningful. And you'd expect that from us. And I'm just sharing that this is with [Technical Difficulty] push in the business to really demonstrate this amazing product development, this focus on functionality, focus on sustainability and creating inspiring bags that people want to travel, and this award speaks to that.

On Page 14, we've had a very successful, I would say, ahead of our expectations launch of Paralux Collection. I think I indicated we're working on this. This launched in September of 2024. It's a collection that really brings the best of our innovation from a sustainability perspective, the bag is largely sustainable. Almost every inch of this product incorporates sustainable materials. It's built for self-repairability, another real sustainable attribute. This is a bag that you can replace the wheels at home.

We can help you do that very easy. And it's built to last, and it's built with superior design functionality. It's become one of my favorite bags to travel with from a carry-on perspective. It's got front access, a mid- access. It's really designed perfectly for the way consumers think about traveling and ease of travel when you're moving through airports and in hotels, what the bags deliver is tremendous. And it was recognized. We won two Red Dot awards for this, both on sustainability design and overall design. And again, it's exceeding our expectation.

And I would argue it's just getting going. I think it's been a really successful collection. And it speaks to the power of a globally launched product with cohesive high-impact media campaigns across all of the regions of the world. This talks about scale advantage when we put ourselves together to deliver on a really amazing product. You should expect more of that from us as we move forward. And TUMI is really on the run. You can see the shift in performance as we stepped into Q3.

We continue to focus on elevating this brand on all fronts. It's a very product-centric and communication strategy-focused business, okay? This is around delivering performance luxury products and then really meaningfully elevating the messaging to consumers on what we offer here and what this means. We had a 50-year anniversary for TUMI. Even that surprised me, I hadn't fully appreciated TUMI was 50 years in the making. It's hard to find brands in our space that are 50 years -- and it was driven. It was well presented the signature TUMI Red that you can see on the left, incorporated in some of the product materials as we are launching our 50-year messaging to consumers. We launched 19-degree light as part of this 50-year, really a testament to the innovation that continues to be deep in the brand TUMI, both on travel bags and non-travel bags, very successful line.

Clear focus on lightweight that TUMI has been needing and waiting for it, very well received by consumers and more to come, is what I would say as we go into next year. And then just lastly, TUMI's Icons Tested” campaign as we talked about the icon of TUMI and what it means to travel with the TUMI that fits the true definition of performance and luxury, how it comes together.

This we launched in September. We've already had 56 million impressions off of a campaign that I think has been well received, both focused on men's, non-travel, women's non-travel and talks about the true DNA of what TUMI is all about when you think about performance luxury. So we're quite excited and more to come on the TUMI's journey as well. We've opened some amazing stores for TUMI around the world.

I just wanted to give you a few of these. South Coast Plaza in California, just a tremendous store. I think we talked about the TUMI store in Shanghai, this flagship location in the bottom left. That's been a tremendous success, really distinctive TUMI. When you get into that store, you feel the brand in a meaningful way. Chengdu, China. So when you see China moving and the types of stores that we're opening within this region, really amazing in Beijing, China as well.

This speaks about the power of this direct-to-consumer model and the strength of the brand as we show up not just -- on digitally, not just with amazing product, but on a footprint that consumers really embrace kind of what the brand is all about. So with that, I will hand over to Reza and I'll come back with outlook right at the end.

Thank you very much, Kyle. We're on Slide 18, just looking at the overall results, and some of this Kyle has covered, but just to go through it. Overall, Q3, we're reporting sales that are down 1.3%, a meaningful improvement from the first half. The first half, as you'll recall, was down 5.2%. So we are seeing that sequential improvement that we had indicated on our last call. Very importantly, this gross margin improvement, not only are we maintaining gross margins despite the tariff headwinds, but we're actually 30 basis points better year-over-year.

And as you'll recall, gross margin last year was running at record levels for most of the year. So we're very, very pleased with what we've been able to do on the gross margin front. Adjusted EBITDA, obviously, the sales have been down, and therefore, that's working its way into the adjusted EBITDA numbers. So we're reporting $143 million of adjusted EBITDA in the quarter. If you're looking at the margin levels, we have had 43 net new stores that have come in year-over-year.

So that obviously has a cost implication that works its way into that margin. So the margin has been impacted between the sales being lower. We have some incremental stores that have some SG&A associated with it. And so we're looking at 16.3% from an adjusted EBITDA margin for the quarter. And adjusted net income at $64 million as well, just looking at the total flow-through of that. Again, I think the important point on the sales is the last 3 months have been positive, and we're feeling pretty good about where the business stands right now.

On Slide 19, just to give you a sense in terms of how everything is performing by region. Net sales did improve sequentially in every region since the last quarter. So as we mentioned, we had a North America business that has been under strain, but even that is looking better quarter-over-quarter. Just to go through the numbers. Asia has had a meaningful improvement, so roughly flat in Q3. And as you can see, the first half of the year, Q1 Asia was down 7%, Q2 was down 7.6%, and we're looking at about 30 basis points down for Q3.

So a meaningful improvement, largely on the back of TUMI as well, although all brands are performing. North America down 4.5%. Obviously, as Kyle mentioned, the wholesale customers from the Samsonite brand impacting that number and that consumer sentiment point that we have been talking about earlier in the year continuing a little bit. Europe returning to positive. We're feeling pretty good about the Europe business, although the travel statistics and the inbound tourists are a little bit lower than what we've expected in the past few years.

Reporting Europe up about 1% in Q3 and Latin America up 1.2% in the quarter. Largely, if we didn't have -- you'll see it on a subsequent slide, if Mexico weren't caught up in some of these tariff issues and some consumer confidence and wholesale buying issues in Mexico, that would have been the normal double-digit growth that you would expect from Latin America in the quarter as well. On the next slide, we can get into it a little bit at a country level just to give you a sense in terms of the individual drivers. If I'm looking at net sales in North America, you should be aware that TUMI really had a good improvement quarter after quarter.

So TUMI was positive 3.3% in Q3 in North America as compared to down 3.3% in Q2. So that's a meaningful shift that we saw quarter after quarter. The Samsonite brand still under pressure in North America, but it is getting a little bit better, and it's largely drawn off of the cautious buying that we're seeing from our wholesale customers. Net sales in Asia, roughly flat, and we're seeing sequential improvement in net sales of TUMI. TUMI was up 7.1% in Q3 versus up 5.2% -- versus a 5.2% decrease in Q2. So very meaningful shift in terms of what we're seeing in the TUMI business in Asia off the back of the initiatives that Kyle outlined.

Strong growth of the brand in China, 10% growth in China in Q3 alone. So we feel very good about TUMI globally. Sequential improvement in net sales of Samsonite brand in Asia. So if you're looking at it quarter after quarter, Q2 Samsonite brand was down about 9%, Q3 down 4.3%. So getting a little bit better as we get enter the back half of the year. And then meaningfully, you saw the shift that we saw in American Tourister overall. That was -- a lot of it was due to Asia, but specifically India.

And so if you're looking at Q3, India improved 8.5% growth in Q3 from down 2.7% in Q2. So really meaningful improvement in terms of the sequential improvement that we saw in that market as well. Going on to the next slide, we can touch on Europe a little bit. Europe sales up about 1% in Q3 as compared to down about 1% in the previous quarter. Both Samsonite and TUMI are delivering positive net sales growth in that region. The specific markets where we've seen improvement, we've seen France and the U.K. help drive a lot of that sequential improvement.

But overall, most of the countries in Europe are performing relatively well. I would tell you that Germany has started to come back a little bit as well, but we were pleased, especially with these two specific markets in Europe. The net sales growth in Latin America improved 1.2% in the quarter. Again, I think this Mexico point is very important as you look at Latin America, excluding Mexico, it would have been up 13.2% in the quarter as compared to Q3 of 2024.

So Mexico is under pressure as we look at that Latin America market overall. On Slide 22, gross margin stability is really a key. It has been all year, but I think we're very proud of where we ended the quarter as well. So Q3 gross margin, 59.6%, 30 basis points higher than the 2024 number of 59.3%. Some of that is driven by mix effects. As we have said over the course of the year, the teams have been very disciplined in terms of maintaining the promotional activity and the cadence. Obviously, we're still trying to make sure that we don't miss on sales and pursuing that, but we have been very disciplined in terms of what we're looking at on the promotional side.

And really, the actions taken to mitigate tariffs have been tremendous. We've talked about this the last -- since the April tariffs on the last couple of calls, we've been talking about this, but you can actually see that with tariffs in full effect right now, if anything, we've actually improved our gross margin. So the mitigation efforts have been very successful. Those included partnering with our suppliers to manage the cost, reengineering product in the medium term to make sure that we hit those price points while making sure that we hit the business specific gross margin targets that we have for all the brands.

And we do anticipate being able to continue that going forward as well. On the next slide, just some of the other financial highlights that bear mentioning coming out of the quarter. We're on Slide 23. Overall, Q3 distribution and G&A expenses were $339 million. That's up 5.1% compared to last year. But bear in mind that we do have 43 net new company-owned stores over the past 12 months. So that's working way into the cost structure. Advertising spend, 6.1% of net sales in the quarter. So that was $53 million in total.

That's about $3 million lower than what we had last year. It's roughly about the same number. We do anticipate increasing advertising as we enter really next year, but you may see a little bit of an increase going into Q4 as well. We want to make sure that we're investing behind the brand, especially now that we have all of these really great product introductions coming in. We want to make sure that the marketing is supporting that as well. Operating profit of $139 million in the quarter, that compared to $133 million in the previous period in 2024.

Strong adjusted free cash flow, $64.7 million. So continuing to generate free cash flow. This business has always had a great track record of doing that. And then a net debt position of $1.2 billion. When we get to the balance sheet, I'll touch on the fact that we had this refinancing that we just announced last week as well, so we can get through that a little bit in terms of extending all of the maturities. That net debt position is after returning almost $300 million of capital to our shareholders as well, so $279 million in aggregate between our share buyback program last year as well as the dividend.

Our net leverage ratio was right around two turns, which is our long-term target for the company. And then liquidity at the end of the period, we were at $1.3 billion of liquidity. Post the refinancing that we did, that did improve a little bit as well. On Slide 24, the DTC sales mix, Kyle touched on this a little bit. Overall, if you're looking at it year-over-year, the wholesale is down about 2% as we increased our DTC mix.

So our DTC mix is now 42% in aggregate. If you're looking at it in terms of the component parts of it, our own e-commerce channels have grown to 11.8% of the total number of sales that compared to 10.5% last year. Our retail, our own store fleet is delivering -- is now about 30% of the mix of that as compared to 29.3%. I know we oftentimes get the question as to what is our store strategy. But what we usually say is that we're trying to keep that portion of the pie that comes from the retail fleet the same.

So it should be around 30% going forward. And most of the DTC growth going forward should come from e-commerce. The other point that I'll just raise is if you're looking at the breakdown of that wholesale pie, wholesale includes e-tailers for us. So it includes Amazon as well as Mercado Libre and the other etailers that you see around the globe. The portion of that 58% that comes from the e-tailers is now 9.2%, that's a full point better than where we were last year as well. So even that wholesale portion, you're seeing us push the e-commerce channels as well.

On Slide 25, looking at travel versus non-travel, Kyle just showed you where the huge opportunity is in terms of trying to expand our presence and stretching our brands into non-travel. Non-travel growth, if you're looking at it sequentially from last year versus this year, non-travel growth up 6.7%. So we have a meaningful investment in this category. So now non-travel represents 35.6% of our total sales. Just compared to last year, we were just shy of 33%. So that 6.7% growth is meaningful and an area that we're going to continue to invest in.

So just looking at it on a year-to-date basis on Slide 26. Obviously, as I mentioned, the first half was down 5.2%. Q1 was down 1.3%. That blends to we are just around down 3.9% year-to-date. Obviously, going to the back half of the year I am going into Q4, we're hoping that, that continues to improve as we get to the back end. Kyle will touch on that in his outlook.

Gross margin year-to-date remains very strong. Again, 59.3% year-to-date. And we do expect as Asia starts to grow back to its normal clip and TUMI, which is performing, that will also further help the gross margin story for us. Adjusted EBITDA is down $77 million year-over-year. That's largely due to the fact that the sales are obviously lower. And there's a little bit of gross margin that's declined year-to-date between last year versus this year.

And that's partially offset by a little bit of lower advertising as well. And year-to-date net income, $187 million as well. Looking at the balance sheet. Again, we have a very strong balance sheet. We feel very good about where we stand. Again, I have a specific slide dedicated to the refinancing, which is on the next one. But just on this slide, we are very well positioned to capitalize on long-term growth prospects.

We have significantly delevered coming out of COVID, but we have a lot of financial discipline, and we expect that deleveraging story to continue. Ample liquidity at $1.3 billion and net leverage stands just right around two turns of net leverage.

On Slide 28, I want to just spend a minute in terms of talking about this refinancing that we did. Basically, we refinanced all of the corporate debt that we had on the balance sheet at Samsonite. This is important because it was massively oversubscribed, showing the strength of our balance sheet overall and the interest in Samsonite. The importance is all of the debt maturities have now been extended. So our core pro rata facilities, our Term Loan A and revolving credit facility now have a maturity of 2030.

The Term Loan B has been set to a maturity of 2032, so going out 7 years. And our senior notes, the Eurobonds that we had talked on the last few calls that were coming due beginning of next year have now refinanced to 2033 as well. If you look at the component parts, we were able to actually reduce pricing on the pro rata facilities, the Term Loan A, the revolving credit facility by removing the CSA that was there.

So that's a 10 basis point improvement in pricing there. The Term Loan B, we were able to also reduce the margin on that by 25 basis points as well. So we're now at SOFR plus 175 basis points. Obviously, the bond markets are very different than where they were when Kyle initially executed the Eurobonds, but we still were very pleased with the outcome of 4.38% on that piece of debt as well. And you should be aware that we're also entering a number of swap transactions that should also help us in the near term in terms of managing the overall financing.

The net-net of all this is basically we've extended the maturities and the interest expense is about the same with where it was previously. And we did improve liquidity by another $40 million as well as a result of this. On Slide 29, just looking at CapEx. Again, I mentioned that we had 43 net new stores year-over-year. Again, we're very disciplined on how much CapEx we spent. Year-to-date, we're at $54 million of CapEx, which is a slight improvement over where we were last year.

Most of the CapEx goes into the retail fleet, as you can see, so $33.8 million of that is going into the stores. The breakdown of that is about $17 million is going into remodels, about $3 million into fixtures. And then new stores is about $13 million of CapEx. Again, very disciplined about how we're choosing to spend the additional CapEx that we have, but we are investing in stores because we believe in the opportunity there as well. I went through that very quickly to leave time for questions, but let me turn it over to Kyle for outlook, and then we'll open it up for questions.

Okay. Thanks, Reza. So -- and importantly, and I think you can sense it from my tone and what we've been delivering, we remain really confident on the long-term tailwinds that support our business. Although the current macroeconomic environment still is uncertain and there's plenty of inflationary pressures around the world that could weigh on consumer demand, particularly in the U.S., as you've heard from us, we expect to drive medium- and long-term sales growth really against very strong product launches, strong and elevating advertising campaigns, capitalizing growth in consumer demand for travel.

It continues. Travel is one of the areas that consumers continue to prioritize and seize again on the opportunities around non-travel underpenetrated geographies, and channels across our business. All of these things we're very focused on and continuing to invest behind.

With positive constant currency sales growth in the recent months, we expect some level of improvement in our constant currency net sales growth in Q4 relative to Q3. Q4 is expected to continue to benefit from global travel demand, strong product launches like Paralux, which really launched at the end of Q3 that's carrying into Q4 and this elevated advertising campaigns that you're seeing and feeling from us, not just on a product like Paralux but across our business.

I think that said, consumer demand remains challenging to predict. I think that hasn't really changed tremendously. And it's -- and we have a sequentially tougher period to comp in Q4 off a stronger demand that we felt at the end of last year. But early reads into Q4, particularly with a positive start with a strong October and strong momentum into holidays make me feel convinced you'll see sequential improvement in the quarter for us and as a business.

You can feel it in the messaging, the tone and just the recent trends that we've seen. We believe our scale advantages, supplier relationships, tariff mitigation efforts will continue to enable us to maintain a strong gross margin profile like we just delivered in Q3. And if you listen to how we talk about kind of the shifts of mix effect as we grow TUMI at a faster pace, as Asia gets back to delivering in normal course of growth that Asia is capable of delivering, this margin has strength behind it.

We've managed through the bumps of tariffs perfectly, and there's opportunities for this to continue to expand in the medium and long term from a mix perspective. We continue to leverage this asset-light business model, as Reza just talked about when we look at the balance sheet and our ability to return cash to shareholders, deleverage our balance sheet on a go-forward basis.

And as Reza just went through, and we successfully just reset and optimized our corporate debt structure, something that was significantly oversubscribed when we went to market, which delivered a great result that provides kind of stable balance sheet and stable liquidity for this business as we look forward to the next 5 years.

And lastly, we continue to prep -- I would say, we're well prepared for dual listing in the U.S. We've been closely monitoring global economic backdrop and our own trading conditions, and we are encouraged with recent results, improvements in our trends in our own business. The Board and I firmly believe and the management team believe that dual listings in the right -- is the right thing for this company and to enhance shareholder value over time.

And we're sitting in a ready position to do that. And we intend to complete this dual listing in 2026, considering the constructive environment that we're seeing. So with that, William, we'll open up to questions.

Thank you, Kyle. Thank you, Reza. Operator, we can go into Q&A now. Thank you very much.

[Operator Instructions]. We are now going to proceed with our first question. And the questions come from the line of Erwan Rambourg from HSBC.

I wanted to thank Reza. I don't know if I will speak to you again, I mean, hopefully, in the future, but just wanted to say thanks for everything and best of luck.

Three questions, if I can. I think you make a good case in terms of correlation between travel trends and sales having broken down post COVID and more recently, with a bit of a digesting period. When do you think you can reconnect to growth that would be similar or maybe even slightly above the growth of travel? Is that as early as next year, you think? So that's the first question.

The second question is around, I think Reza mentioned the ad spend ratio should maybe pick up a bit in Q4 and into '26 to support the comeback of the business. Where do you see that ad spend ratio more sustainably?

And then last question. I think, Kyle, you said that you were confident that Q4 could show sequential improvement despite the world not being that easy. Where do you see that improvement coming from, whether it's region or brand sequentially?

Okay. Thanks, Erwan, and thanks for the call out on Reza. I might just make a statement because others might have a thought on Reza as well. Reza and I have been together for 7 years doing some amazing stuff with this company, so I can't thank Reza enough as well. We're in a good position as a business. We've transformed a lot, particularly through COVID and positioned it well.

But we're well placed on the finance side. Reza has got an amazing team around him. That we won't miss a beat. We'll obviously start a search on that, and we'll be thoughtful, just like I was thoughtful when I brought Reza into the fold with me 7 years ago. But we're well placed. The team's well trenched the finance team super solid.

As you can tell, I'm laser-focused on delivering growth in the business and driving strategy and nothing changes in that arena. This business is well rooted with deep teams around us, but I agree and thanking Reza. I haven't quite congratulated him on that because I'm slightly annoyed with him -- I'm just ready. But that's -- but that's normal, but we've done some great stuff together -- we spent a lot of time together. So thank you.

On the returning to travel trends, I think we're -- as I said, I feel like we're in this inflection point right now off of the back of what we've seen from kind of surge in travel and the dip that we felt off the back of that and consumer sentiment. But we're seeing some good trends right now as we're looking at the months fall. I think we're not too levels that are normal for us. But I have an indication and inkling that next year will look more normalized for us from a growth perspective, and I think start to really show that correlation.

If you go back 15 years and see how perfectly correlated we are and our ability to actually outgrow the industry. And I think we start to trend into that as we get into next year, particularly as we get into Q2 as we're comping kind of a different period. And momentum feels good as we're going into holiday.

I think the Q4 kind of trend that you asked as your third question, I think we generally see it kind of across the mix. The only market that I would say, continues to be challenged and largely because -- it's a meaningful wholesale business in North America, where we see very good sell-through. We're looking at sell-throughs of our October numbers of our month of October and month to date September sell-throughs that are quite high, quite surprising, actually. It speaks to consumers moving consumers moving ahead of holiday. We can see that in our November, Decembers.

So I think you'll see sequential improvement across all of our business, just like you saw in Q3, you'll continue to see that across each of our brands. I expect Samsonite maybe to improve at a faster clip. That was kind of at a different point in Q3 than maybe what you saw in TUMI and American Tourister, but I expect that to kind of catch up. And we're seeing generally growth across all of our regions and some consistent improving trend way, which speaks to me, and it helps support kind of my comment on the front.

We're really at this inflection point where everything is kind of reshifting and correlating back to the trends that we typically see in our industry. From an ad spend perspective, I just want to make sure we interpret right. I think we're -- we've been leaning into advertising. But Q4 from a percentage basis, will probably look like what we've been doing roughly year-to-date, maybe even as a percentage, just a bit lower.

But overall, we're in and pushing. And so for the full year, we'll probably be just shy of 6%. I think the natural place for this business, and we've talked about this before, is somewhere around 6.5%. And I think as we really continue to build momentum, don't put it past us to push it forward. But if you're thinking next year, I think we bring it up to kind of what the normal trends are for us that I think is the right levels if we're really driving new consumers to the business.

And excitement to the business, really effective efficient spend, but probably in that mid-6% range is the natural place to be.

We are now going to proceed with our next question. And our next question comes from the line of Chris Gao from CLSA.

So I have three questions. So firstly, is regarding the China trend. So we have been seeing very exciting sequential recovery of TUMI brand Samsonite brand, which is also similar with some of the luxury brand data points that have been reflecting a recovery in China. So the first question is how do you see the sustainability of China's -- China markets recovery in the next few quarters? And also for the TUMI brands recovering, which reached 10% in the third quarter, how much is coming from retail space expansion and how much is coming from the same-store sales.

And also -- the second question is also related with China, it is about the latest update. So how do you see the Double 11 trends in China right now? And also regarding recent China recoveries consumer profile, do you see the recovery is more boosted by the existing customers coming back? Or it is mainly coming from your new customers' recruitment? So this is the second question.

And the third question is regarding the cash deployment. Since we have been seeing Samsonite adding on liquidity after the refinancing of senior notes and credit facilities, and recall that last year, Samsonite has launched a tranche of buyback. Is this something that we'll continue to consider going forward? And also dividend side have been continuously improving the dividend payment in the past 2 years. So do you also consider any dividend payout ratio increase? So these are the three of my questions.

Why don't I start with the China stuff and then Kyle, -- China -- you can take it from there.

Yes.

So overall, as you can tell, we definitely are seeing a shift in China. Again, this year, China compared to last year, we felt pretty good about it, but the first half of the year was a little bit slow. So when you were looking at China, so Q2, China was down about 6%. And China now, we're still a little bit down, but we're approaching flat in Q2 or it's down about 2% right now. But we are anticipating Q4 and we can already see the early reads of it. Obviously, we've seen a little bit of Double 11 already.

We've already seen October as well. We're firmly in positive territory right now with China. It is all brands, but I will be honest, TUMI has really outperformed. So you saw the 10% number that we just shared. To answer your question about where it's coming from, actually, you'll be surprised -- maybe you'll be surprised to hear this. If you're looking at TUMI overall, the total number of net new stores year-to-date in all of Asia is actually 0.

So all of it is -- now there are obviously certain locations where you exit and you add another one, and we're getting -- we're trying to get some larger square footage stores in the region. But this is really just -- so it's not through additional store expansion. It's actually coming from the existing store footprint as well as those new locations really delivering. In terms of who the customers are, it's a mix. So we do -- especially for brand TUMI, we do have some greater data in terms of being able to get some loyalty information from those customers.

So you are seeing existing customers come back, but we are also seeing new customers being introduced to the brand as well, especially in China, making some really meaningful investments in advertising and brand behind some local influencers has helped us in that regard. Obviously, the new product introductions have been great. You've been with us for a while, so you'll recall that last year, we were talking about one of the initiatives we had was around 19-degree light. So trying to make sure that we have a lightweight product that really resonates with that international consumer.

Those are the kinds of things that we've been doing to make sure that we can address the product needs, but also investing behind it with real brand advertising as well. So overall, again, I think we feel very good about our China business at a macro level across all the brands, but TUMI has been disproportionately doing well, as well.

Early reads on Double 11, we don't have the final numbers in yet, early reads have been very positive. We've been pleasantly surprised in certain cases, candidly, in terms of how well it's gone. So I think that should work its way into the Q4 numbers as well.

Let me see what the other question you had -- the new customer -- cash distribution. So what we've said is the dividend policy, we generally look at about a 40% payout ratio, you should expect us to do that. That's about $150 million in terms of cash use. So expect that going forward.

Nothing has changed in terms of our approach with share repurchase. We're opportunistic around it. As you migrate to a U.S. listing, we are mindful that we have certain shareholders where from a tax perspective, it's much more efficient to return capital to them via share repurchase as opposed to dividends. So we will revisit that with the Board. But actively right now, we've completed the $200 million that we were out to do that we're holding those shares in treasury.

We'll decide what to do with that at the time of the listing. And then going into next year, we'll decide whether we will look at that opportunistically as well. It will probably end up being some sort of mix between the dividend and share repurchase, but that hasn't been determined yet for next year.

Cash flow for the business remains tremendously strong. This kind of asset-light model that we talked about continues to deliver and to our ability to have some share buyback opportunistically pay dividend and continue to deleverage the balance sheet is something that we're very capable of doing. Even in a year where we're maybe trending down low single digit for the full year.

The business generates a tremendous amount of cash flow. So all of that will stay in place.

Okay. Can I follow up with one question. That is about the pricing. So the background of tourists -- can we ask about the magnitude of price increase in U.S. for the third quarter and also help it to trend in the next few quarters? And also, if there could be any price increase in other regions, could you please also update us as well?

Yes. We haven't disclosed the level of price increases in the U.S. market. What we've said is it's been a combination between price increases, working with our suppliers. The other thing you should bear in mind as it relates to tariffs, a large portion of the landed cost of the product in the U.S. is freight, which has actually been working in our favor. So through a combination of those three, actually, it's more than that, but largely those we've mitigated it.

The other point that I'll just raise is usually buy luggage every probably 3 years or so, it's not a regular good that you're regularly seeing what the price is. So the end consumer -- the actual price increases are really going to have a negligible impact. So it's not going to be like there's a sticker shock that my $200 carry on all of a sudden is $500.

And we're constantly redesigning product and reengineering products. So it becomes kind of a neutral story when you think about a period of 2 or 3 years because we're able to reengineer a lot of what we've been doing and a lot of what you've seen in markets like Asia and China where the consumer is doing a little bit of trade down, but within brand, we're able to reposition products to hit price points that deliver margin. And that's really what drives our business.

So this is a business that you just kind of tack on price increase and off you go. This is around reengineering constantly to hit the right margins, to hit the value that consumers are looking for in the products. And there are no pending pricing. Most of everything we did on tariffs was done as we exited Q2 because we had full visibility to it. So there's nothing from a price increase perspective kind of baked in our business for Q4. And next year will be just a function of normal course if there are some on a normal course basis.

We are now going to proceed with our next question. And the questions come from the line of Anne Ling from Jefferies.

Just a couple of questions. First, regarding the margin, like I understand that in terms of having a stronger growth from TUMI, which is the higher-margin business and also more retail. So we have a pretty good GP margin. But I think we also have some store expense. So therefore, like our -- we have some pressure in terms of our OpEx on top of like -- top line growth was slightly negative.

So my question will be like moving forward, when will we start to see like same-store sales growth start to have positive operating leverage. Maybe you can share with us some guidance in terms of like what we should be looking at in terms of the adjusted EBITDA margin. When will we be going back to the high teens level that you think that you previously mentioned. That's my first question.

And my second question is on year 2026. Any like initial feel about like -- should we be going back to the mid-single-digit top line growth trajectory from that on?

Why don't I start with the margin point. If you look at it on a percentage level, if you're just looking at our cost structure and always -- keep in mind, every time we talk about EBITDA margins, we should always look at advertising and then the rest of the cost structure as well because advertising is a lever that we move up and down, and we just finished saying that as you're entering next year, you should expect us to be increasing the advertising point as well.

So if there's an increase that's coming as a result of sales rebounding, we will reinvest some of that behind advertising in the brand. But generally speaking, if you're looking at the -- so we had about a little over 40 stores, so 43 net new stores on an LTM basis that are adding a little bit to the cost structure. During that period of time, revenues have been down. So naturally, there's a deleveraging that's happening. You have some increased costs from new stores coming in. There's also just the normal wage increases, rent inflation and things like that, that you're looking at.

If you're looking at it just in terms of the percentage increase, even including those stores, you're up about 4% or 5%. I think it's like 4.8%, if I remember correctly or thereabouts year-over-year. So it's not like something that's really out of whack. Usually, what happens is as soon as you return to sales growth and even just a couple of points of sales growth, you start to see the operating leverage come back.

But again, you have to look at that in terms of at what point do we start to reinvest in advertising and increase that by whether it's 0.5% or thereabouts. So we haven't given guidance next year as yet for -- in terms of where we're going to be on sales or margins. We typically do that off of the year-end numbers in our normal course. So you should expect from March. What I will say is just the general trends, that Kyle said in his remarks, the trends are very favorable going into next year. We do feel good about two really big things.

There's the overall macro level points in terms of what you expect travel to do, and Erwan asked the same question as well. And we're seeing that we are -- now that we've come out of that revenge travel kind of pull forward of demand that, that correlation is coming back again. So you have just the normal trends of the industry that are happening.

But don't underestimate the fact that we are entering into a replacement cycle for next year as well. So you're coming up on that 3-year, 4-year period that where a lot of bag replacement happened post-COVID, and it's that natural replacement cycle should benefit us as well. So I think the combination of those two make us feel pretty good about going into 2026. But I think you should just expect formal guidance when we finish out the year.

And I think for '25 our Q4, you guys know our Q4 is often our strongest EBITDA margin quarter for us, and that still looks the same for us as well. So if you look at our year-to-date EBITDA margin, that will step up for the full year off the back of what typically very good EBITDA margin in Q4 that we can see will be delivering.

So it gives you a good sense for it. And I think just to close the loop by, as we talk about advertising, I think Erwan asked the question. we are planning on leaning in to push advertising, which will do the same as driving sales.

It will really allow kind of a lot of our brand and growth strategies to really accelerate for us. But that comes with kind of the short-term meaning on the overall margin as we lead into advertising. And so we should expect that a bit from us as well. But I think it's exactly the right thing to do as the business starts to move.

And as I think I said during Erwan's question we start to get into some normal correlation to travel for next year is how we're feeling, but as we look with a slightly easier comp, which will also help next year as well.

Thanks, everybody. We really appreciate the call. Any questions, you know how to get a hold of William and Alvin. And we'll be out and about meeting people as well over the next few weeks.

Great. Thank you very much, Kyle. Thank you very much, Reza. Thank you very much, everyone, for joining the call.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.