By Charlie Lunan
Samsonite International S.A. said a strong dollar that has cut into tourism spending and the rapid online migration of retail sales in China slowed its growth in the six months ended June 30.
“There are two markets where we have already documented several near term challenges,” Samsonite Chairman Timothy Charles Parker wrote in a letter to shareholders. “The strong dollar has hit some of the popular tourist destinations hard, and the first half of the year has also been affected by timing shifts in some of the lumpier wholesale businesses. The strong U.S. dollar has also made destinations such as Hong Kong, whose currency is linked to the U.S. dollar, significantly less attractive compared to other countries, and this has had a major impact on the profitability of what is predominantly a retail business. In the Chinese market, there are significant upheavals arising from the rapid growth of e-commerce and the emergence of a more subdued pace of growth in consumption.”
Samsonite reported sales of casual bags and packs fell 5.3 percent in the six months ended June 30 as a decline in High Sierra sales and a shift to more traditional luggage in Asian markets more than offset double-digit growth in sales of Gregory packs and bags.
The company, whose shares are traded on the Hong Kong stock exchange, reported sales of Gregory packs grew 20.9 percent to $21.8 million during the period, an increase of 17.6 percent in currency-neutral terms from the first half of 2015. Sales of the much larger and more moderately price High Sierra brand, however, slipped 3.7 percent (-2.7 percent c-n) to $52.4 million, due primarily to declines in the U.S. and Canada.
Samsonite’s Red brand also declined as South Korean consumers and Chinese businesses shifted their spending toward more traditional luggage.
In Asia, which is the company’s largest region, net sales were flat (+3.7 percent c-n) compared with the first half of 2015. Growth was driven mainly by Japan and Australia, where net sales rose by 17.3 percent and 25.4 percent, respectively in currency-neutral terms. Both countries saw good growth in the core Samsonite and American Tourister brands, augmented by further expansion of Gregory in Japan and High Sierra in Australia.
That growth was partially offset by sluggish performance in China and South Korea where net sales on a constant currency basis were more or less flat year-on-year due to shifts in consumers’ channel preferences. Trading conditions were especially challenging in China’s TV home shopping and department store channels as consumers continued to migrate online. Consumer sentiment remained weak in South Korea and net sales declined 15.6 percent in currency-neutral terms in Hong Kong and Macau due to lower Chinese tourist arrivals.
In the U.S. and Canada, net sales increased 0.2 percent (0.5 percent c-n) to $403.6 million as higher shipments to e-commerce retailers and certain other wholesale customers and the addition of 16 company-operated stores was offset by a 4.4 percent currency-neutral decline in same-store sales due to lower tourist arrivals to U.S. gateway cities.
In Europe, net sales grew 5.4 percent (8.6 percent c-n) on the back of 25.7 percent growth at American Tourister. With the exception of France, where business was affected by the recent terrorist attacks, all of major markets in Europe reported solid constant currency growth, with Russia leading the way with net sales up 23.3 percent, followed by Italy (up 19.6 percent), Spain (up 15.3 percent), Germany (up 13.6 percent) and the United Kingdom (up 8.0 percent).
Samsonite reported net income excluding foreign currency impacts and financing costs related to its August 1 acquisition of the premium luggage brand Tumi, declined 1.7 percent to $100.3 million. The decline was due primarily to increased spending on store openings, lower same-store sales in certain markets, including the U.S. and Hong Kong, and the geographical expansion of the American Tourister, Lipault and Hartmann brands.
Photo courtesy Gregory Mountain Products
