‘Revenge travel’ could be the passport to success for Samsonite

After the Covid-19 pandemic locked-up much of the world’s population, demand for travel is soaring. One company, identified by the managers of Henderson Far East Income Limited, that has benefited from this trend is Samsonite, thanks to savvy brand deals and an attractive balance sheet.

With rising inflation prompting a rapid increase in interest rates, the re-emergence from the Covid-19 pandemic has felt in parts of the economy like something of a damp squib. However, the lessons from the pandemic remain evident in our buying habits; after being repeatedly locked down for two years, we are eager to get out of our houses and do things.

On the move

Spending on travel and tourism swiftly and aggressively recovered from the troughs of the pandemic period, in a phenomenon known as “revenge travel”. Numbers continue to hold strong in Western economies even as the cost of living has climbed, with international arrivals into Europe only 3.2% below 2019 levels in the January to September 2023 period.¹

This trend has longer to run in Asia. Travel and tourism out of China and into the wider region was already rising exponentially prior to the pandemic. Indeed, according to the UN World Tourism Organisation mainland China had the largest outbound travel market in the world, with 65% of travellers making trips for leisure purposes.

Much of this demand focused on its neighbours, and, with Covid restrictions lasting significantly longer in China including some remaining into the first months of 2023, demand has yet to recover, never mind restart its growth phase. Meanwhile, domestic Chinese travel is already surpassing pre-pandemic levels, reflecting the pent-up demand for travel in Chinese society.

With this in mind, businesses exposed to tourism demand, particularly on a global level, could be in a position of strength. Of course, the businesses exposed to this demand vary. While the obvious place to turn may be the airlines, they are particularly vulnerable to the vagaries of the oil price, currently on a renewed upward march. Elsewhere, airport operators can be impacted by factors as unpredictable as travel destination trends, or weather.

One stock that has benefited from renewed tourism numbers – as identified by the managers of Henderson Far East Income Limited – is Samsonite. The Hong Kong-listed luggage manufacturer has established itself as the accessible luxury name in the travel baggage market.

In part, this comes from sensible brand management, including carefully curating its stockists in different markets (in the UK think John Lewis, Selfridges and Next). Across its multitude of luggage brands, it has also engaged in sensible, strategic partnerships.

For example, the company’s Tumi brand has collaborated with prestige sports names like McClaren and Tottenham Hotspur, while the core Samsonite brand has focused on regionally-minded celebrity endorsements, such as Korean boyband phenomenon BTS – ask your nearest gen Z – and fashion-oriented collaborations, like a large campaign with Hugo Boss earlier in 2023.

All in the numbers

This unusually powerful brand identity has fed through in the company’s numbers. Its interim results, published in August 2023, recording staggering rises in earnings, including a 44.5% rise in net sales year-on-year and a 78.8% rise in EBITDA, a measure of core earnings, in the same period.² While some of the rise can be attributed to the post-pandemic recovery, net sales rose 14.6% on 2019 levels and EBITDA was up 38.1% on the same measure.

These numbers represent a complete turnaround for a business tarnished with accusations of false accounting and dishonesty by its former CEO in 2018.

With travel expenditure globally still c. 10% below pre-pandemic levels, the outlook for Samsonite currently looks positive, although inflationary pressures for consumers could still have some impact in the near future.

¹ https://etc-corporate.org/news/europes-tourism-displays-a-strong-rebound-but-remains-uneven-across-the-regions/
² E_Samsonite 2023 Interim Report.pdf

Glossary

Balance sheet – A financial statement that summarises a company’s assets, liabilities and shareholders’ equity at a particular point in time. Each segment gives investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. It is called a balance sheet because of the accounting equation: assets = liabilities + shareholders’ equity.

EBITDA – Earnings before interest, tax, depreciation and amortisation (EBITDA) is a metric used to measure a company’s profitability net of expenses and associated costs, taxes or debts.

Inflation – The rate at which the prices of goods and services are rising in an economy. The Consumer Price Index (CPI) and Retail Price Index (RPI) are two common measures. The opposite of deflation.

Price-to-earnings (P/E) ratio – A popular ratio used to value a company’s shares, compared to other stocks, or a benchmark index. It is calculated by dividing the current share price by its earnings per share. It is calculated by dividing the current share price (P) by its earnings per share (E).

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Revenge travel article

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