Higher tariffs and reduced Chinese tourist traffic in US weaken Samsonite in third quarter

Hong Kong-listed luggage house Samsonite posted third-quarter sales (ended September) down -0.7%* at constant currency (and -2.5% reported).

The contraction to US$921.5 million was blamed on a slowdown in the US, South Korea and Chile, and the worsening political unrest in Hong Kong. Samsonite’s share price slipped on Thursday from HK$17.50 to HK$16.04 on the results statement.

Samsonite has a strong presence in travel retail (pictured is Hong Kong International Airport)

The company – owner of the Tumi brand which is widely distributed in travel retail – stated that excluding Hong Kong, net sales growth was +0.2%.

On a constant currency basis, all regions showed growth except North America which slid by -7.6% to US$339 million. However, on a reported basis, all regions contracted except Asia Pacific which generated revenue of US$333.1 million.

Above: At constant currency only North America contracted in Q3 but reported sales show declines everywhere except Asia. Below: Q3 performance by brand [click to enlarge]

Asia’s overall Q3 performance has pushed the region to almost level pegging with North America in the nine months to September. Asian sales reached US$977 million in the period, just shy of North America’s US$993 million, which took a significant hit of -6.3% compared to the same period last year.

Samsonite stated: “YTD September US sales were down largely due to the impact of higher tariffs and reduced Chinese tourist traffic. Retail comparisons in gateway stores, which were most affected by inbound traffic, were down -12.8% but direct-to-consumer ecommerce net sales continue to be strong with growth of +18.3%, excluding eBags.”

Tumi saw deceleration in third quarter

While Samsonite generated net sales up +1.0% in Q3 (an improvement from the -1.2% seen in the nine months to September), Tumi showed Q3 growth of +0.6% and +3.4% for the nine-month period.

Tumi at Milan Linate Airport. Europe performed well for the brand in Q3.

Tumi’s Q3 result was affected by a decrease of-3.8% in North America due to reduced Chinese tourist traffic in US gateway cities. On the positive side, Europe surged by +10.5%, Latin America by +13.0%, and Asia by +3.6%. Samsonite noted that excluding the troubled and slowing markets of Hong Kong and South Korea, Tumi’s Asian growth would have been +14.8%.

Overall nine-month net sales for the company decreased by -1.2% year-on-year to US$2,677.2 million.

Kyle Gendreau said: “We will… diversify our sourcing base and renegotiate prices and payment terms with vendors to manage the impact of the recent US tariff increases.”

Commenting on the results, Samsonite CEO Kyle Gendreau said: “We are encouraged by our progress as we continued to reposition for long-term growth and profitability. For the three months ended September, all our regions achieved constant currency net sales increases except North America. (This was) despite headwinds in key markets including the US, South Korea, the Hong Kong domestic market [excluding net sales made in Macau and to distributors in certain other Asian markets-Ed], and Chile.”

Tumi international expansion safeguarded

“We remain focused on managing our cost base while continuing to invest in growth initiatives. In addition, we have temporarily trimmed advertising spending for the second half of 2019 to mitigate the pressure on our profitability.”

In terms of outlook, Samsonite cited ongoing trade negotiations between the US and China, Brexit, economic growth slowing in parts of Europe, and unrest in Hong Kong as reasons to be cautious.

Gendreau added: “We will continue to execute our profit improvement initiatives, including increasing our bricks-and-mortar retail profitability. We will invest in long-term growth drivers including further international expansion of the Tumi brand. We will also continue to diversify our sourcing base and to renegotiate prices and payment terms with vendors to manage the impact of the recent US tariff increases.”

*All percentages shown are at constant exchange rates unless stated.

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