Tags: samsonite | perfect | match

Samsonite Shouldn't Wait Too Long for Next Perfect Match

Samsonite Shouldn't Wait Too Long for Next Perfect Match
Tyler O'neill | Dreamstime

By    |   Saturday, 26 August 2017 10:41 AM

Samsonite International SA CEO Ramesh Tainwala likened M&A to a teenager seeking a girlfriend, telling Gadfly on Thursday, "it comes when it comes."

Patience is a virtue. Tainwala has proven to be a savvy dealmaker, with purchases like Tumi, the high-end luggage maker, and the online category leader eBags.com padding earnings in the first half. Knowing when to pounce is key, too, and the takeover prospects in bags and luggage brands couldn't be better for a buyer like Samsonite.

Consolidation is afoot among makers of bags, shoes and accessories, as retail sales slow and companies struggle with challenged outlet and department stores.

In the last three months, we saw Michael Kors Holdings Inc. buy Jimmy Choo Plc and Coach Inc. acquire Kate Spade & Co. in what's started to feel like musical chairs among luxury labels.

Fashion brands that used to depend on distributors in Asia and Europe are having a harder time covering the costs of these middlemen as smarter consumers, helped by internet transparency, refuse to pay premium prices in key markets like China. Coach, Kate Spade and others are trying to find new ways to charge more, including recasting themselves as higher-end brands. 

That's a big reason why Samsonite went after Tumi in the first place. The company had tried to move upmarket for years but never had the street cred with people who spend serious money on luggage like Tumi. That brand also came with access to 2,000 distribution points in 75 countries. 

Tumi had an outsized impact on growth in the last half-year, particularly in Samsonite's direct-to-consumer business, where revenue rose 89 percent from the year before. Excluding Tumi, the increase was 20 percent.

It's clear Samsonite's strategy relies on growth through acquisition. It's made 10 purchases since 2012, broadening its brands to offer products at every price point. It makes sense to keep the luxury streak going while the timing is hot, with companies like Salvatore Ferragamo SpA, Prada SpA, Canada Goose Holdings Inc., Burberry Group Plc and Furla SpA potentially in play. 

Some of those might be too expensive for the Hong Kong-listed retailer, especially as Samsonite still carries more than $1.8 billion in debt from recent purchases. 

Another wise option would be along the lines of the most recent acquisition. Samsonite's $105 million cash purchase of web-only eBags.com helped address an area where it lacked mettle: e-commerce.

Tainwala told Bloomberg TV on Thursday he hopes to take the eBags business to $1 billion in annual sales, and to boost Samsonite's online sales to 25 percent of the total, from around 10 percent today. Those goals probably aren't ambitious enough.

Ebags sales goal: $1 billion

As more consumers shift their purchases online, Samsonite will need an even bigger web presence. It should consider other online businesses, including startups like Toronto-based Heys International Ltd. and Away of the U.S., which recently raised $20 million in Series B funding for its line of tech-connected suitcases.

Samsonite is already developing its own version of tech-connected luggage, but as with eBags, the century-old company could probably benefit from exposure to the kind of expertise and culture that comes with these startups.

Sensibly, Samsonite is taking the time to integrate Tumi and eBags, but it shouldn't spend too long on past relationships. Another one could be right around the corner.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal

© Copyright 2019 Bloomberg L.P. All Rights Reserved.

   
1Like our page
2Share
ShellyBanjo
Samsonite International SA CEO Ramesh Tainwala likened M&A to a teenager seeking a girlfriend, telling Gadfly on Thursday, "it comes when it comes."Patience is a virtue. Tainwala has proven to be a savvy dealmaker, with purchases like Tumi, the high-end luggage maker, and...
samsonite, perfect, match
590
2017-41-26
Saturday, 26 August 2017 10:41 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved