Samsonite:Dampener

USA and China drag on luggage name’s 3Q15 sales

Samsonite’s 3Q sales were a touch weaker than expected due to the USA(tourist sales) and China (B2B). Sales on a constant-currency basis wereup 9% in 3Q versus +17% in 1H. The strong US dollar continues to weighon reported revenue, which was roughly flat year-on-year. We finetuneour estimates by dropping our full-year sales forecast but lifting marginsslightly. We only expect 10% net profit growth this year. We cut our pricetarget from HK$31 to HK$29 by applying 20x earnings (previously 22x),which is in line with the last three year’s average.

Slowdown in 3Q sales

Sales grew by +9% on a constant FX basis in 3Q, or flat year-on-year on areported basis given the strong US dollar. This 9% growth was a slowdownfrom 1H, which was up 17%, and due to the rolling off of acquisition impacts.Nonetheless, sales growth was a touch below our expectations.

USA and China slightly weak

Europe was strong at +19% due to continued gains at American Tourister andthe consolidation of Rolling Luggage. LatAm was +2%, suffering fromeconomic issues in Brazil (-35%). North America was +2% from +17% in 1Has the acquisitions of Speck and Gregory anniversaried. Excludingacquisitions, sales slowed from +4% in 1H to +2% in 3Q and was due toweaker tourist flows to gateways locations such as Florida and New York. Asiawas +10% but slower than 1H (+17%) due to weaker growth in China. B2Bsales (last year had a high base, when B2B recovered in 2H14).

Cutting revenue but increasing margins

We cut our full-year 2015 sales forecast to 5% from 8% growth. However, weproject gross margin to expand by 40bps QoQ in 2H and we expect operatingexpenses to be kept under control. We forecast a full-year operating marginof 12.1%, which is down a little YoY but could be slightly conservative.

HK$29 price target

We are trimming our valuation multiple from 22x to 20x (last three year’saverage) to arrive at our new price target of HK$29, which implies 26%upside.