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Morningstar | Samsonite Faces Prolonged Consumer and Tariff Weakness; Uncertainty Heightened, FVE Cut

Samsonite’s revenue and earnings growth over the next five years is likely to be driven by its integration of Tumi, which was acquired in 2016, and eBags in 2017. Tumi gives Samsonite a meaningful presence in the premium to luxury end of the global luggage market. We expect Tumi, which has mainly been a U.S.-centric brand, to see growth from increased global sales points. However, eBags is being retooled into a stronger online platform for Samsonite group sales and not expected to contribute meaningfully in the near term.Samsonite is also investing in building its direct-to-consumer, or DTC, sales. With the proliferation of online shopping platforms, the company aims to develop and gain better control over the products available online and reduce the perception of discounts. It has cut distribution to the wholesale channel as part of this strategy. The group will also add more retail stores, particularly under Tumi.The key risk to Samsonite in the near term is a deterioration of U.S.-China trade relations. A second tariff hike on its China-made luggage into the U.S. would raise import duties by 15% and hurt gross profit margins. While the company would pass through the higher costs, it would probably be staggered out over two or three years, in which case, we'd expect a less-aggressive store-expansion policy.With the Tumi and eBags acquisitions to be digested, and with a focus on streamlining and revitalizing its brand portfolio, we do not expect any meaningful acquisitions in the next few years. Smaller brands Kamiliant and Lipault are also growing quickly but are still relatively small in significance. In addition, we would not be surprised to see Samsonite sell or cut back on noncore brands from its portfolio. We think growing wealth in emerging markets will continue to benefit Samsonite over the longer term. The World Travel & Tourism Council estimates average annual global tourism growth will be 4% through to 2027, driven in large part by emerging countries led in significance by China at 8% growth.