Performance soars, yet stock price deflates. Why does Samsonite (01910) experience a "divergent path" of growth?

As we approach the year 2023, it seems that this year's consumer market has experienced a significant imbalance between hot and cold sectors. However, if we were to count the consumer companies that have maintained strong growth momentum, the century-old luggage leader, SAMSONITE (01910), certainly has a say. On the evening of November 13th, SAMSONITE released its 2023 third-quarter performance report. The financial report showed that the company achieved a revenue of $958 million in Q3 2023, an increase of 21.2% compared to the same period last year (calculated after excluding the impact of exchange rates, the same below); net profit attributable to the parent company was $115 million, a 101.6% increase year-on-year. In the first three quarters of this year, SAMSONITE's revenue reached $2.734 billion, a 35.6% increase year-on-year; net profit attributable to the parent company was $268 million, a staggering increase of 142.4%. The overall growth momentum remains impressive. Interestingly, on the morning of November 14th, SAMSONITE's stock price opened high but quickly dropped, with an intraday decline of nearly 3% at one point. However, the stock price rebounded in the afternoon, closing at HK$24.4, a 1.67% increase. The next day, SAMSONITE's stock still had some "strange" fluctuations. After opening significantly higher in the morning, it quickly fell, erasing most of its gains. At the close, SAMSONITE closed at HK$24.6, up 0.82%. Looking at the longer term, SAMSONITE's cumulative increase this year is close to 20%, significantly outperforming the Hong Kong stock market index. However, compared to its own performance, SAMSONITE's current price has also fallen by over 10% from its highest point this year. Continued high growth in performance As a global luggage leader with a century of history, SAMSONITE has accumulated strong brand and product strength in its development. It is reported that SAMSONITE's brand portfolio is rich and has certain positioning differentiation. It has formed a brand matrix centered on SAMSONITE, American Tourister, and Tumi, which can cover a wide range of consumers. Looking back at SAMSONITE's development over the past five years, over 90% of its net sales come from the North American, Asian, and European markets. In the first half of 2023, the company's net sales in all regions exceeded pre-pandemic levels. In the first half of 2023, net sales in the Asian region increased by 18% compared to the first half of 2019, while net sales in North America, Europe, and Latin America increased by 1.3%, 26.6%, and 69% respectively. According to the company's latest quarterly report, SAMSONITE continued its high growth momentum in the Asian region. During this period, the region's revenue increased by 44.9% to $373 million, accounting for 39% of total revenue, an increase of 5.6 percentage points. Among them, China and Japan performed particularly well, with growth rates of 72.6% and 69.2% respectively. In addition, compared to the same period in 2019, the Asian market has surpassed pre-pandemic levels. In contrast, SAMSONITE's performance in North America and Europe was slightly weaker. In Q3, the revenue from the North American market was $321 million, an increase of 10% year-on-year; the revenue from the European region was $214 million, an increase of 6.7%. In addition, SAMSONITE also generates a small portion of its revenue from Latin America. During the period, the company recorded revenue of $49.2 million in this region, an increase of 16.5%, accounting for 5.1% of total revenue. In terms of product categories, SAMSONITE's products can be divided into two main categories: travel and non-travel. Looking back at history, in 2020, due to the impact of the global pandemic, the proportion of travel products decreased, maintaining a ratio of approximately 1:1. In the first half of 2023, with the accelerated recovery of leisure and business travel in China, the proportion of travel products increased. Travel product sales amounted to $1.174 billion, accounting for 66.1% of net sales, while non-travel product sales amounted to $602 million, accounting for 33.9%. Entering the third quarter, the momentum of travel products remains strong. During the period, revenue from travel products contributed $645 million, while revenue from non-travel products contributed $313 million, increasing by 19.7% and 24.3% respectively year-on-year. In terms of brand allocation, SAMSONITE, American Tourister, and Tumi account for over 80% of total net sales. Among them, Tumi's proportion has increased in the past two years. In the first half of 2023, Tumi's net sales increased by 48.5% and accounted for 24% of total net sales, an increase of 1.4 percentage points. In Q3, the revenues of the SAMSONITE, Tumi, and American Tourister brands were $498 million, $214 million, and $174 million respectively, increasing by 20.1%, 29.8%, and 19.8% year-on-year. The corresponding revenue proportions were 52%, 22.3%, and 18.2%. At the same time, SAMSONITE opened 25 new direct stores in the third quarter, and the contribution of direct channels further increased, accounting for 37.7% of revenue, with a year-on-year increase of 26.9%. Based on the above, it is clear that SAMSONITE showed strong development momentum in the third quarter from various perspectives. While achieving significant revenue growth, the company's profitability has also improved. In the third quarter, the company realized a gross profit of $571 million, with a gross profit margin of 59.6%, an increase of 4.6 percentage points compared to the same period last year. During the same period, the company's net profit attributable to the parent company reached $115 million, a year-on-year increase of 101.6%. Lack of upward momentum in stock price and insufficient growth potential? Despite the high growth in the third-quarter performance, SAMSONITE's stock price has shown signs of a lack of upward momentum, indicating an increasing divergence in market views on the company's future prospects. It is believed that the cautious bullish sentiment in the secondary market may be due to the company management's cautious optimism about next year's growth. According to reports, SAMSONITE stated in the earnings conference call that compared to 2019, the company's revenue in 2023 is expected to be slightly lower, mainly due to uncertainties caused by the pandemic and global supply chain issues. This may have affected market sentiment and led to a cautious approach by investors. In conclusion, while SAMSONITE's performance in the third quarter showed strong growth, the stock market's reaction indicates a divergence of opinions on the company's future. Despite the challenges posed by the pandemic and global supply chain issues, SAMSONITE's strong brand and product strength, as well as its continued high growth in key markets, position it well for future growth. However, market sentiment and uncertainties may continue to have an impact on the company's stock price movement in the near term.In the fourth quarter of the year, sales are expected to achieve high double-digit growth, while on a year-on-year basis, they are expected to register an increase of over 20%. On one hand, the sales of the company's brands are optimistic during the Q4 period due to the stimulation from Singles' Day. On the other hand, the performance of the Tumi brand in the European and American markets is stable, and it is expected to continue to bring incremental growth to the company.However, SAMSONITE forecasts low double-digit growth in sales for 2024, which means that the company's growth rate will slow down next year. From an industry perspective, the luggage industry has shown a strong Matthew Effect in recent years, which provides a favorable industry environment for SAMSONITE to maintain growth in the medium and long term. According to Euromonitor International data, in 2022, the global CR3, CR5, and CR10 were 24.6%, 31.4%, and 41.3%, respectively, increasing by 0.2 percentage points, 0.4 percentage points, and 0.9 percentage points year-on-year. It is reported that this is mainly due to the sales growth of top luxury brands such as LVMH, Hermes, and Chanel, and the increase in market share. According to the same data source, the CR10 of the travel bag market in China in 2022 was 29.1%. Compared with mature developed markets, the luggage industry in China, especially the travel bag market, is still fragmented, and the industry concentration is expected to continue to increase. Overall, considering SAMSONITE's rich and diversified brand and product positioning, which can cover a wider range of consumer groups, and considering the potential in the Asian region, SAMSONITE is expected to maintain a certain growth momentum based on its competitive advantage in the long term. However, the true investment value of SAMSONITE for secondary market investors may still be a subject of debate. On the one hand, given the high base this year, the sustainability of SAMSONITE's performance growth may be questioned. On the other hand, the company's last dividend payment dates back to 2018, and whether consumer companies that have lost this bonus point of dividend payment are still worth long-term investment is also a question worth considering.