Samsonite Earnings: Management Lifts 2023 EBITDA Margin Guidance

Narrow-moat Samsonite’s 01910 first-quarter earnings were largely in line with our expectations, but beat Refinitiv consensus estimates. However, market reaction so far is muted, and while we lift our fair value estimate slightly to HKD 27 from HKD 26.50, we note that shares are trading just slightly undervalued, so buyers may want to allow for a larger risk/reward. Management edged up its 2023 adjusted EBITDA guidance to 18% from 17%, reaffirming our bullish near-term view, but we note that margins are close to peak and our projections forecast a margin pressure to materialize in 2024.

Travel recovery worldwide continues to fuel demand for Samsonite’s products—driving quarterly revenue up by 55% on a constant currency year-over-year basis. Relative to prepandemic periods, comparable sales were 18% above those in 2019.

Management sees encouraging sales trends going into the second quarter, especially in China, where sales are rapidly growing following the recent zero-COVID pivot. Profitability was the highlight in the first quarter, with the adjusted EBITDA margin clocking in at 18.4% versus 10.2% seen in the same period in 2019. We expect the business to continue to benefit from lower input costs and sales leverage over the next few quarters, which should translate to higher profitability.