Samsonite Earnings: Management Again Lifts Margin Guidance, Shared Encouraging July Trends

Narrow-moat Samsonite’s 01910 second-quarter revenue came slightly below our expectations, but margins were ahead. Management lifted full-year adjusted EBITDA margin guidance to 19% from 18%, reaffirming our bullish near-term view. Overall, we maintain our HKD 27 fair value estimate and note that shares are trading just slightly undervalued, so buyers may want a larger margin of safety before investing in Samsonite shares.

Travel recovery worldwide continues to fuel demand for Samsonite’s products—driving quarterly revenue up by 36% year over year on a constant-currency basis. Relative to prepandemic periods, comparable sales were 15% above those in 2019. Management sees encouraging sales trends going into the third quarter, especially in China, where sales are rapidly growing following the recent zero-COVID-19 pivot.

Profitability was the highlight in the second quarter, with the adjusted EBITDA margin clocking in at 19.3%, up 170 basis points from the same period last year. We expect the business to continue to benefit from sales leverage, favorable region mix shift, and lower input costs over the next few quarters.

We fine-tuned our earnings forecast for 2023 to factor in lower sales but stronger margins going into the rest of this year. While we continue to forecast record levels of profitability over the short term, we don’t believe the firm can maintain current profitability over the long run. The initial pandemic outbreak led several competitors to exit the luggage market, and the release of pent-up travel demand that followed the coronavirus lockdown has driven consumers to buy up whatever luggage they could find on shelves. But in our view, competition may increase due to minimal barriers to entry and nonexistent switching costs. While we expect Samsonite to see its adjusted EBITDA margin reaching 19.4% in 2023, our midcycle assumption is just 15.7%, a number in line with the prepandemic average.