Samsonite Sees Tumi Sales Doubling to $1 Billion on Global PushBy
Samsonite sees small distribution-led acquisitions possible
Tumi to develop new products integrating Samsonite technology
Samsonite International SA said it expects its luxury travel products brand, Tumi Holdings Inc. to double sales to $1 billion as the world’s largest luggage maker pushes the newly-acquired company into the global market with new, lightweight products.
Samsonite forecasts Tumi doubling its revenue, which stood at $548 million in 2015, in as little as three years, with the luxury brand launching new products using Samsonite technology by the end of next year, Samsonite Chief Executive Officer Ramesh Tainwala said Tuesday in an interview. Samsonite plans to distribute Tumi’s products in China and expect strong growth there, he said.
“Tumi’s travel luggage segment is not that strong, especially in Asia and Europe, because they lack technology to make lightweight luggage. Samsonite has the technology,” said Tainwala. “The result of the benefit that Samsonite provides to Tumi in terms of technology will be more visible in 2018.”
Samsonite’s $1.8 billion acquisition of Tumi, which completed earlier this month, solidifies its position as the top luggage maker and launches it into the premium baggage and travel accessories segment. The 106-year-old company has been aggressive with acquisitions since it listed in 2011, expanding with the purchases of luxury bag makers, Hartmann and Lipault as well as Speck Products, a maker of cases for electronic devices.
Tainwala sees the possibility of smaller acquisitions that are distribution-related as the company works to integrate Tumi over the next few years. “We don’t stop looking for acquisitions,” he said. “Tumi will keep us busy for the next few years.”
Samsonite reported Tuesday its first-half net income dropped 12.7 percent to $82.4 million from a year earlier, amid the uncertainty of slower growth prospects, terror incidents, and the impact of weaker currencies against the dollar.
Samsonite shares rose as much as 6.5 percent in Hong Kong trading Tuesday. Samsonite’s shares have dropped 4.2 percent through Monday after it announced the Tumi acquisition on March 4.
“The market is waiting to see if the deal can bring real synergy and become a new growth engine for Samsonite amid the business slowdown,” said China International Capital Corp Ltd. analyst Chris Kwai Tuesday.
Kwai is cautious on whether Tumi will be able to double sales in the next few years, though growth below that forecast would be seen as positive. “It would mean that the acquisition was the right decision for Samsonite to improve its performance,” he said.
The second-half looks much more “hopeful,” Tainwala said in an interview with Bloomberg Television. The company’s seen some early signs of a recovery, he said. Sales are forecast to post mid- to high-single digit growth in North America and high single-digit growth in China in the second half, Tainwala said. Samsonite gets about 40 percent of its revenue from Asia and a third from North America, with China making up about 10 percent of revenue.
Tumi will launch new lightweight products at the end of next year customized for Chinese consumers, Tainwala said. Tumi’s products right now are mainly designed for American consumers, with heavy luggage that “needs a whole Asian family to lift,” he said.
Though terrorism was one factor affecting growth in the first half, travelers are resilient and have changed destinations, Tainwala said. Political and economic uncertainties, however, weigh on purchases.
“The uncertainties make consumers hold back on their wallets,” said Tainwala. “Consumers are seeking more value.”