Recently, the central bank's 300 billion share buyback and holding increase lending policy officially landed, triggering a wave of share buyback and increase holding frenzy among listed companies, which is expected to further boost market sentiment. However, at the current overall market warming up, some enterprise stock prices still lack upward momentum, the rise is only a temporary phenomenon, and after the heat fades, most of them fall back to their original levels.

On October 21, Samsonite (01910) closed down 2.24% to 18.32 Hong Kong dollars, giving back most of the gains made in the past month. On the news front, several investment institutions have lowered the company's target price, expecting the company's performance to continue to be weak. There were rumors before that the company may seek a dual listing in the United States under the arrangement of JPMorgan and Morgan Stanley, but so far there has been no further disclosure of more information.

Data shows that Samsonite has been frequently buying back shares since August, having spent about 0.2 billion Hong Kong dollars on share buybacks in October alone. With Q3 performance guidance weak and limited market growth space, how will Samsonite regain investor confidence in the future?

As profit indicators rise, can the slowing trend of performance growth be concealed?

In the first half of 2024, the domestic tourism consumption market rebounded rapidly. According to data from the Ministry of Culture and Tourism, the number of domestic outings in the first half of the year was 2.725 billion, a year-on-year increase of 14.3%; the total expenditure of domestic tourists reached 2.73 trillion yuan, a year-on-year increase of 19.0%.

The cultural and tourism consumption continues to heat up, also driving the mid-term profit indicators of Samsonite to rebound slightly. The interim report shows that the company's net sales for the first half of the year were 1.7685 billion US dollars, a decrease of 0.4% year-on-year; gross profit of 1.0648 billion US dollars, an increase of 2% year-on-year; operating profit of 0.3147 billion US dollars, an increase of 0.8% year-on-year; profit attributable to equity holders was approximately 0.164 billion US dollars, an increase of 7.7% year-on-year; and basic earnings per share was 0.113 USD.

According to the Zhitong Finance app, by region, in the first half of 2024, the sales revenue in Asia, Europe, and Latin America increased by 2.0%, 4.6%, and 20.3% year-on-year respectively, while North America remained relatively stable.

In the first half of 2024, in terms of brands and channels, the net sales of Tumi brand increased by 0.3%, while the net sales of American Tourister brand slightly decreased by 0.9%; the net sales directly facing consumers increased by 4.7%, accounting for 38.1% of the total net sales in the first half of 2024, compared to 37.7% in the first half of 2023.

In the first half of 2024, the company's gross margin increased from 58.8% in the same period last year to 60.2%, setting a record for the first half of the year, with improvements in all regions. The company attributed this growth to the increased proportion of DTC channels in total net sales, changes in brand portfolio, and strict control over promotional discounts.

As we enter the second half of the year, the enthusiasm for travel consumption remains high. Taking the National Day holiday as an example, according to data from the Ministry of Culture and Tourism's data center, the number of domestic trips during the National Day holiday period was 0.765 billion, a year-on-year increase of 5.9% based on comparable calculations, up 10.2% from the same period in 2019; the total spending by domestic tourists was 700.817 billion yuan, a year-on-year increase of 6.3% based on comparable calculations, up 7.9% from the same period in 2019.

However, investment institutions are not optimistic about Samsonite's performance in the third quarter. For example, Daiwa released a research report stating that it is expected that Samsonite's Q3 business trends will not differ significantly from Q2, with most of its major markets continuing to slow down, and the Q4 business performance trend will not change significantly; UBS, on the other hand, expects the company's Q3 performance to soften due to factors such as price competition in the Indian market and slowing growth in Western regions. In addition, a higher-than-expected degree of deleveraging in operations and unfavorable shifts in the sales mix have led the bank to lower its profit margin forecast.

Apart from the objective factors that are pessimistic about the overall consumption environment, the market's main concerns about Samsonite still lie in debt and growth prospects.

Despite some reduction in debt pressure, Samsonite is still struggling with insufficient growth momentum.

Samsonite's debt issues can be traced back to 2016. That year, the company acquired the high-end brand Tumi for 1.824 billion yuan, followed by a significant increase in goodwill and intangible assets as a percentage of total assets from 47.8% to 63.9%, totaling 2.97 billion yuan. At the same time, the liabilities increased from 0.82 billion yuan to 3.14 billion yuan.

According to the International Financial News App, in 2020, due to the impact of the epidemic, Samsonite impaired goodwill and intangible assets by a total of 0.74 billion yuan in the first quarter, resulting in a net loss of 0.79 billion yuan for the quarter. To enhance liquidity, Samsonite's long-term loans and liabilities further increased. As of March 31, 2024, the company's cash and cash equivalents were 0.745 billion yuan, outstanding financial debt was 1.825 billion yuan, net debt was 1.08 billion yuan; goodwill and intangible assets were 2.812 billion yuan, accounting for 52% of total assets; the asset-liability ratio remained high at 68.57%.

However, this year, with the improvement in profit indicators, company destocking situation performing well, and debt situation also showing signs of improvement. The interim report shows that the company's inventory decreased by 14% year-on-year to 0.64 billion US dollars, with inventory turnover days decreased by 5 days to 171 days, speeding up inventory turnover; the net leverage ratio in the second quarter of 2024 dropped to its lowest level since the acquisition of TUMI in 2016, at 1.39 times, with free cash flow growing by 28.7% to 81.6 million US dollars in the first half of the year.

Looking at the trend of the company's stock price, the current stock price is not only far from the peak of 36.5 Hong Kong dollars in 2018, but also still too early to return to the level of 30 Hong Kong dollars in March this year. Since late September, despite a brief recovery, the company's stock price has fallen back to around 18 Hong Kong dollars, close to the level before the overall market rebound.

Even with multiple recent buybacks, Samsonite's stock price has not been able to 'ride the wind,' perhaps because market investors do not have a bullish outlook on the company's future growth momentum.

Despite the continuous revenue growth in recent years (except for the significant decline due to the epidemic in 2020), behind the impressive performance is the company's continued path of 'spending money' through acquisitions. In 2011, the same year the company went public on the Hong Kong Stock Exchange, Tim Parker, the then chairman and CEO of Samsonite, proposed the path of development through acquisitions. In the following years, Samsonite successively acquired the French fashion luggage brand Lipault, the second largest phone case brand in the United States Speck, outdoor and adventure backpack brand Gregory, Italian luggage brand Chic Accent, high-end business luggage brand Tumi, and eBags, the largest and top global luggage e-commerce website in the United States.

While swiftly transforming into a multi-brand conglomerate through acquisitions and achieving growth rates beyond the market average, the company's debt has also been on the rise, with the asset-liability ratio nearly 70% as of March this year.

Now, as the company continues to expand, the growth rate of performance has unavoidably started to slow down, but what is more noteworthy is the annual decline in the company's market share.

According to Euromonitor, from 2013 to 2022, Samsonite has consistently maintained the first global market share in the travel luggage market. Between 2018 and 2022, Samsonite's share in the global luggage market dropped from 19.4% to 15.9%. In 2022, the company's market share was 3.3 percentage points higher than the second place, LVMH.

By 2023, it seems that Samsonite has slipped from the 'global number one' position. According to a recent report released by GTJA, Samsonite's market share in the global luggage market last year was 3.8%, only second to LV and Kering.

Additionally, according to Euromonitor, in the Chinese luggage market, Samsonite's market share decreased from 4.9% in 2017 to 3.7% in 2022. A report from Haitong Securities shows that from 2012 to 2022, the percentage of Samsonite's total sales in the Chinese market decreased from 10.0% to 5.8%.

With the decline of Samsonite, brands like Rimowa, Crash Baggage, and Away have taken the stage. Different from Samsonite's positioning for business people, the designs and marketing of these brands are more youthful. They associate products with trends and cultural attributes through hiring rock singers for promotion and organizing exhibitions, adding more brand value to their products.

According to the Wise News & Finance App, the travel luggage industry is relatively fragmented, and luggage belongs to low-frequency consumption goods, resulting in a low industry growth rate. According to Statista's forecast, global luggage market revenue is expected to reach $187.6 billion by 2024, with a compound annual growth rate of around 3.93%.

The lack of clear growth drivers in the industry also indicates that Samsonite's future growth space is limited. If Samsonite cannot convince investors with more positive financial data in the second half of the year, the market's pessimistic expectations may be difficult to digest in the short term.