Samsonite sales growth in Asia slows

Samsonite said it expected sales in Asia to grow at less than half of last year's pace, as the world's largest luggage maker by revenue reported a 76% drop in net profit - attributed to exceptional costs and items - in its first full-year results since becoming a public company.

The company said last year's results could not be compared in a meaningful way with 2010 figures without considering a one-off gain in 2010 of USD 379.8 million when earlier impairments were reversed, and the USD 24.8 million it spent on its USD 1.25 billion Hong Kong initial public offering.

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Net profit of USD 86.8 million exceeded the USD 64.2 million forecast at the time of its IPO.

Tim Parker, chief executive, said last year's 43% increase in Asian sales set a pace which was not sustainable once revenue had reached a much higher level.

"Despite the emergence of the eurozone crisis in the middle of last year, global travel numbers continued their advance across all regions," he said. Sales rose 28.8% to a record USD 1.6 billion. Excluding the USD 54 million in sales from two licensing agreements which were terminated last year, sales would have gone up by 34.4%."

Samsonite results beat consensus estimates, according to Barclays Capital analysts. Sales growth was strong across the regions apart from the last quarter, but inventory days remained a healthy 118 days compared with 117 days in 2010, they said.

The company is targeting the lower end of the market in India and China, currently dominated by small, non-branded products. Ramesh Tainwala, president of Asia-Pacific and Middle East, said: "In India luggage sold in small stores is always sold with a piece of rope and in airports people wrap their suitcases to death because they have the impression that it is not going to work. So we offer something basic which is not expensive, but it works - we want to encourage people to trade up to branded luggage."

A new brand called AT will offer luggage costing as little as Rs 2,000 (USD 40) and the company has just launched the line in China.

Kyle Gendreau, chief financial officer, said Samsonite would consider making "small acquisitions" of casual bag makers. One example of a good fit was JanSport, best known for its backpacks, though he stressed that Samsonite was not aware if JanSport was available.

Samsonite shares dropped 1.1% in Hong Kong after the results came out, against a 0.77% drop in the Hang Seng index.