Samsonite Earnings: Management Maintains 2024 Outlook; We See Downside to Long-Term Profitability

Narrow-moat Samsonite’s fourth-quarter 2023 results were slightly behind our expectations. Nonetheless, management maintained guidance for 2024, while also emphasizing that they are vigilantly observing the competitive landscape and prevailing promotional dynamics. We made minor updates to our near-term forecasts, but have kept the bulk of our long-term assumptions unchanged. We maintain Samsonite’s fair value estimate of HKD 27 and we view shares as fairly valued currently. Although some investors point to the low price/earnings multiple as an indicator of more upside in the valuation, this belief is contingent on Samsonite's ability to maintain its current margin profile in the long run. However, we approach this optimism with caution. Our reluctance to project the current 20% adjusted EBITDA margin into perpetuity is due to the lack of evidence that the luggage industry will remain structurally less competitive, and more profitable, after covid-19.