Thule Group AB

STO:THULE

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, welcome to the Thule Group 2020 Year-End Results Call. My name is Abby, and I'll be coordinating your call today. [Operator Instructions]I will now hand over to our host, Magnus Welander, CEO. Please go ahead, Magnus.

[Magnus Welander, CEO & President]

Thank you, Abby. Good morning, everybody, and welcome to the year-end report for 2020. And what a weird year 2020 has been. So if we turn to the first slide of the presentation and look a little bit on the fourth quarter results, of course, the fourth quarter then sums up a fantastic second half of the year. When we looked at the third quarter report, we told you that we were expecting a season pickup to come and actually even slip into the fourth quarter, and that was exactly what happened. So for the fourth quarter, we reported a 45% currency adjusted growth. And it was very similar in the 2 regions with Region Americas growing 48% and Region Europe and Rest of World growing 43%. So a very strong result. As we said many times, we are very convinced about our capability of when we see top line growth, we have a very slim and still very much scale in our business operations in the back end and that economies of scale really was helping us to achieve a strong EBIT margin in what normally is a small quarter, meaning that we delivered an EBIT margin in the quarter of 15% compared to the close to 6% that we normally would have in this period. Strong cash flow also from the strong sales in Q3, and that meant that overall, we delivered a very strong result.Based on that strong result, there is also a Board proposal for a dividend. That then means that the dividend we will present to the AGM is built on 2 parts. In practice, you could say, we then pass on the dividend that was planned for 2019 as an extraordinary dividend in 2020 instead. And we, on top of that, increased the ordinary dividend to SEK 8. So in total, that means a SEK 15.50 dividend in the year. If we turn to the next page and look a little bit on some key things that have happened in the last few months. I'm extremely proud of the fact that although it wasn't to the big hoopla you would normally do when you inaugurate a building where you've invested SEK 100 million, which is what we've done in our new R&D center, it was mostly myself and the Head of Global Product Development, Karl-Johan Magnusson, that walked around there, but I'm still very positive about the fact of having opened that building. That building is a piece of the big puzzle of a continued strong focus on making sure that we continue to have the best product in the market. Because product is king in this company, and we will continue to develop a great product. In 2020, we spent 5.1% of sales on product development. And as you know, that means that it was a decrease versus the 6% we had previous year. The logic for that is, of course, a fantastic top line growth for the full year of 13% and also the fact that we did not push as hard on some of the planned luggage projects. In general, we will still travel slightly above 5% in the coming years, as previously indicated. The great new facility that is open now will enable us to even more efficiently bring out more products to come. And what is also very positive to note is that after Board approval in December, we've already kicked off the building works of a further expansion of our world-leading Thule Test Center. In that test center, we will expand with more testing equipment, more space and some new areas for testing for future product categories. And that test center expansion will be opened early Q2 in 2022. So a big continued effort there. And those new developments bring loads of great new products out there. In 2021, we will be bringing several new bike carrier models, several new Packs, Bags & Luggage, updating on refreshed strollers and bike trailers for our kids. But also, what is nice to see in our recently entered category, rooftop tents, that our brand-new Thule Tepui Foothill tent will come to market in spring. And it's already won the prestigious ISPO Gold Award as a innovative way of ensuring that you can't only sleep on the car, you can also bring the gear with you at the same time. So continuing success will be key, and I'm confident of that in product development.If we look at the full year on next page of the presentation, because I think it's easy to get focusing too much on specific quarters, and we said already in after a weaker Q2, that we expected the year to see a very strong second half when the season, that normally is the spring and early summer, became a summer, early autumn and even into late autumn season. So it's more important to look at the full year. For the full year, we delivered a 13% currency adjusted top line growth and a 27% EBIT growth. And what that means is I'm very happy to say that once again, as a company, we have proven that we don't only set targets, we actually achieve our targets, because that means that we have now for 2020 an EBIT margin of 20.3%. So better than the target that we set in the Capital Markets Day in 2017. If I now then -- I know that a lot of you will be keen to know what is the next financial targets, especially as the 15% target was reached in 2015, the 17% target was reached in 2017 and the 20% target in 2020. I'm sure some analysts are very optimistically waiting for the next target. I can tell you that we're not doing any financial target setting at this time, but that we will, later on in this year, early next year, come back at a Capital Markets Day talking more about our financial targets as a whole and then, of course, talking more about the business as well, which is even more interesting. If we go to the next page, I'm presenting the quarterly sales in -- through past years. And the reason I'm doing that is to ensure that we don't get carried away on comparative numbers. Because the reality is, of course, that when we will look at 2021, due to the exceptional 2020, we will start the year well in comparability versus previous year. I have no doubt that we will have a strong first half of the year. We should because 2020 was very weak due to the pandemic lockdowns.So subject to that we do not see the same type of aggressive lockdown measures, which I do not believe, we will be seeing a strong performance versus the very weak 2020. But then in the second half of the year, we will, of course, be exposed to some very, very tough comps because the season was weird and it was compressed in a different period than normally consumers would buy our product. So the reality is, when we are looking at our business for '21, we are expecting: one, that the seasonality will be more normal, meaning much more Q2, much less Q3, Q4; but also that it might even be slightly more pushed that way into Q2 due to that some retailers missed out a little bit on opportunities early in the summer as the business started coming back.I think we did, as a company, a fantastic job being able to do 52% more business in Q3 and 45% in Q4. But still, there were retailers that would have liked to sell even more but were caught off-guard on the demand. Some of those retailers most likely will, therefore, try to anticipate believing, as we do, that the trend will continue with staycation and biking business going on also in '21. So if anything, there might be slightly even bigger skew than historically to the second quarter and late first quarter. If we look at the results by the regions on next page, you can see that I'm also very happy to be able to say that both regions fared very well in the year and in the quarter. So for a full year, we saw a 10% currency adjusted growth in the Americas region, and we saw a 14% currency adjusted growth in Europe and Rest of World. I'm not going to go into the details about the product categories because we're dealing with that in the coming pages.But what it's nice to be able to say is that this growth isn't just from a regional perspective, there are very few markets where we didn't grow. There are some Latin American countries where we struggled due to both the setup of the distributor setup in a COVID reality with concerns in the market, makes the distributors more cautious, makes them sell down their stock before they order from us, plus that some of the Latin American markets have been more depressed from their economic and financial situation. But aside from that, we generally grow globally around the world in most of the markets, which is very promising. If we go and look at the next page and look what it has meant in terms of which brands we sell in, the journey that we have been passing through for the last years continues. The Thule brand is truly successful, one, by us broadening ourselves into new categories, but also, of course, thanks to the fact that we're growing in the categories where the Thule brand is the undisputed market leader for more than 25 years.So within Sport&Cargo Carriers, we grow very fast. And on top of that, we're adding successfully Thule into new arenas like the multisport and jogging strollers and bike trailers, et cetera. So that meant that in 2020, the Thule brand stood for 86% of our sales. The tough market for the Packs, Bags & Luggage sector meant that the second biggest brand, the Case Logic brand, now represents 4% of sales. And in total, the smaller brands of the Thule Group represented 6%. And also that the private label sales and OEM sales to the large manufacturers of motor homes as well as cars remained actually flat, and that meant, as a percentage of sales, they declined.So it is Thule brand that is dominating. And the Thule brand is constantly being strengthened by the fantastic job that our marketing team is doing and by the breadth of what the sales teams are able to open new doors and new opportunities to meet consumers in different ways, but in the end, mostly because the products are brilliant. If we go to the next page and look a little bit on how we have fared in the different product categories, I would love to say that it was all green. I have told people that many times, you cannot be fully satisfied until you show green numbers on everything. And unfortunately, you realize that with what has been going on in the travel sector and what has been going on with people working from home, university students studying from home, it has meant, and I'm sure you've read that, tremendous challenges for anybody in the Packs, Bags & Luggage arena. So let's start there where we did not see growth. We declined 21%, quite evenly between the 2 regions as a share of development.And if you look at that, that I am sure when you will compare to bigger luggage players when their quarterly reports come out, you will be positively surprised how much better than many others we are faring. And that is, of course, that we have a less exposure being a new player in the luggage business. Players that are doing most of their volumes in cabin, at the trolleys and suitcases will see much, much worse numbers. So far, most of them had indicated sales drops of around 70%. But also, in what we do very well, which is smaller laptop backpacks, laptop bags and sleeves, there's been challenges because, as I mentioned, when students don't go back to university, they don't buy a cool new backpack. When office workers do work from home, they don't buy the new laptop bag. So there has been clearly some decline in those sales. We have won some additional contracts, but retail stores have been very closed. We also do a lot of sports-specific and tech bags. And in sports specific, we do a bike transport cases when somebody flies with their bike. We do ski roller bags, et cetera, when somebody flies with their skis. Those categories have also been exposed to the drastically reduced sales. While other categories, like smaller hiking packs and bike [ near ] bags, have done very well in the period. If we look at the other end of the scale of where we truly outperformed, it is within the Active with Kids category with 37% growth. So that is a fantastic result on a global scale; and in Region Americas, even more so with 57% growth for the year; 33% in Europe and Rest of World is not to be underestimated either. And what we're seeing here is a tremendous performance across the world in all the categories. In RV Products, we grew 9%; and in Sport&Cargo Carriers, 17%. So let's turn to the next page and look at Sport&Cargo Carriers in a little bit more detail. If you look at what we're talking about here, in a category which many times I've got the question and there's been analysts and others that have said, this must be very dependent on car sales, I think we can now this year kill that myth because, as you all know, car sales have been dramatically down, while we show the biggest growth ever since I joined the company with 17%. In Europe and Rest of World, we grew 18%; in Region Americas, 13%.And the drivers have been clearly bike racks. And we know, and as you've read and you've seen about all the bike sales and bikes selling out, that, of course, has helped us. But we also need to remember, we've been doing very well with bike rack sales for many years before, driven by the trend that e-bikes are heavier and, therefore, more difficult to transport. They're also more expensive. So somebody who has bought an e-bike and wants to bring it with them has a much higher likelihood to levitate towards the best brand even if that product is more expensive because compared to the high price you pay for the bike, it doesn't stand out so much. And honestly, we're also the brand in a recent study done by the German test institute and communicated in German media, there were many other brands that simply failed in their tests of carrying those heavier e-bikes, while our products succeeded as a test. So the e-bike trend is helping us. The increased sales of bike is, of course, helping us, and that is a strong driver. We had a very strong second half of the year of roof racks after a very tough first half. And I feel that, that growth in the year is a great sign of what we have been able to do in how we have offered our new roof rack generation. In the box business and the roof box business, we see differences between the 2 regions with actually in roof boxes, the North American market performing better. And the main reason for that is that although you also, in the North American market, see some of the ski resorts with limitations and less people and partial closedowns, the big aggressive closedowns at the very end of this ski season in the spring of 2020 and the even more so aggressive ones now entering into the winter season in the Alps region does hurt the roof box sales in this period.Obviously, rooftop tents was a success. I could -- wish I could say that I had forecasted that I knew that this would be. We were a little bit lucky in the timing of going into rooftop tents because what has happened, of course, with people wanting to travel in their personal bubble, this was a brilliant way of doing it. There was an underlying strong trend, we jumped on that and, of course, that trend has got some boost. So we have performed very well in rooftop tents. For '21, it is really a slightly boring, it might seem, a matter. It's just doing the same, but even more. We will continue to build on our core strength. We have proven in the way we could handle rapid decline of demand in the spring and extreme ramp-up in the autumn, and we are better than any of our competitors in terms of having a flexible supply chain with own plants close to the main markets. And in a season like this one that we see ahead of us, it will be extremely difficult for anybody, including us, to truly forecast what will go on. There will be limited lockdowns in certain countries. There will be wavering situations and peaks and troughs coming. Somebody like us that are close to the market have the capabilities and have the financial strengths to handle that will do better. So I feel very good about that. We also, and not due to COVID, but because of earlier decisions long before, already had planned and are bringing to market in 2021 several new bike-related products, one among them being a new trunk-mounted bike carrier range in 2 models, but also 2 new roof-mounted bike carrier models and some new towbar-mounted for the North American market, so -- or hitch-mounted as it's called there. So a fantastic new portfolio, on top of the already award-winning towbar-mounted bike carrier portfolio we have. In roof racks, we continue to use our market-leading portfolio and the new fresh generation of racks we have. In boxes, we will try to capture what we believe will be a strong staycation trend in the summer. There will be challenges in the beginning of the year in the alp countries because there will be less ski travels and, therefore, people going less to those resorts. In some markets, we believe it will be strong still, like the Nordics and others, where people are expected to still drive up and maybe do more cross-country and other things when they're at their ski cabins. But in the pure alp countries, there will be clearly a challenging start of the year. And of course, in rooftop tents, you saw a cool new rooftop tent. But in general, we will, with the products we have, continue to see growth with that staycation trend. If we look at the next category, RV Products, this is, of course, a category that has -- there are several stock-listed companies that presents and talk about that category. You have the French Trigano. You have the big U.S. Thor Industries. You have the Swedish Dometic. And if you look at it, it all depends on a bit where you stand in the supply chain in how you talk about the business. We've mentioned many times that most of our products are easily assembled on the outside of vehicle, the dominant of what we do. That means that we have a higher share of sales to the dealerships. But we do have a significant share of sales, more than 40%, also to the manufacturers when they manufacture vehicles.What happened in 2020 was lockdowns closed down not only those RV manufacturers, but actually the suppliers of the chassis for a few months. So when consumers, especially in Central Europe, were very keen to have an RV to be able to do some vacation in the summer, there simply wasn't the capabilities of the manufacturers to come up with many new vehicles. That meant a very good for the long-term cleanup of older vehicles that have been standing a few years at the various dealerships. Many of those dealerships have already in attempts to try to sell off the old vehicles, equip them with many Thule products, et cetera, to try to get them more interesting. So that meant that we saw in some markets more sell-out of existing vehicles that were working with Thule products and not as much the push with the new ones coming. As we saw in the second half of the year, more or less from September, a very rapid ramp-up on that very complex supply chain because the R&D manufacturers really are similar to what you've been hearing from the truck industry and car industry. It took some while to get their very complex supply chains up and running. But once they started doing that from September onwards, we had a fantastic Q4. And that was the reason why we ended the year with 7% growth in the main region we do business, which is Europe and Rest of World. You then see a very high number, 73%, from a very, very low base on those niche products we do for the U.S. markets, which are mostly van-related products. When I, therefore, look at 2021, and this is the category where we have the longest order book because, as I mentioned, a big chunk of the business does go to the manufacturers, we know that there will be a very good start to the year as long as there is not new lockdowns in those various plants that are making the vehicles. There is a very good order book because now those manufacturers are wanting to fill up those dealership loss where there was a cleanup due to inability to deliver last year. So that will be continuing. And I feel very good about how we will be able, as we have done once again in 2020, capture market share. The team based on [ Maine ] and in Belgium has done a fantastic job in how they worked closely, both with the main dealership channel, but also with the main manufacturers in ensuring that our market-leading, award-winning products are the ones that are chosen for those vehicles. If we go to the fastest-growing category, as I mentioned, Active with Kids, on the next page, it's clear that we were helped by the fact that 2 out of the 3 subcategories are related to using a bike. It is bike trailers and it is bike seats. And they were clearly, in different ways, as I've already mentioned when we did the Q3 summary, helped by the bike. The one that was helped the most was that less costly bike seat, around EUR 100, because when many of those consumers went out and rushed out to buy a cheaper bike, they didn't all of a sudden spend too much money, so to speak, in their world of maybe EUR 1,000 to EUR 1,200 on a fantastic bike trailer because they were not into the biking. They were not sure they would bike for many years to come with their children.That trend was there anyway. We have been for the last few years growing very strongly with bike trailers. And we grew with our bike trailers also this year, mostly driven by a long ongoing e-bike trend and more people using bike to commute. Child bike seats specifically got a big boost, thanks to more bikes being sold.So -- and I'm very happy to say that we did a very strong results also in the growing stroller category. Of course, one reason being that we now have 3 models. We're starting to be a more complete player because we did launch the third new model to the spring -- in the spring. Not a brilliant year to launch a stroller when everybody is in pandemic mode and stores are closed, but still, it did well and it picked up as the year went. What's also important for strollers, many times I mentioned during 2019 my surprise that our main competitor and actually the market-leading brand for jogging strollers in the U.S. had an extremely aggressive cost-reduction rebating scheme going for the full year, which meant that we actually lost market share in '19. As they finally decided to be realistic about pricing and came with a price back to the old level, we regained that market share, which is one of the main reasons why we now see a 57% growth in Region Americas.I am convinced that we will continue to take market share. We have a broadened offer. We have a broadened distribution that is growing every day. And we have rebounded and rejigged all the products with cool new colors, small extra new features and a general improvement. We're also leaning forward in terms of having availability. We are definitely very ambitiously looking at being able to serve the demand as we are convinced it will come during the spring in these categories. So feel very good about the Active with Kids category. If we then look at the challenged category of Packs, Bags & Luggage, as I mentioned, it's obvious that it was the one hurt clearly by the pandemic. And it's also obvious that you will see some abysmal results from many players in the Packs, Bags & Luggage. We need to be realistic about how quick the travel world will recuperate. You see a lot of different data. Many people are planning that it will take until 2025 until travel is back to the 2019 level. I think you have to be realistic to say there will be 2 types. There will be the people that are so desperate to go in any trip when they're finally allowed to so that a lot of vacationing trips might be picking up. But that will still be compared to people traveling several times a year for some vacation.And more importantly, in terms of a cabin carry-on luggage, I think we have to be realistic, looking only at myself, that there will be less business travel than there's been in the past, which means it will be a quite depressed market. The only good with that is we're going to compare with a pretty depressed 2020 already. And the other good thing is that we still believe in the long term of the market because we are actually a tiny player in it. So we can still take share even it will be a depressed market. And we have both the financial strength, the brand and the product offer to be able to do that. But we have to be realistic that it will be a quite challenged category also for '21. So with all of that and that information a bit more about the products, I leave it over to Jonas to talk about a little bit more about the financials. Over to you, Jonas.

[Jonas Lindqvist, Chief Financial Officer]

Thanks, Magnus. We are now on Slide 13. As Magnus mentioned, we have had another very good quarter as the fourth quarter is quite exceptional because the seasonality for the Thule business usually leads to the fourth quarter, which is a small quarter, has an EBIT margin of about 5% to 6%, whereas we now, as you can see, have 15% in the fourth quarter of 2020. The main reason for the high EBIT in the quarter is, of course, a quarter with very high sales. The gross margin reached 40% in the quarter compared to 38% in the same quarter last year. The high volumes, as I said, and also a favorable product mix are the main reasons for the high EBIT. There is not much difference on the SG&A costs. The finance net increased to a net cost of SEK 18 million in the quarter compared with SEK 14 million last year in the same quarter. And the difference lies in revaluations of the cash pool now that the Swedish krona has strengthened. The interest cost has gone down since we utilized our bank facilities less than last year, much of it, of course, thanks to the fact that we did not pay dividends in 2020. The tax rate for the full year was 23.7%, which is well within our guidance of 22% to 25%. The tax in the fourth quarter was somewhat higher because we wrote down deferred tax assets in our bags business. But there is no cash flow effect from that. And now a few words about working capital and operational cash flow. If we turn to Slide 14 in the presentation, we see that the working capital has decreased to SEK 1,171 million by the end of the fourth quarter, which is SEK 100 million lower than at year-end last year. However, if we take the strengthening of the Swedish krona into account and compare using the same exchange rates as at year-end 2020, we will have to lower last year's working capital by about SEK 100 million. This means that the working capital at comparable exchange rates is on the same level as last year. Actually, this is quite satisfying as we've grown the business by 13% this year. We have had lower inventory than we would have wished for, for most of the second half of the year, and we are now building it up in preparation for the coming season. And the increase in inventory from last quarter, that is Q3 2020, is SEK 240 million. And this means that we are now back to last year's level going into the new season.Regarding operational cash flow, we have had a strong fourth quarter, mainly coming from profit and accounts receivables being paid. Accounts receivables were on a high level at the end of Q3, and this has more than offset the increase in stock that we've made during Q4. Finally, capital expenditure in the quarter was SEK 54 million, which is almost on the same level as last year's SEK 58 million.Thank you, Magnus.

[Magnus Welander, CEO & President]

Thank you, Jonas. If we then look at the financial targets on the next slide, it is, of course, very satisfying to be able to say that 13% growth is, of course, clearly higher than our organic growth target. 20.3% EBIT margin is higher than our ambitious 20% EBIT margin goal. And then we have the 2 other targets that we, of course, need to touch upon because it does look weird with a 0.2x leverage when you have a leverage target of 1.5 to 2.5x.And we also need to a little bit clarify that, yes, it looks -- superficially, it's like it's 138% of net income. But in reality, I think it's more fair to look at it as a 78% for the 2 years that have passed that we pay out as a dividend. And we already last year, ahead of proposing the SEK 7.50 share dividend that was then withheld, that was already stated that, that was the type of levels you could be expecting going forward, around that 80% mark.So the obvious question is that the net debt-to-EBITDA leverage target doesn't seem to make a lot of sense. And we have and the Board has agreed that we will be coming back later this year, late this year or early next year at the latest, with a update where we will have a Capital Markets Day talking about some of the longer-term ambitions from a business perspective as well as also discussing the right financial targets going forward. So with that, let's look forward. Let's look at what we will focus on, on 2021 as a conclusion before the question time. It is really comically enough to say more of the same. We're not going to change anything in what we've been doing. We will continue to drive the growth-oriented strategy that we've been so successful with. The growth-focused strategy really hinges on profitable organic sales growth, and that is driven by great products.We also have talked a lot about how the whole team in all aspects, our social media team, our online content and platform team, all the efforts we do in all those things strengthening the Thule brand, using the motto Bring your life, that is really showing results. We will continue to utilize our strong back end. And we have a fantastic team that has been around for a long time in our finances, et cetera, that can scale up and drive a good work effort there. And we will continue to do a steady rollout of our direct-to-consumer sales where we, in 2020, added Germany in July, added Netherlands in December and earlier, a few days ago, added France. There will be more countries coming as well. In terms of the product portfolio and the push we do there, we will continue to spend above 5% of sales. We will utilize the fantastic new development center. And as I said, very excited about that expansion of our Thule Test Center with already a world-leading facility, but now with some new equipment and some further staffing, be able to take on even more efforts there. The team led by Rik Erlandsson in our supply chain has done a tremendous job. I have to give enormous kudos to all the blue-collar workers and all the plant managers and operational staff that has ensured that we could handle those type of tremendous swings in our plants. We have not done that without -- and just forgot about the future. In the meantime, we've also kept on investing for future growth, planning and taking efforts. That also means that 2021 will be the highest CapEx year ever for the company, one, because we have some of those costs associated with the finalization of the development center and the expansion of the Thule Test Center; but also because we are continuing to expand both our plants in Poland, both in Pila and Huta, and we are also expanding our Seymour facility with additional capacity and some new products to come in. We are continuing also what was an ongoing journey already for all brands, but a journey that was clearly sped up a lot by the realities that you weren't going to any international affairs and you weren't being able to meet your customers live. So we did a very big push. And as I said, the online content team and marketing teams did a brilliant job in extreme pressures to come up with improved digital sales tools implementation in '20, ahead of time schedule. We are now doing further enhancements on those. We are continuing to do big upgrades to our home page that already has seen some big improvements in '20. And we are continuing a more increased and focused social media push. That will mean that we will have a very strong cash generation also in 2021. Of course, that means that, that will enable us to do M&A, and we have several interesting objects that we're looking at. But you also know what I have been saying since we got stock-listed, we're not going to buy a company just because we have money. We will buy the right companies where we can perform fantastic things in the years to come, which we've proven with all the small entities we have bought so far. So that means that we will continue to see an increased dividend stability as well. There are still many uncertainties around us. I think you read the articles as much as we do every day about some limited lockdowns here, some challenges there, some versions of the virus here, some question marks around vaccination rollout. I also think you read every week about difficulties of getting containers out of China that's already starting to log up things on the big ports in Los Angeles. And there are not going to be easy times. It's going to be an extremely busy year where the proven flexibility that our team has shown will be key. And we shouldn't get too bullish about this is going to be an easy ride. It won't. It will be a lot of challenges. But it will be challenges with a positive overarching trend and wind in our back. It's always easier when the staycation trend is there, when people are prepared to spend more money on sustainable, high-quality products than buying average products. That is always a favor for a company like ours. So we look forward to a positive 2021 and open the floor for questions.

[Operator]

[Operator Instructions] We have a question here from Gustav Hagéus from SEB.

[Gustav Hagéus, Research Analyst]

Congrats on a quite stellar end to a good year. A few questions. If I may start with sort of your end note there, Magnus, on freight costs, perhaps a little bit of FX, raw mats also heading upwards versus last year. You typically don't wiggle your price strategy too much based on external factors. So I would assume your baseline is to raise prices by 1% or so this year. In a scenario where perhaps you go slightly below your targets, your current targets this year, given tough comps and a bit, I guess, a little bit more growth in RV, which carries a little bit higher margins, I think, what you recon in such a scenario your chances are of maintaining current EBIT margins around these levels?

[Magnus Welander, CEO & President]

I'm confident that we will stay above the 20% target we've set.

[Gustav Hagéus, Research Analyst]

Okay. That's very direct. And then on the -- I'm kind of a little bit interested. You mentioned here the direct-to-consumer sales, which has grown, I guess, globally in many companies. I would assume your best prospects of growing that materially would be in the Americas rather than Europe. So it would be really interesting if you could share a little bit of numbers or put some color on where you've come the furthest in this type of sales. And if you see a longer-term perspective, perhaps be a little bit positive to margins if you put a little bit more sales from your own sales rather than through retailers.

[Magnus Welander, CEO & President]

No, you're absolutely right as all global brands, they have a higher share of sales direct-to-consumer in the U.S. due to the fact of the MSRP policy, the possibility for strong brands to set the prices also for their customers. So therefore, you are more price competitive as well as service competitive when you're selling your products on your own direct-to-consumer in the U.S. So you're right, U.S. is the highest share. We're close to double digits. And I think we will very soon pass double-digit share of our sales in our own direct-to-consumer in the U.S.We have then been doing it for now 1.5 years, close to 2 years soon in the Nordics. And we're starting to see Sweden and Denmark growing. Realistically, you will see still a low single digits in Europe for some years to come. But we are now, as I said, adding the biggest market, Germany, which is very competitive. So it's not one where I think you will see the biggest share of our sales. But we've also added Holland, France and soon U.K., and there are a few more markets coming late in the year. So low single digits in Europe still, but of course, as you were saying, growing faster than anything else.And if you look at margin, you have to do the very delicate thing of not confusing gross margin to what it means to the profit level because it was so easy to make money being an onliner. You would make -- I see a lot of online retailers being significantly more profitable. So gross margin pickup is, of course, very good. But also, what -- why we're choosing the countries we're choosing and in which order we're choosing them is to make sure that it also falls down on the bottom line. So there will be a margin enhancement also on the EBIT line as this share grows.

[Gustav Hagéus, Research Analyst]

Great. And then I'm a bit interested in your recent acquisitions in Denver, Outdoor and Tepui. It seems like you've taken some small strides to penetrate the U.S. market for sort of wildlife enthusiasts, fishing, resting, hunting, that sort of thing. So firstly, I'm interesting, do you find this sort of subcategory to be a good fit for Thule? And do you feel that current combination of those 2 companies and with the roof racks and boxes you already have there is a good and broad-enough portfolio to be -- sort of to capture that full opportunity? And -- or would you benefit from a broader assortment going forward, do you think?

[Magnus Welander, CEO & President]

I think you're absolutely right, it's obvious that we are adding some of the products. We've been very clear. I said that to you, Gustav, and many others, that we're not doing something to just have one odd product. But we're not at the same time going to throw everything at something. It needs to be the right thing. So the fact that we have entered this category, of course, means that we'll look more and more seriously and are hoping to broaden our assortments over time, but only if you can make money on it. We're not going to bring product for the stake of bringing product.We also have to be realistic that channel is often more challenging than product. So you need to make sure that if you look at it, you have the hook and bullet, as the Americans call it. The bullet part isn't for us. There is more around the hook parts, so the fishing and channel outdoors, which is for us. And in that work, it is about finding the right things where it's big enough to make sense and where the incumbents haven't destroyed the margins so that you can play well there. So we will look at broadening there, but we're not going to rush after anything.

[Gustav Hagéus, Research Analyst]

Okay. Might I have one last question? I think finally that you mentioned that you're expanding your testing capacity in Sweden also for the new categories, which I assume you will talk a little bit more about on the Capital Markets Day you mentioned today. But am I wrong in thinking that since you're going to test them in Sweden, it still might be products that, to a lesser extent, than, say, your baby -- some of your baby strollers are sort of sourced through Asia, but rather a high extent produced -- self-produced in Poland or Sweden? Is that a fair assumption given those comments?

[Magnus Welander, CEO & President]

I wouldn't have any -- honestly, it wouldn't have any logic due to that, that a reason for having one huge development center is that we have fantastic staff there. We have some brilliant testing engineers. We have the development center next door. If you have the development center next door, you get brilliant feedback from the test center. So no matter where we produce something, where we source it from or if we produce it ourselves, all the test facilities focused to that one world-class facility. So that's the rate.

[Operator]

Our next question comes from Daniel Schmidt from Danske Bank.

[Daniel Schmidt, Research Analyst]

A couple of questions from me as well. And I guess starting off with a difficult one, sort of the million-dollar question is, I guess, how demand will be impacted as the world normalize, which it hopefully does during '21? Could you shed some light on what you think regarding that or maybe you could say something? If you could give some sort of guesstimate what the COVID impact was last year with the 13% growth that you delivered.

[Magnus Welander, CEO & President]

Yes. You know me, Daniel, I will only say I feel confident that we will beat our organic sales target of minimum 5% also in 2021.

[Daniel Schmidt, Research Analyst]

I'm a bit referring to -- because you also -- I think you also -- you actually mentioned, in connection with Q3, that most of this would have happened anyway, but you did see quite excessive demand when it comes to child bike seats and I think maybe you also mentioned bike bags. Are you willing to repeat that? Or do you want to extend that comment or widen it in terms of products or add anything to that?

[Magnus Welander, CEO & President]

But you're right, that there will be certain products that, of course, have very, very strong comps. But you also need to look at things that trends don't change overnight. And I think we also have to be realistic that our products aren't necessarily an automatic product. If you take, for example, the bike for near bags, so the bike bag that allows you to throw your computer in and some few stuff when you bike back and forth to work, let's be honest, there isn't that many people that did bike back and forth to work in 2020. Many bought a bike, but they didn't go back and forth to work with it because they still stayed at home with their jogging pants on and worked from home.I think, therefore, that if you look at our type of product category, we did see a lot of boost, but it isn't like that has ended. There will be a lot of people actually using that bike in '21 for bike commuting and, therefore, get interested in having some of our bike-related product also in '21. So we didn't see the same huge effect if you look at it from a business point of view that maybe the pure bike manufacturers did.So I think from a business overall growth, I feel very confident with above 5%. When you look at your biggest challenge, Daniel, and mine in trying to talk to you guys every time is, let's not make some mistake about seasonality shifts. We must like clearly ahead after the first half because we will not be able to meet up to sales in the second half. There is no doubt. So we need to be well ahead of the 5% target when we summarize Q2 and the first 6 months. Otherwise, there will be no chance to meet that target when we summarize the full year.

[Daniel Schmidt, Research Analyst]

Absolutely. No, but that's clear. Good. And then another difficult question maybe and sort of just to have a discussion around it. And the margin target is, of course, reached earlier than expected, and you're not going to come back on that until maybe later this year. But could you sort of -- what's your reasoning in terms of optimal value creation? Where do you think sort of the optimal value creation is in this company? And how should we view that?

[Magnus Welander, CEO & President]

I believe that it's always good to go back to what you've said, and only if there's some dramatic changes that actually has changed your opinion should you do it. Nothing has changed my opinion. I mentioned a few times that EBIT percentage target was not per se important. It was a more a confirmation to you and investors that we were extremely confident in our fact that when top line growth happened, we would say an economies of scale. The most important is top line growth and pure true EBIT monetary growth. It's not about percentage. So we are not going to be doing the mistake of underspending just to try to squeeze the percentage [ a tenth of a percent ] up. It's going to be all about driving true top line growth and true bottom line growth. That's where the value creation comes.

[Daniel Schmidt, Research Analyst]

Good. Very clear. And maybe a final one as well. Selling expenses and admin expenses were, of course, coming down during the year, especially in the second half and in Q4. On the back of travel restrictions, I assume you guys doing more launches digitally and meeting your customers digitally. What's the sort of -- what's the marching order for the company looking into '21 when it comes to these lines?

[Magnus Welander, CEO & President]

I think my simple advice: do not invest in a travel-related or a fair and events-related company. We will be traveling much less also in '21 because there are still many restrictions around. We will be utilizing even better tools on already a very successful digital sales event that we manage ourselves. We are lucky enough to be a strong brand. So I think the big challenge will be for smaller newcomers to take that share that they might have been getting in the past at some fairs, while us as a leading brand in the category do get the attention for retail to our specifically, purposely invited digital events. So we will clearly, yes, travel more. That's my hope, definitely, but not nearly to the levels of '19, and we will not close to '19 in terms of what we spend on fairs and events. But we will spend more money on digital. So there will be some things spending more and some less, overall, a rather maintained cost level.

[Operator]

We now have a question from Karri Rinta from SEB (sic) [ Handelsbanken ]

[Karri Rinta, Research Analyst]

Karri Rinta, Handelsbanken. I have few questions. I think, firstly, can you remind us of how much of your Sport&Cargo Carriers sales is directly bike-related, i.e., bike carriers and so forth? And then if you can share a similar figure also for the kids category, that would be very helpful to get started with.

[Magnus Welander, CEO & President]

So I can't remind you because we never disclosed it. But what we have disclosed as a total is that roughly half of the business almost this year is something that is related to bike. And we've also disclosed the fact that strollers used to be, not anymore because it's past child bikes, it's now, but it used to be our smallest category. It's the fastest growing. But -- so you can realize that bike trailers is big. So if you look at it, we clearly have a bike-related exposure in Active with Kids still.

[Karri Rinta, Research Analyst]

All right. And then if we look at bicycle sales and what kind of indications we get from the bike manufacturers and retailers, I think they are -- what we know is that there are still very long lead times when it comes to bicycles and bike components. But what do we actually know about the end-user demand? Because maybe since a lot of demand has been shifted online, so what are the Canyons of the world telling you about the actual end-user demand at the moment for bicycles? And what kind of sort of -- how can we then extrapolate that to demand for your products? So I would like to have some actual -- not the actual numbers, but some sort of tangible anecdotes at least for this market.

[Magnus Welander, CEO & President]

Yes. I think if we split up that, it goes to help you, don't get too confused about Canyon being big. They're not. They're still the old traditional brands that completely dominate bike sales, although Canyon is doing well as well. So it isn't the fact of -- also all the Trek, Specialized, Cannondale also sell directly online much more than a Canyon does, total numbers. But if you look at all those big players, all the Giants, et cetera, I think the easiest one has always looked to Shimano because they produce to every one of them and they're stock-listed. Shimano's expectations are very positive for 2021 because there was, as we all know, a lack of bikes because the supply chain couldn't cope. They're still struggling to cope, by the way.I think you need to be careful in doing a direct relationship with Thule sales as if somebody, day 1, when they happen to buy a bike, automatically always buys a Thule product. They don't. I wish it was that nice because then we would sell much, much more and I would be running a much, much bigger company. Some of those users, when depending on the way they will use that bike and that approach of how they will use it, might much later on, years after they bought a bike or maybe sometimes as they bought a bike, think about I'm going to start biking with my kids as well. I need a bike trailer. It could be somebody who already had a bike then later on got a kid. So it wasn't the bike. It was the kid that triggered them to buy the bike trailer. And therefore, you shouldn't confuse that direct relationship with our performance.Our general performance is much more associated with the fact that when major cities like Paris, London, every other major city has taken the opportunity to, in 5 months, do as many investments in infrastructure as they were planning to do for the next 5 years, that has meant that they have created an ability for people to bike commute and travel by bike in a completely different way than it only looked some time ago. That, over time, will help us because the more people use their bikes and bring bikes with them and get passionate about biking, over time, they will migrate to buying also Thule products. So there isn't this -- we're not a sub-supplier to the bike industry. We're not making bikes. We're not a bike retailer. So you can't see that very quick direct link that I fear that you might be looking at.

[Karri Rinta, Research Analyst]

All right. Fair enough. And then a short-term focused question. The first quarter, we have now probably Germany extending lockdowns for until the end of February, I believe. And then we -- as you mentioned, there are some -- a lot of ski resorts that are closed. So how much is sort of winter sports alpine-related of your first quarter sales? And how concerned should we be about these German lockdowns?

[Magnus Welander, CEO & President]

I think you shouldn't be concerned because you also have to remember that the end of quarter 1 was quite dramatically hit in 2020 by a similar situation with very extreme, very sudden lockdowns. So from a -- if you're talking from a pure comp logic, January and February were very strong last year, March was not. And we will, therefore, have to see what it means in terms of the performance. And you also have to say that if you look at it once again, people might not go directly to go to the ski resorts to do downhill skiing. But if you look in many markets, they will go somewhere depending on the level of lockdown maybe in March and do something in that period.So combining that with what we believe and expect to see a strong earlier, more normal spring start, which we often say is from mid-March, normally, the spring starts with bike-related products, it didn't in 2020, but we expect it to do that in '21. I feel pretty confident also about Q1 performance. As I said to Daniel, we definitely need to be ahead on the first half because we will have extremely tough comps in the second half.

[Operator]

Our next question comes from Mats Liss from Kepler Cheuvreux.

[Mats Liss, Equity Research Analyst]

First, congratulations, of course, very solid finish there. But my first question regarding -- regards Active with Kids, I mean growth is picking up, and you have increased the offering there. And my question is, though, if you still lack something there to sort of boost safety even more.

[Magnus Welander, CEO & President]

Yes. We will be bringing new Active with Kids products out later in the year and next year, definitely. We will continue to broaden. We haven't stepped in this lightly. We intend to become a big player, as we mentioned many times. And as we mentioned many times, that takes years because we're doing it organically, and we don't want to rush it with the wrong product. We want to come with great products. So you're absolutely right, we will continue to broaden our assortment in the coming years in Active with Kids.

[Mats Liss, Equity Research Analyst]

Is it more related to your own offering? Or is it also that you have -- well, lack retail exposure that you would like to have?

[Magnus Welander, CEO & President]

I think in general, as always, a channel is more difficult, as I said. So we are continuously growing. We're adding retailers. We're adding space within the retailers, and that is as important as adding product for growth. We are becoming a name, and that is at different levels in different markets depending on success with different retailers. But definitely, we're becoming a player. And as we become an even bigger player, I'm sure that will help our sales.

[Mats Liss, Equity Research Analyst]

Yes, great. Promising. Well, in the sports and outdoor segment then, 2 things I'd like to ask there. First, I mean we have this electrification of all types of vehicles, including bicycles and cars. And so do you see that these trends are sort of making different need of products from your side, that you need to sort of adapt your bike carriers for an electric vehicle? Or is it the same?

[Magnus Welander, CEO & President]

No, there's definitely -- we constantly -- that's one of the good things of working with all the major car manufacturers of the world for their future generation because we know how the next coming years, cars will be looking what demands that will be on them because we're working so close with all the leading brands of the world. And that means, of course, as always, even in the past days when it wasn't just between, is it diesel, petrol or electric, there's always been a development in the car industry, and there is an ongoing development. And we are bringing some new products out this year that are more associated with the logic on how an electrical car might want to load and bring things. But there will be more of those coming because the trend is obvious. But we feel very confident that there is no other brand that have the insights, the competence and the monetary weight behind them in product development for meeting those new demands.

[Mats Liss, Equity Research Analyst]

Okay. Great. And this is more maybe M&A-related. But I guess the sports and outdoor could be your -- in the marine segment as well, could that be something -- I mean you don't have -- I mean maybe packs and bags and some other features are sort of marine-related. But do you see an opportunity there to grow the business? Or if...

[Magnus Welander, CEO & President]

Yes. You need to look at it from the size of what we are good at. There's always -- you need to make sure that whatever you acquire, you have an insight and understanding of it. Otherwise, how could you claim that you will make it better, then it's otherwise more of an arbitrage type of acquisition. And if you look at the marine part, there isn't that many logical things that would match our skill set competence. So I don't see for us marine being a promising big sector due to that.

[Mats Liss, Equity Research Analyst]

All right. I checked that box then. Well, you talked about the selling expenses. We have some questions there. But it seems that you make things more efficient now, and we shouldn't expect the selling expenses to return to the previous levels in 2021, even if you invest in digitalization and so on. It's...

[Magnus Welander, CEO & President]

There is, of course, certain selling expenses that are directly associated with growth. So you have some in terms of pure monetary spend, as we grow, you will see some cost. But you're right, I don't expect us to see a negative shift on selling expenses as a share of sales. I don't expect that.

[Mats Liss, Equity Research Analyst]

And 2 small final ones. First, a tax-related things there. You had your cleanout tax assets in the packs and bags area this quarter. So is there more to come?

[Jonas Lindqvist, Chief Financial Officer]

No. Jonas here. I don't see any more of that coming. We've taken a pretty prudent view of -- we had a deferred tax asset in our packs, bags business, but we have written down now looking into what we believe coming in the next years.

[Mats Liss, Equity Research Analyst]

Great. And finally, just about CapEx. I heard that CapEx will pick up somewhat, but I didn't hear numbers. Could you give some indication?

[Magnus Welander, CEO & President]

We didn't give an exact indication, so you correctly not to hear it. But we've said, over time, if you look at several years, we will run the 2.5% mark. And if we say it's higher this year, you realize we're going to be more -- above 3% as well this year, specifically. But averaging it out, that is because we don't take CapEx decisions based on trying to make our numbers look good. We take them when we need it from a business point of view. So it becomes a bit bigger this year as we're anticipating actually one of the plant expansions with the strong volumes we've seen.

[Operator]

We have another question here from Gustav Hagéus from SEB.

[Gustav Hagéus, Research Analyst]

I just realized your U.S. RV sales went from 1% to 3% of sales, so 3x growth year-over-year or somewhere around that. Is that a prudent investment, Magnus, going forward that you should grow this business [ 300% ]? Or is it happening?

[Magnus Welander, CEO & President]

I think -- yes, and not as a percentage growth because now we took a step this year. And as we told you guys a few times, we don't want to do business in categories where, for some reason, all the leading brands aren't making any money because then it would be presumptuous to believe we would be making a lot of money. And it's here on the niche products that we've now entered. And we now are setting to get some traction on those niche products, and they will continue to grow nicely, not necessarily with the same percentage, but I'm sure that there will be a strong growth -- strong double-digit growth in the coming years as well.

[Operator]

We have no further questions from participants on the line.

[Magnus Welander, CEO & President]

So then I want to thank you all for listening in. As I've said, very proud of the fact that we once again proved that we don't only set targets, we actually achieve targets. I'm very happy with and proud of what the team has been able to do in a difficult year in showing extreme flexibility and capability in handling ramping up and ramping down. And I'm looking forward to a very exciting 2021 and look forward to talking to you after the Q1. Thanks.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.