With the impact of the "new crown pneumonia" epidemic on the global consumer market, Hong Kong consumer stocks have plummeted collectively, of which Samsonite (01910), the world's largest brand luggage manufacturer, has continued to plummet, and has suffered a waist cut year-to-date, hitting a new low in nearly 8 years.
Source: Huasheng Securities
While the pandemic has plunged the global tourism industry into a cooling period, the negative impact of the remaining earthquakes on related markets such as travel goods has become increasingly apparent. For Samsonite, which is already facing a debt crisis, the damage to the supply chain caused by the epidemic and the slowdown in global sales growth have undoubtedly greatly weakened its ability to repay its debt. In early March, S&P Global rated its debt as "junk," and as of the end of September last year, Samsonite's debt was about three times its revenue.
Source: Samsonite official website
Long before the outbreak of the epidemic, this century-old luggage brand was already in danger. In 2016, Samsonite acquired tumi, a well-known American luggage brand, for a whopping $1.8 billion, which was one of the reasons for its debt crisis. Last year, the price of its products rose by about 10% due to the impact of the Sino-US trade dispute. The data shows that Samsonite's net sales in the first half of 2019 were $1.75 billion, down 5% from the same period last year. Operating profit was $124 million, down 38 percent.
The pandemic has worsened Samsonite in the midst of the debt crisis, with many of its factories in China and Southeast Asia shut down in February and severely damaged supply chains. Consumers' reduced willingness to travel has also hampered their sales.
"Father of Samsonite" Jesse. Schwader
It is reported that the Asian market accounts for about 1/3 of Samsonite's overall business, and in 2018, about 8% of its total brand revenue came from China. For Chinese consumers, Samsonite has a fairly high brand recognition. Its minimalist yet futuristic design has led the way in the aesthetics and functionality of the suitcase for the past 110 years. "Father of Samsonite" Jesse. Mr. Schwarder founded the legendary luggage manufacturing company in Colorado in 1910. At the time, he wanted to give the new suitcase an alias that would symbolize its sturdiness and durability, so he chose the biblical Hercules samson to name his product.
In an era when carriages and horses were the main means of transportation, wooden suitcases were once the most ideal suitcases. After the Second World War, people's travel methods have changed dramatically, long-distance travel by plane and cruise ship has become more frequent, and travelers need more durable suitcases to prevent the contents of the box from being squeezed, scratched and deformed during the consignment process. Under the new market demand, Samsonite developed suitcases that used magnesium instead of wood, triggering a revolution in the travel case world.
Over the years, Samsonite has been committed to the design, development and innovation of new products, and has launched cross-border cooperation products with many designers. Among them, many products such as the scope 55 cm upright trolley case designed by Australian ghost designer Mark Newson, the Samsonite black label series designed by the late designer Alexander McQueen, and the cosmolite series using innovative curv technology have won many international design awards such as the European IF Design Award and the Red Dot Design Award. In June 2011, Samsonite was officially announced to be listed on the Hong Kong Stock Exchange.
In the history of Samsonite's brand development, acquisitions are undoubtedly one of the important ways to occupy the global market. Since the successful acquisition of American Travel, the second largest brand of luggage in the United States, Samsonite has embarked on a tireless acquisition path. In 2012, Samsonite acquired the American luxury luggage brand Hamant and the urban outdoor brand American Alpine; in April 2013, it acquired the French luggage brand Lipault, and in June of the same year, it acquired gregory, an American professional backpack, mountaineering and cross-country running goods and accessories brand, and the new brand Cameron.
According to industry analysts, due to unfavorable factors such as the epidemic, Samsonite's acquisition and expansion plans in recent years may slow down this year, focusing on debt repayment and store business management. Samsonite has 1,300 self-operated stores worldwide, and its gross margin last year was maintained at around 60%. While the established luggage company appears to be giving off a red light in the midst of the crisis, S&P and Moody's predict Samsonite will still be able to keep cash flow steady in the near term as its cost controls on sales channels are more efficient than other small suitcase manufacturers.