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Samsonite: A solid luggage brand getting a makeover
5/2/07
5/1/07
Thursday, May 3, 2007
When it comes to luggage, I've found you can't beat Samsonite in terms of durability. Samsonite Corporation (OTC:SAMC)
is one of the world's largest manufacturers and distributors of
luggage; its brands include SAMSONITE® Black Label, LAMBERTSON TRUEX,
SAMSONITE®, AMERICAN TOURISTER®, LACOSTE® and TIMBERLAND®
Over the years, I've carried other kinds of luggage, but I find myself resorting to Samsonite when I travel. It is like wearing a Timex on your wrist -- it is timeless and always works. Of course, Samsonite has never been known for its style. But this is changing, and fast.
Three years ago, a new CEO arrived. Marcello Bottoli knows style -- he formerly had run Louis Vuitton. He came to a company that was in rough shape, much in part to 9/11 and the steep decline in people's travel spending. Bottoli saw the promise: An iconic American luggage brand, one that had been around for nearly 100 years, and one whose sales were also international. (Around 60% of its business is abroad.) Coming from the luxury goods sector, he set out to not only make Samsonite more stylish but also to help right its financial ship.
And under his leadership, Samsonite appeared to be turning around. Using his Louis Vuitton savvy, he brought on a creative director as well as haute couture designers. To reward owners for improving fiscal conditions, in December the board approved a $175 million cash distribution, paid for in part by taking on more debt. I think taking on debt to pay a bonus is a troubling thing indeed. But the ship continues to be steering in the right direction, so I am inclined be more forgiving this time.
As part of the 4th quarter earnings release at the end of April, Richard Wiley, Samsonite's CFO commented, "The Company's strategy of streamlining operations while delivering top line growth resulted in a 10.9% year-on-year increase in fiscal 2007 adjusted EBITDA to $134.7 million. Execution of our strategic plan to improve margins resulted in a 240 basis point increase in gross profit margins to 51.0% in fiscal 2007 from 48.6% in the prior year. This was driven by price increases, improved sales mix and lower fixed manufacturing and direct product costs." Additionally, Samsonite paid off $19.1 million in debt.
Samsonite currently is an over-the-counter stock (OTC), which means it is not traded in a centralized exchange like NYSE or AMEX. Generally, I'm somewhat wary of OTC stocks -- they are not listed on exchanges because they don't meet exchange requirements, sometimes because they are too small, but sometimes because they are offered by companies that have bad credit ratings. Samsonite is a company I'm willing to gamble on right now. The owners talk of leaving the OTC market and listing on another exchange again sometime this spring.
Bottoli moved headquarters to London, much because of the brand's strong international presence, so it would likely trade on the London Stock Exchange. Samsonite's stock price is low, but signs are pointing upward in terms of its financials, and I think Bottoli is executing the right strategies in making designs more fashionable and expanding even further into foreign markets.
Type of stock: An over-the-counter stock that may rise again. Samsonite is a well-established luggage brand that is getting a much needed makeover and going global.
Price target: In the 1990's, this stock traded in the $45 range. Samsonite currently trades at $1.12 and was as low as $.80 cents in the last 52 weeks. I think this is a worthwhile gamble. This brand has survived nearly a century, and while it might not get to the $40 range soon, there is the potential to go double digit to at least $10 over the next 18 months. I am thinking of buying this stock for my own portfolio and letting it sit for a few years as this brand is transformed back into its previous glory.
hilaryonstocks at 1:43:00 PM EDT Blog about this entry |
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Samsonite: A solid luggage brand getting a makeover
Over the years, I've carried other kinds of luggage, but I find myself resorting to Samsonite when I travel. It is like wearing a Timex on your wrist -- it is timeless and always works. Of course, Samsonite has never been known for its style. But this is changing, and fast.
Three years ago, a new CEO arrived. Marcello Bottoli knows style -- he formerly had run Louis Vuitton. He came to a company that was in rough shape, much in part to 9/11 and the steep decline in people's travel spending. Bottoli saw the promise: An iconic American luggage brand, one that had been around for nearly 100 years, and one whose sales were also international. (Around 60% of its business is abroad.) Coming from the luxury goods sector, he set out to not only make Samsonite more stylish but also to help right its financial ship.
And under his leadership, Samsonite appeared to be turning around. Using his Louis Vuitton savvy, he brought on a creative director as well as haute couture designers. To reward owners for improving fiscal conditions, in December the board approved a $175 million cash distribution, paid for in part by taking on more debt. I think taking on debt to pay a bonus is a troubling thing indeed. But the ship continues to be steering in the right direction, so I am inclined be more forgiving this time.
As part of the 4th quarter earnings release at the end of April, Richard Wiley, Samsonite's CFO commented, "The Company's strategy of streamlining operations while delivering top line growth resulted in a 10.9% year-on-year increase in fiscal 2007 adjusted EBITDA to $134.7 million. Execution of our strategic plan to improve margins resulted in a 240 basis point increase in gross profit margins to 51.0% in fiscal 2007 from 48.6% in the prior year. This was driven by price increases, improved sales mix and lower fixed manufacturing and direct product costs." Additionally, Samsonite paid off $19.1 million in debt.
Samsonite currently is an over-the-counter stock (OTC), which means it is not traded in a centralized exchange like NYSE or AMEX. Generally, I'm somewhat wary of OTC stocks -- they are not listed on exchanges because they don't meet exchange requirements, sometimes because they are too small, but sometimes because they are offered by companies that have bad credit ratings. Samsonite is a company I'm willing to gamble on right now. The owners talk of leaving the OTC market and listing on another exchange again sometime this spring.
Bottoli moved headquarters to London, much because of the brand's strong international presence, so it would likely trade on the London Stock Exchange. Samsonite's stock price is low, but signs are pointing upward in terms of its financials, and I think Bottoli is executing the right strategies in making designs more fashionable and expanding even further into foreign markets.
Type of stock: An over-the-counter stock that may rise again. Samsonite is a well-established luggage brand that is getting a much needed makeover and going global.
Price target: In the 1990's, this stock traded in the $45 range. Samsonite currently trades at $1.12 and was as low as $.80 cents in the last 52 weeks. I think this is a worthwhile gamble. This brand has survived nearly a century, and while it might not get to the $40 range soon, there is the potential to go double digit to at least $10 over the next 18 months. I am thinking of buying this stock for my own portfolio and letting it sit for a few years as this brand is transformed back into its previous glory.
hilaryonstocks at 1:43:00 PM EDT Blog about this entry |
Add to del.icio.us | digg this
This entry has 9 comments: (Add your own)
-
Without a doubt, Samonsite is a great brand and a good buy for the money. I find http://www.innovationluggage.
com to have the best prices for Samsonite. -
Hilary, still a buy??????
-
I bought 900 shares. The buyout will only make about 350.00 for me plus the short term taxes I will have to pay....
What happpend to 10.00 dollars ??....... -
Hilary,
What do you think of Samsonite takeover by CVC?
7/17/07 9:12 PM