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THUPY (THUPY) Q3 2026 Earnings Report, Transcript and Summary

THUPY (THUPY)

Q3 2026 Earnings Call· Thu, Oct 22, 2026

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THUPY Q3 2026 Earnings Call Key Takeaways

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THUPY Q3 2026 Earnings Call Transcript

Operator

Operator

Hello, everyone, and thank you for joining the Thule Interim Report Q3 call. My name is Molly, and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, Mattias Ankarberg, CEO, to begin. Please go ahead.

Mattias Ankarberg

Analyst · Jefferies

Thank you very much, and welcome, everybody, to this call. As usual, I'm joined here with by Toby Lawton, our CFO. We'll speak to a presentation that will also later be available at our website. And as usual, we'll do a short presentation followed by Q&A. So starting off with the highlights on Page 2. We are now 3 quarters into the year, and we have 3 quarters in a row with organic growth and improved profitability, which is clearly a step in the right direction. In the third quarter, we delivered this growth despite seeing a declining RV market, which, of course, impacts us. But on the other hand, we see continued really good momentum and accelerating growth in Active with Kids & Dogs, which is helping the quarter nicely. Profitability continues to be improving and strong and improving -- improvement, sorry, is driven by the efficiency initiatives that we are actively pursuing. Now that we also are close to a year from the updated -- from setting the updated financial targets at the end of last year, we can also assess our progress so far and can conclude that we are on track towards the new financial targets that were set in November '25, which is something we will get back to. But zooming in on the quarter on the next page, it is another quarter with continued growth and increased profitability, modest organic growth, up just over 1% and the reported growth in SEK is 3%. It is a continued tough market, particularly in this quarter in the RV segment, which we'll come back to, but also more generally in the North American market. Europe continues to do better than North America, with organic growth being up 4% in Europe and minus 1% in North America. And the difference between the reported growth this relates to currency and also to the small acquisition of curli that we did at the end of Q2. Gross margin is really strong. However, please do note that there is a positive impact from tariff refunds amounting to SEK 52 million, which -- and there is also a negative impact from the higher raw material prices. And then they, in turn, are partly in the quarter offset by price increases we did mid-quarter, and we will get back to all of those 3 points later on. All in all, we have an EBIT margin of 20%, which is clearly above last year. Again, excluding the tariff refunds, we are still in line with or just marginally better than last year's level, which for those of you who follow us closely may remember that was a historically high level. So we have a solid profitability and also excluding the tariff refunds. Sales and admin costs are decreasing as a percent of sales. And all in all, EBIT amounts to SEK 521 million. And continued, this is a good cash flow quarter for us and continued good cash flow and also that above previous year, almost SEK 800 million. And zooming out to the year-to-date, we are now grown 2.5% organically this year so far, and improved gross margin and an EBIT margin that is up by 1.5 percentage points. Taking a further step back before we dig into the details for the quarter, we can see that this means we continue the long track record of profitable growth at Thule, and this chart shows the development since the IPO in 2014. On the last 12-month basis, we are now at SEK 10.4 billion of sales, SEK 1.8 billion of EBIT and 17.3% EBIT margin. And as mentioned in the beginning, it is now almost 1 year since we set new financial targets. We announced those at the Capital Markets Day or in conjunction with the Capital Markets Day in November last year. And since Q4, which is the smallest quarter for us, following the third quarter, we have a fairly good view about sort of where the direction is heading this year and can evaluate the progress made so far. And the conclusion is that we are developing on track towards the new financial targets. We should mention that we have 3 financial targets: organic growth, profitability and dividend payout ratio. And we can see that despite the market not being easier than last year, we are improving on all metrics. So very overviewish organic growth is now 2.5% for the year so far, clearly up versus the minus 1% last year. EBIT margin is up 1.3% on the last 12-month basis compared to last year, and dividend payout ratio continues to be above the target. It's also worth to just mention that these targets are announced, they are ambitious. They are above the historical performance of Thule, and we like them to be ambitious because we want to be ambitious. But we have also been clear that they are not to be reached immediately. We have an ambition to reach them in the midterm, which we have said is 2 to 4 years. So I think -- and I think perhaps more interesting than the numbers themselves is to see what is driving these numbers. And you may remember, if you participated at the Capital Markets Day that in addition to the targets, we laid out a plan for how to reach them, both what's going to happen on the growth side and what's going to happen on the efficiency side. And we also set ambitions, we call it, midterm growth ambitions for all of our 4 product areas. And we can see that for each and every product area, we are moving in the right direction. So for example, Sport & Cargo Carriers last year was a minus 1% organic growth. This year, we are at plus 1% so far, and the ambition is to get to 5%. So a step in the right direction. RV Products, 4% last year, 3% this year so far, almost at the midterm ambition already. Active with Kids & Dogs, we see a big improvement, 13% growth this year so far, almost at the 15% we are targeting as an ambition level. And it's nice to see that, that product area is also now more meaningful in size. So it contributes also nicely to the total. And same improvement on Bags & Mounts from minus 10% last year to plus 2% this year so far and a good step in the direction to 10%. So good progress on the sales development in all 4 product areas towards the midterm ambition. So with that overview completed, I thought I'd turn into a bit more detail on the quarter specifically. And as usual, we'll give some highlights and comments to each of the 4 product areas. Starting off on Page 7 with Sport & Cargo Carriers, which is our biggest product area. It's just over half of sales in Q3. And in the quarter, we saw a small organic growth of plus 1%, taking the year-to-date to 1%. And this is, as in previous quarter, driven by New Thule products. We have delivered several new products also this year, and we continue to see that premium is doing really well. And a good example is the new premium Bike Carrier, Thule Epos ParkSecure, where we have taken our best bike carrier and put parking sensors on it. And it's a great example of how we can expand the category and attract the consumer that still has money to spend and has the passion and willing to spend it on great products. So that's a great example. We have continued momentum, what we call rear of car cargo, so boxes that you mount behind the car. And actually also when we upgrade entry-price products like the rooftop box Thule Pulse has helped also. Generally, we see the most positive development around the premium price points, particularly connected to new products and innovation. We do see quite good growth in Europe, but we do continue to see a decline in North America, which is holding this total Sport & Cargo Carriers growth back. Within RV Products, we are currently experiencing a negative market development, which is clearly impacting sales. We declined 5% in the quarter, taking the year-to-date to 3%. Coming from a period where market conditions have been improving for a few quarters, we did see a decline in registrations of new vehicles, motorhomes and caravans starting around mid-quarter 2 in most European countries, and that has continued into summer also in the third quarter. Clearly, this is impacting sort of sales of new vehicles, obviously, but also then our sales to those customers. It is for us, so far, particularly impacting the aftermarket or the dealers, which are closest to the consumer, whereas the OE channel in manufacturers is more stable. We continue to do better than the market and the registrations, and we continue to see that, as we've talked about for several quarters, that new products also within the RV products product area are adding growth for us. And we can also note that the consumer interest continues to seem high with high activity and great bookings at camp sites across summer and good attendance at big fairs now recently. But a tougher market takes the sales down in the quarter by minus 5%. The third product area is Active with Kids & Dogs, where we see a fast and also accelerating growth, 22% organic growth in the quarter. If we look -- include the acquisition of curli, small acquisition and look at the total, net sales is up 31%. And we see that all of the 3 categories that we call Champion candidates are continuing very strong. And these, just to clarify, are categories where we have the opportunity to be clear global #1, drive the category through innovation, and get leverage as the #1 player in the category and out-innovate competition. But they are not yet of the scale that we call them a Champion. They are not yet at SEK 500 million each. But we continue to see really good growth in all-terrain and running strollers. We see a very nice trend in dog transportation, including the launch of the new products and the harnesses Thule Dart, and also sustained momentum in child car seats, which is also further boosted by the rollout of the connected car seats that was initiated during summer has continued throughout Q3. We are also pleased to see that we have seen an improved trend for multisport and bike trailers, which is also part of this category, had a tough start due to still too much stock at retail, but turned around mid-Q2 and continues to grow now in Q3. And similar to other categories, this is clearly the most premium products that are driving the growth. Continue on Bags & Mounts on Page 10, which is the fourth product area, giving some details for the quarterly performance. So just to start that over to make sure we got it, a decline of 4% in the quarter and a plus 2% year-to-date. A few different factors to note in the quarter. Performance phone mounts on the one hand, clearly benefit from some new products. which has been well received. I'll give an example later, but also a wider distribution. And part of that is supported by some Thule team working closely with the Quad Lock organization. For example, you can now find these products at big retailers like Halfords in the U.K. We have launched these products in China on some marketplaces, and that's clearly helping the growth. On the other hand, there is a phasing impact, which impacts the quarter -- the sales in the quarter, excuse me, negatively. And the reason is that particularly Apple has changed the launch schedule compared to last year. One big moment for consumers to upgrade their phones is, of course, when there is a new phone available. And last year, Apple launched an upgraded suite of phones in September. And this year, so far, only the Pro models. So fewer options to upgrade, lower sales, and that means that sales would be phased differently until these new models are launched. But good progress besides that phasing impact. On the bag side, we continue to see good growth in Thule branded bags, good reception of some new products for this year, including the Thule InLock for bike commute and the Thule Chasm gear haulers. We continue to see a decline in Case Logic as we have done for a long time. And also just to note that after the quarter, we acquired the intellectual property and product rights for some mountain bike bags delivered by a company called Aeroe. You see some of the products on the picture to the right. It's a small asset deal with a company where it had small sales, but it's a really nice product that fits really nicely into the bags category and very much in line with the strategy we have taken to bags to move more into outdoor and sport-related products, for example, bike. So with that, I conclude that part of the presentation and hand over to Toby to cover some of the more financial details.

Toby Lawton

Analyst · Jefferies

Thank you, Mattias, and good morning, everybody. So I will start on Slide 11 here on the financial summary. And firstly, on sales, you can see we had sales of SEK 2.6 billion this quarter on the top left in the table, and this represents a 3% increase versus quarter 3 last year. And if I just break down that 3%, you can see 1.2% comes from organic growth, as Mattias has mentioned, 1% of it comes from exchange rate movements, which, yes, are now positive this quarter, which is a change from some previous quarters and 0.8% comes from the acquisition, that acquisition of curli, which Mattias mentioned, which we made at the end of quarter 2 in the Active with Kids & Dogs product area. So for the year-to-date, you see on the right-hand side of the table, we've then seen an organic growth of 2.5% year-to-date, so for the first 3 quarters of the year. When it comes to gross income and gross margin, we have increased versus last year. But very important here to understand that this includes a one-off impact from tariff refunds from the U.S.A. of SEK 52 million in the quarter. And I could just give a bit of color that this is basically all of the tariff refunds we've received so far, and it relates to the repayments of tariffs, which we paid out during basically the last 3 or 4 quarters or so. And it's basically the full refund that we expect for now. We -- future tariff refunds are possible, but they, for the moment, remain highly uncertain, and we'll comment if we know -- if and when we know more. If we, however, exclude those tariff refunds, the gross margin in the quarter was 47.3%. So that you can see is slightly down on the same quarter last year, which was 47.5%. And this is due to the fact that we had higher material costs and freight costs coming through as a result of the Middle East conflict and the higher oil price. So those have started to hit us this quarter. Previous quarters, we were basically hedged from that impact. And we've talked about that previously as well. These higher costs then for materials and freight are partly offset by increased prices, which have come in from 1st of August. But obviously, that means they haven't had full effect this quarter. If I move down to selling and administration expenses, expenses are slightly higher in SEK in the quarter, but lower as a percentage of sales. And this lower cost level overall is driven by the efficiency initiatives that we are continuing to drive and continues to contribute to the EBIT margin improvement. So that's contributing positively both in the quarter and also in the year-to-date to improving profitability. And the EBIT then for the quarter was SEK 521 million, and the EBIT margin for the quarter is then 20%. This is up versus the same quarter last year, but it's worth mentioning that even without that tariff impact that I mentioned previously in gross profit, even without that impact, the EBIT margin is slightly up versus last year as well, even noting that we had a strong margin and strong EBIT result in this quarter last year. So it was a historically high level last year, and now it's even higher. So finally, then just coming down to the bottom line on net income after financial costs and taxes, and we report a profit in the quarter of close to SEK 400 million. And year-to-date, we have just over SEK 1.2 billion, both of which are up double digit versus last year. And that also means that, obviously, earnings per share is also up versus last year by the same amount. If we just move on to the next slide, share of sales. And here, you can see our sales by geography and by product area. And on the left-hand side, you can see that the share of sales from Europe is on an LTM basis has increased. So it's now 69%, and this is where we have the strongest organic growth. So that's what's the reason behind that. And it's important, obviously, that we perform well in Europe, by far, our biggest and most important markets. North America and particularly the U.S.A. has been more challenging in the last couple of years, but the actions we are taking here continue to have effect, and we see traction and improving trend there as well. On the right-hand side, you can see the share of sales by product area. And maybe one quick comment here that the biggest increase is obviously in Active with Kids & Dogs product area, where we've seen strong growth from the Champion candidates that Mattias mentioned earlier. And going forward, we'll also have a small impact from the new acquisition curli, in Active with Kids & Dogs as well. But otherwise, no big changes in the profile. If we turn to the next slide, Slide 13, just showing the margin development over recent years. And this we also talked about in the Capital Markets Day in November last year. So you can refer to some more details on margin development there. And firstly, if we look at the EBITDA margin at the top, you can see that the LTM EBITDA margin has now increased to 20.8% versus 19.5% in 2025, and that level is higher than the historical level pre-pandemic and the history, if you just -- with the exception of the pandemic period, which obviously had a different profile. Secondly, if you look at the EBIT margin, you can see this also increased on an LTM basis to 17.3% versus 16% in 2025, so 1.3% margin improvement. And that's really a result and good to see the result of the actions that we are taking that they're having an impact in both gross profit and in EBIT margin and cost efficiencies, and we're taking a step -- an important step towards our EBIT margin of -- EBIT margin target of 20%. Okay. On the next slide, we have some data on cash flow. It's been a good quarter on the cash flow side. And I could mention Q2 and Q3 seasonally are our strongest quarters where we deliver good cash flow due to the seasonality of the business. And you can see that on the graph on the bottom left. The cash flow from operations in the quarter was SEK 791 million, which was a good level with good profitability and also with a reduction in working capital contributing here of more than SEK 200 million. We also had some cash outflows in the quarter for CapEx of SEK 120 million, and this is mainly related to the investment we are undertaking for automating and extending our warehouse in Poland. And this good cash flow obviously means we managed to reduce our net debt. We had an impact on our net debt of close to SEK 600 million in net debt reduction, bringing our leverage down to 1.6x. That's our net debt-to-EBITDA leverage. So we're down to 1.6x at the end of the quarter, which you can see on the graph on the bottom right. So good to see, yes, a good impact on the balance sheet and deleveraging there as well. So yes, with that, I'll hand back to Mattias.

Mattias Ankarberg

Analyst · Jefferies

Thank you, Toby. Just a few forward-looking comments before we open up for questions. We are now on Page 15. Well, our focus and our strategy and our priorities stay the same. We are focused on building Champion categories and driving efficiency gains, and we can see that it's delivering results. Again, 3 quarters in 3 quarters of organic growth and increased profitability. We are still in a market with cautious consumers and retailers. And from a geographical view, North America is still the toughest market. And as noted in the beginning, following a period, a couple of quarters of improved market conditions, we see that RV registrations in Europe, we have our RV business is almost entirely in Europe. Registrations started to decline in mid-quarter 2 and now continued over the summer. So that impacts us negatively, of course. The raw material cost increases that were a consequence or started to increase following the conflict in the Middle East are impacting us now, but we are mitigating it by price increases that started in mid-quarter 3. So that's where the market situation is, and we don't see a major shift in the market in the short term, either for the positive or for the negative. But we have things we can do, which we continue to do at a very high pace. We continue to work -- our #1 priority is to build bigger and more Champions, launching updated and upgraded products to grow the existing 6 Champion categories that we have, but also continue to fuel the fire in our Champion candidates, which are now accelerating in growth in Q3 across actually all of dog transportation, car seats and all-terrain and running strollers. We are also continuing to work to turn the bags category around, focusing more on outdoor and sport products and using bags and accessories to the other categories as well. And then lastly, efficiency gains. We continue to drive the initiatives that we have underway, and we are coming down in R&D spend as a total. However, please note again that we are spending more than ever on the Champions, but we are prioritizing that over other things. And continuing the supply chain initiatives that Toby referred to earlier will also help us going forward. So good progress on all ends. We have launched several products in 2026. On Page 16, there is an outline of some of the most important ones. As we are now in Q4, most of these products, if not all product launches actually are done in the year. And we are, of course, at a state now where we can evaluate what's worked and start to plan the activities for 2027. And this wouldn't be a Thule presentation unless we highlighted some of the great products that we feel are meaningful, both from showing who we are, but also for the commercial side of the business. So for example, Page 17, Thule Epos ParkSecure have really been a nicely well-received product for this year, taking our most premium bike carrier and improving it by adding in this case, parking sensors which has been a really appreciated feature and functionality from a consumer point of view and clearly opens up more opportunities for, for example, parking sensors for some of our products. We've continued to invest in products also in performance phone mounts or the Quad Lock business. And on Page 18 is a very recent example launched just in September of a new mount. For those of you who may remember Quad Lock, I mean, the technology and the real asset is really in the mounting part of the solution, where there are specific mounts for specific use cases for specific vehicles that protect your phone and makes it easy to use the phone and while being sort of active. And this is a product called Handlebar Mount Pro. Which has a double axis adjustability for motorcycles, also including vibration dampening, making sure your phone is well protected at any kind of engine frequency and bumpy road that you may be out adventuring on. So those are some examples of continued innovation in our Champion categories. And then we are continuing to build up the Champion candidates. For example, the connected car seats, which is the next-generation car seat with sensors included to give parents feedback immediately and another further step of preventing misuse, which is unfortunately very common when installing and using car seats. Really nice progress of this. Good rollout started at summer and continue throughout Q3 and some more in Q4. And we are also adding products to our Active with Dogs, dog transportation product category. And the most recent launch is called Thule Dart, where we have now, as you may see in the picture here, launched some products related really to safety, safety around car and with the dog crate. We have products related to safety transporting dogs with bikes. And now we add accessories, so to speak, products that are more for everyday and by foot use, for example, the Thule Dart, which is a premium dog harness for larger dogs and also comes with leashes and in several sizes and colors. And then lastly, I mentioned quickly that besides the Champion work, we are still progressing our turnaround of the bags category. And as being more outdoor with our assortment is a priority, we are also developing some new products. And one good example this year is the Thule Chasm gear haulers, which are both to the left and right here on this picture, which is a really nice adaptable product, possible to flat pack and then expand and has been very nicely received and helps the bags category turnaround in 2026. So that concludes the presentation part of this call, and we now turn to operator to manage Q&A.

Operator

Operator

[Operator Instructions] Our first question comes from Adela Dashian at Jefferies.

Adela Dashian

Analyst · Jefferies

A couple of questions from me. Firstly, on -- if you're able to provide some sort of EBIT bridge in the third quarter, specifically as it relates to price effects, but also inflationary pressures, how much that contributed in Q3? I guess my question would like to answer what sort of offset we should expect going forward if these inflationary pressures continue?

Toby Lawton

Analyst · Jefferies

Toby here. So, basically the price increase that we've implemented from the middle of the quarter from August does not quite offset the material cost increases. So there's basically a small negative in the quarter, which I mentioned. That's why the gross margin, excluding the tariff refunds is 47.3% versus 47.5% last year. So it's slightly negative. I would say, going forward, when we have the full effect of the price increase, we expect it to offset the material cost increase. So that's what we expect going forward. I won't kind of go into the exact amounts of each. It's not. Yes, it's not huge numbers, but obviously, we've largely offset it in the quarter, but not quite. And going forward, we expect to offset it.

Adela Dashian

Analyst · Jefferies

I'm sorry. Thank you for that. But sorry, did you mention what kind of price increases you did?

Toby Lawton

Analyst · Jefferies

Yes. We did, we did -- sorry, that's a good point. We mentioned previously. So the price increase is approximately 2.5% that we had in August. So yes, so that's the scale you can -- of the price increase.

Mattias Ankarberg

Analyst · Jefferies

And maybe as we talk in details here, but maybe worth to note then is that the price increases are, of course, not impacting the full quarter as they were done in 1st of August, so 2 out of 3 months, which is why we see a more positive effect in the next quarter.

Toby Lawton

Analyst · Jefferies

Yes.

Adela Dashian

Analyst · Jefferies

Yes, makes total sense. And then I guess, moving into the next quarter, this is an RV heavy quarter for you. What -- yes, I guess, how has this trading look like in the first month?

Mattias Ankarberg

Analyst · Jefferies

Yes, you're very right about that. And RV -- the RV segment is tough. And I think we don't expect that to change sort of for the better or much worse in a single quarter. It is, of course, also the sort of last quarter of the year, and it's a little bit of how much stock people take in, et cetera. But we expect that to be tough also in Q4. What has been good for us, as you're aware, is the Active with Kids & Dogs. We continue to see really good growth, which has been balancing out that and then some, which we also expect great progress on also going forward. So no sort of real change in any of those directions.

Adela Dashian

Analyst · Jefferies

Okay. I see. And then maybe you already did mention, but the phasing of the performance phone mounts, will that come through in Q4 or in H1 next year?

Mattias Ankarberg

Analyst · Jefferies

Yes. So for us, we do see a really nice underlying sort of performance with increased distribution, good new products. But this phasing thing is really related to launch of new products and sort of phones and particularly Apple. And yes, it really depends on when Apple decides to launch sort of the remaining iPhone 17 products. So far, I think the market sort of intel or rumor is that, that will be in Q1 next year, which means that why is this important? Because it's when there is a launch of a new smartphone, some people upgrade to new phones. And I think another event that typically happens is around Black Friday or Christmas sales. So we expect that unless those products are launched very soon, that will weigh on the Q4 as well. But hopefully, it won't play as big of a role. But we will see when these new phones are launched. But most likely, what we hear is it's probably beginning of '27.

Operator

Operator

Our next question comes from Gustav Hagéus at SEB. Gustav Sandström: I have a question on the organic growth of 1% in the quarter. You mentioned, Toby, that sort of 2/3 of a 2.5% price increase were in that number then. And then was it 1.5% also from January in those numbers, let's say, a bit more than 3%. Is that the price component in the quarter? If you could confirm that roughly? And then also what's the mix component to the top line, that would be helpful.

Toby Lawton

Analyst · Jefferies

Yes. So what was the question exactly, Gustav, sorry. But yes, we had... Gustav Sandström: So if you could divide the top line growth in price/mix volume, please?

Toby Lawton

Analyst · Jefferies

Yes. I mean it's obviously a big change in mix with obviously RV being the main one declining this quarter with strongest growth in Active with Kids & Dogs. So we don't -- it's not comparable to measure a volume of an Active with Kids & Dogs product to a volume of an awnings. So -- but I mean, absolutely, price has an impact on growth and yes, the new products that we launched, but it's -- yes, it's -- I think it's not relevant to compare volumes of leashes to volumes of awnings, to be honest. Gustav Sandström: Okay. But if you combine mix and volume then into one, is it fair to assume that price was more than 3% of the 1% organic growth? Is that how we should understand it?

Toby Lawton

Analyst · Jefferies

I mean you had -- we had a price increase from the start of the year, and then we had -- yes, obviously, the price increase from August. So yes, you're right. Combine those 2, yes, you're somewhere around that, yes, somewhere around 3%.

Mattias Ankarberg

Analyst · Jefferies

I think one more factor to add is that we're launching new products. And they are, of course, in general, sort of driving price points up. And I think a good example is the one we brought up with Thule Epos ParkSecure. So that also impacts the mix, of course. We do renew our assortment on a quite frequent basis, which impacts the mix positive. But price/mix is for sure, helping us this year. If that's what you're asking, Gustav.

Toby Lawton

Analyst · Jefferies

Yes. Absolutely.

Operator

Operator

Our next question comes from Daniel Schmidt at Danske Bank.

Daniel Schmidt

Analyst · Danske Bank

Just coming back to the gross margin maybe and the price increases that you did do by the 1st of August, which implicitly means that you had a headwind from higher raw material and higher freight costs evolving during the spring into the summer affecting July. And assuming that July is bigger than 1/3 of sales in the quarter and the gross margin only being down 0.2% underlying makes me think that the price increases that you've done should overcompensate a bit versus what you experienced given the underlying gross margin for the quarter? Or are there other sort of underlying factors supporting the gross margin? And will those also support the gross margin in Q4?

Toby Lawton

Analyst · Danske Bank

Yes. There are other underlying factors. For example, the mix with obviously RV being down, the rest being up, it means the mix is more positive. And there's also some things around the timing of how the increases come in, Daniel. Sometimes it takes a bit more time than originally predicted to come through into the cost of goods sold as well. So we don't expect overall the price increase to sort of offset more than the cost increase. Over time, we expect it to offset the cost increase, but no more basically. And then in Q4, probably these effects -- I mean, mix will always depend on what the mix in the quarter will be, but the effects of kind of the timing of the raw materials coming in and the timing of the price increase, we expect to be fully in, in quarter 4 basically.

Daniel Schmidt

Analyst · Danske Bank

Okay. Just looking at the latest raw material development seems to be coming down a bit in the past 1.5 months. What's the lead time in general for raw mats to hit you?

Toby Lawton

Analyst · Danske Bank

Yes. Generally, we're kind of fully hedged 1 quarter ahead and partially hedged the quarter after that. So it takes -- yes, it takes 3 to 6 months to come through. We do see a little bit of easing. I mean it's still definitely up this year, but it's -- yes, it kind of went up very quickly, I would say, when the crisis erupted in sort of end of Q1 and then it's been stayed pretty similar level. But yes, it has eased off a little bit in the last month or 2.

Daniel Schmidt

Analyst · Danske Bank

Okay. And Mattias, you talked a lot about the acceleration of growth that you've seen in Active with Kids. Is there any inventory effect here at all? Or is this sort of a true reflection of sell-through or underlying demand? And if so, why the acceleration versus what you saw in the first half?

Mattias Ankarberg

Analyst · Danske Bank

No, I think there was a little bit of holding back in the first half in bike trailers in this category, which maybe explains why the numbers -- part of the explanation why it's accelerating now. And I think another explanation we try to point out is we've added more products throughout the year. These product categories, particularly then car seats and dog products, we introduced, what is it, 2 years ago. So we are kind of building the portfolio and building the distribution still, which helps, for example, the connected car seats and Thule Dart now in Q3. But there was a bit of stock overhang, so to speak, or stock issues in trailers that held back Q1 and part of Q2. And then that's now gone. So that also helps.

Daniel Schmidt

Analyst · Danske Bank

And when you say building distribution, have you added any sort of names that you want to call out in terms of retailers in Europe or in the U.S. that's worth mentioning? Or is this just organically in each market?

Mattias Ankarberg

Analyst · Danske Bank

No, but we have added a couple. I think we are now at a point where we are present at the most important channels in the biggest markets with both kids products and dog products. We are -- but I think it's also a matter of penetration. So when you work with -- I'll give you an example, Kölle-Zoo, the biggest pet retailer in Germany, you start with maybe 10 or 15 stores as pilot stores and you prove your product and it's sort of turns well enough to stay on the shelf, and then you get another 30 stores and then you get maybe the full 150. So I think we've now had 2 years in where we can really prove that Thule products is selling through. It's appreciated by the consumer, and we add to it. So it's a continued sort of work to widen the distribution footprint in the key customers that we have and add a little bit of new channels. I mean we are opening up, for example, dog transportation in Canada soon coming and Southern Europe, et cetera. But by and large, the big markets, the big retailers, we are present, but we are expanding our footprint within them.

Daniel Schmidt

Analyst · Danske Bank

Good. And I think you mentioned shortly also that you might see some pressure in bags in Q4 related to the same sort of scheduling when it comes to new mobile phone models from Apple, for example, but that it should be less of an impact than it was in Q3. How much did that impact Bags & Mounts in Q3? And why should it be less, you think?

Mattias Ankarberg

Analyst · Danske Bank

Well, I think these are really sort of tactical effects on sort of quarter basis. But if you look at the mounts business, one important event in Q3 is when Apple, particularly because it's the biggest player launch new phones and then some people, if there's a great upgrade, people buy new phones. And in Q4, you have more events of different nature. There is Black Friday, which is an important event for these kind of lower ticket items, and then there is Christmas shopping, of course. So hey, if there are fewer new models out, that would probably impact that too. But there are also other events that would probably impact the quarter more. So to be really honest, we're not really focusing on sort of a quarterly basis and exactly the impact of each driver. What we are trying to do is to add new great products, and then we are widening the distribution where there is still a lot to do for performance phone mounts. Even though it's a great DTC business, there are also physical retail chains to work with that we're going after and successfully done this year. And we'll see when the phasing comes, when the new phones are launched, that will give a little bit of an extra kick probably in the beginning of next year. But so far, we see that we continue to expand the business, which feels good.

Daniel Schmidt

Analyst · Danske Bank

Okay. And then lastly, there was some sudden changes to the composition of the Board yesterday. What is your view on why this is taking place?

Mattias Ankarberg

Analyst · Danske Bank

Yes. No, I will be happy to comment on that. I think -- and just to probably -- nobody may have missed it, but there was a change of Chairman, and that is the only change. And I think from our point, it's nice -- I mean that is clearly the only change. The remaining Board members are the same. Both the biggest owners and the Board has expressed clear confidence and support for the strategy and the management team and sort of the progress made. So I think it's a question of who should be Chairman, and that is, as you know, the way things work, that's a question between the owners and the Chairman. But we had a good Board meeting yesterday, and we continue to make progress on our plan and continue to move forward.

Daniel Schmidt

Analyst · Danske Bank

But do you see any sort of shift of focus from the Board now that you have a different Chairman than you had the day before?

Mattias Ankarberg

Analyst · Danske Bank

As of now, absolutely none whatsoever. I think there has been -- I mean, the new Chairman came in as Deputy Chair in May, and he has spent good times with us to come in and understand the business and travel to very important global metropolitan areas like Hillerstorp, for example, in Småland, making sure to dig into the business. And I think likes Thule as a company and is very on board with the strategy, and we've spent time onboarding Per-Arne on several topics. So I think we have a clear way ahead, which is to continue the plan that we have laid out and also spent some time explaining at the Capital Markets Day last year.

Operator

Operator

Our next question comes from Hai Huynh at UBS.

Hai Huynh

Analyst · UBS

Just a couple, please. On the pricing that you did in the last quarter, have you seen any kind of either retailer pushback or volume impact from this? And also, where are you seeing competitors? Are there similar pricing actions follow through? And if volumes remain weak, is there a little bit of promotional giveback in the promotional period in Q4?

Toby Lawton

Analyst · UBS

I can start there. Basically, I guess, retailers never like price increases. So there's always some kind of pushback. So -- but I would say -- we -- overall, we see competitors facing the same kind of pressures. And so there's price increases from many of their suppliers in our sectors and others as well. So it's not something that comes as a surprise. And yes, we haven't seen major pushback or major sort of -- yes, drama around the price increase in any way. So was there a second part of the question there?

Hai Huynh

Analyst · UBS

Yes. I mean just in terms of pricing actions from competitors and also.

Toby Lawton

Analyst · UBS

Yes. No, I would say broadly, broadly similar, yes. And obviously, it depends a little bit on the kind of product and the kind of materials you've got included. So kind of when I say 2.5%, that's an average. So -- but yes, we certainly don't stick out on the high side, I don't think, for the price increases. And that's partly because we're in the premium segment. So obviously, as a percentage of a bigger number, it's a smaller percentage.

Hai Huynh

Analyst · UBS

My second one is on restocking in North America. So in the pre-close, you said that post Labor Day restocking is one of the key variable. Where are you seeing that now? I'm seeing receivables increased quite a bit year-on-year on the sales of plus 3%. So -- is this connected? Is this a sign of restocking? Or how do I interpret this North America going forward?

Mattias Ankarberg

Analyst · UBS

Yes, it's a good point. And to make sure everybody is on the same page, this has been particularly an issue or a topic for us in North America, where we have actually quite a few of our big retail partners that have seen positive sales growth of Thule products. But as they are working on decreasing their inventory, we haven't seen the same sell-in. We have side note seen very nice progress and growth in our Thule DTC channel, Thule.com in the U.S., which is also another sign that the consumer is buying more product. But you're very right. We continue to see that retailers are being cautious. I think when we speak to them and our team speaks to them, I think this is probably the correction that they wanted to do by now. But we are also exiting kind of summer or high season, which means that if you are a little on the cautious side, you're not going to carry too many bike carriers over winter, but rather stay sort of a little on the shy side not to make sure that you have too much inventory. So still cautious retailers still take in less from us than they sell out, but we hope that this is now kind of the correction at least for sort of spring/summer product that's done. So we should have a normalized situation as spring kicks in, in 2027.

Hai Huynh

Analyst · UBS

My next one is just on -- when you say 2- to 4-year horizon to meeting targets. So you're at 2.5% year-to-date. How much of this target depends on self-help? And do you need the market to recover to get to that kind of levels? Or is this something that you think you can deliver mostly by yourself?

Mattias Ankarberg

Analyst · UBS

Mostly by ourselves, but our reasoning has been sort of the following that historically, Thule has on average delivered around 5% organic growth in a market environment where you had sort of stable inflation, stable interest rate and a GDP of maybe 2% to 3% and Thule's end market has probably grown a little faster being exposed to sport and outdoor. So maybe, let's say, 3% or 3.5% or 4%. So an outperformance of, I don't know, 2%, 3% maybe. And we think we can do better growth wider gap towards the market, if you like, because, for example, we have new categories that we are building up that we think will top that up. But we do need some kind of stabilized market and not the market which is continued sort of very uncertain or even declining, which is, for example, the case now in RV. So it's encouraging, I think, for us, at least internally when we look at the numbers this year because the way we look at it, the market isn't easier this year. But still, the things we are driving is making the growth this year better than last year in the 4 product areas that we're looking at and the fastest growth is coming from the area where we said we would have the fastest growth. So it's a good step in the right direction. So there's -- most of it, to summarize, are things that we can do ourselves, but we do need a stable or a somewhat positive marketplace, even if it's not all the way up to historical levels.

Hai Huynh

Analyst · UBS

Got it. And just lastly, a very quick technical one, just for purpose of modeling EPS going forward. But the tax -- your effective tax in Q3 is a bit lower, 19.2%. Is it -- any comments there? Is it just a shift of the mix into lower tax segments? Or is there some changes that we need to model going forward here?

Toby Lawton

Analyst · UBS

Yes. I would say if you model -- take the year-to-date tax rate, which we think is -- yes, is the right level to use for modeling going forward as well with the right mix. In the quarter, we had a bit of a phasing between the quarters with tax refund, which kind of reduced it in this quarter, but it was probably a bit too high in quarter 1 and quarter 2. So year-to-date, around 23%, we think is a normal effective tax rate for us.

Operator

Operator

Our next question comes from Mats Liss at Kepler Cheuvreux.

Mats Liss

Analyst · Kepler Cheuvreux

A couple of questions from me as well. Just to come back to this pricing discussion and I guess there was some back and forth there. But do you expect to sort of implement well, the yearly price increase at year-end? Or is it too early to comment on that?

Mattias Ankarberg

Analyst · Kepler Cheuvreux

Mattias here. Yes, we expect to stay on the annual cycle and do some price increases by Jan 1, like everybody, but modest. We haven't still finalized, but modest.

Mats Liss

Analyst · Kepler Cheuvreux

Great. And also -- well, Active with Kids & Dogs, there are some questions regarding that as well. But I mean, the solid 21% growth is impressive. And -- but will the sort of comps become tougher in the coming quarters? Or should we expect that trend to continue?

Mattias Ankarberg

Analyst · Kepler Cheuvreux

Yes. Well, in a way, they become tougher, of course, because we've had nice growth for a while, but we're also adding new products and expanding distribution footprint, as we talked about. So this is a category I mean our ambition is to grow 15% per year in Active with Kids & Dogs. That's where we need to or want to get to midterm, and that should really contribute then to the overall growth profile of the company. Right now, we are at 13% year-to-date. So we are close, but we want to sort of continue to scale that up, and we are investing behind it. So that's the goal.

Mats Liss

Analyst · Kepler Cheuvreux

Okay. Great. And finally, maybe a bit philosophical, but I guess the car fleet becomes more electrified. And what would you say about your sort of opportunities there and the content you can offer in an electric car compared to a combustion engine car?

Mattias Ankarberg

Analyst · Kepler Cheuvreux

Yes. There is a clear shift in the vehicle fleet to your point. And I think we have done quite a lot. I mean one good example is, I think, the rear of car boxes that we have developed with electrical cars, people are less inclined to put something on top of the car because it's a drag and then you get lesser range. But if you have a box behind the car, actually, for most electric cars, you have a higher range because you get better aerodynamics, but it's also a convenient product. So we continuously need to adapt to that. We've done a big push on fitting out roof racks to Chinese electrical vehicles, for example, which has helped. So continue to sort of adapt to these factors, to your point, Mats, but also try to drive sort of some innovative products like, for example, the rear of car boxes will be key for us also going forward.

Mats Liss

Analyst · Kepler Cheuvreux

And the change sort of the in brand mix there, I mean, the Chinese are doing well. Is it sort of -- do you have this similar opportunities there are the sort of domestic suppliers of those products in China, which are sort of in favor for them? Could you say something about that?

Mattias Ankarberg

Analyst · Kepler Cheuvreux

Yes, sure. I think -- I mean the Chinese domestic market is quite small still for some of these type of products. There's a lot of regulatory hinders to put things on top of your car and behind your cars and whatnot. But Chinese automotive players are, of course, gaining a lot of ground in, for example, Europe and South America and Australia. And there, we have just made sure we have a really great assortment that fits these cars. As you know, some of our products are -- have fit kits that we call them that are adapted to each and every car model out there. So -- and I think we -- this is one example of, I think, a competitive advantage that Thule has because we have engineers in 3 continents that measure all the new cars and can quickly then get those measures and drawings back to our engineering teams and get new fit kits out to quickly have those globally in each market. So it's one example of how we adapt to the Chinese car, I don't know, revolution or growth, but primarily outside China, not in China.

Operator

Operator

Our next question comes from Fredrik Ivarsson at ABG.

Fredrik Ivarsson

Analyst · ABG

First, maybe on the underlying gross margin. When I try to strip out Quad Lock from the equation, it still looks like you're approaching, say, 44%-ish versus pre-pandemic average of around 40%. Can you talk about this expansion a bit more. What's been the sort of key drivers apart from price? And do you see more upside to it as you, I guess, wash out some noncore products and additional supply chain efficiencies, et cetera?

Toby Lawton

Analyst · ABG

Fredrik, I mean, we have been on a journey to increase gross margin, which you've seen over the last 2 years or so or 3 years or so. And you're right, it's increased. I mean, Quad Lock has had a positive impact, but even without Quad Lock, it's increased, and there's been many factors. There's been not least the efficiencies we're driving in supply chain, which are improving gross profit. On top of that, we have -- we're growing in sales through D2C channels, which improves gross profit. And then you always have some mix changes within our business as well, partly between the product areas that you see, but even within the product areas where we're driving more yes, more growth in premium than in the lower price points as well. So yes, so it's multiple factors, Fredrik. But yes, absolutely.

Fredrik Ivarsson

Analyst · ABG

Is it also fair to assume that the Champion categories come with a little bit higher gross margin on average?

Toby Lawton

Analyst · ABG

I say -- I mean, because they're so big and a big part of the business, they are very close to the average, I would say that. But -- not really. I wouldn't -- yes, so yes, I think they're in line with the average basically.

Mattias Ankarberg

Analyst · ABG

Yes. I think one interesting little observation, I'm not sure how it ties in, but it's a good observation, Fredrik, I think it's maybe not easy, but we can clearly get benefit from innovation and sort of new premium product with the Champions category. So focusing more on that also helps the mix effect, if you like. I think this Thule Epos ParkSecure is maybe one concrete example of a higher price point, but higher functionality, if you like, and positive contribution to the mix on both sales and margin profile.

Fredrik Ivarsson

Analyst · ABG

Yes. Okay. And then sorry for coming back to this, but the phasing in Quad Lock, just to understand how this works because I think last year, Apple launched the iPhones, I think they were in stores latter part of September, so end of Q3, shouldn't the phasing effect then be worse in Q4?

Mattias Ankarberg

Analyst · ABG

Yes. Well, I guess, it could be. I think we're also having, in general, holiday season in Q4. Q4 is a fairly substantial quarter for the Quad Lock business. There's Black Friday, there is Christmas shopping, there is post-Christmas shopping. So I guess there are other more general shopping behavior things also lifting up the quarter. But to be -- as I said before, we haven't modeled the phasing effects compared to other effects in detail to be really frank. What we can see is we see a negative effect in Q3. We expect there to be some negative effect in Q4 as well. And if that effect is bigger and smaller in Q3, I guess, we will see. But there are other big consumer moments aside from new phone models that you can tap into and work to drive growth with, which we're hoping will deliver a better number in the short term.

Fredrik Ivarsson

Analyst · ABG

Yes, we'll see. And then on the similar topic, but when I look at Bags & Mounts, I guess, around 70% is Quad Lock and then the remaining is the legacy bag business, and you are washing out parts of that product category at the moment. And I got to maybe around a 20% sales decrease in Q2. First, maybe can you sort of confirm that number and is the decline similar in Q3?

Mattias Ankarberg

Analyst · ABG

I'll try to follow your logic. But you are right that more than 2/3 is now mounts or Quad Lock. That's correct. The Thule bags business is the majority now of the remaining bags business sort of the bags business, I should say, quite largely so. It is delivering positive organic growth modestly, but still. And then the legacy business, Case Logic brand, some OE stuff is declining sharply. And I actually don't -- maybe 20% is probably directionally right in that part of the business. But just to be underlying, and that is not including the Thule branded bags business, which is actually growing even if as a modest number.

Fredrik Ivarsson

Analyst · ABG

Makes sense. And last one on product development cost. Can you help us to think about 2027 already now, if you expect those to sort of remain stable or increase or decrease next year?

Toby Lawton

Analyst · ABG

Yes. Fredrik, I refer back to what we talked about at the Capital Markets Day, where we expect to reduce product development costs by 1% over this medium-term period, so 2 to 4 years. We've reduced by a bit this year. So we'll see where we end up this year, but I think we'll have taken a step maybe halfway there this year, and we expect as a percentage of sales to come down a bit again next year as a percentage of sales. So overall, with growth, we expect the absolute number will probably increase a bit. But as a percentage of sales, it will come down. And then overall, over that 2- to 4-year period, we expect to come down by 1%.

Operator

Operator

That concludes the questions that we have time for today. So I will hand back to Mattias Ankarberg for closing remarks.

Mattias Ankarberg

Analyst · Jefferies

Thank you very much, everybody, for joining the call. Have a great day and talk to you again at the next quarterly call, if not before. Thank you.

Operator

Operator

This concludes today's call. Thank you for joining. You may now disconnect your lines.