Introduction to this report:

Due to weak global consumer demand, Q3 revenue and profit fluctuated in the short term under the high base; Q4 sales are expected to improve marginally as the high base effect declines.

Key points of investment:

Investment advice: Considering that Q3 earnings fell short of expectations due to weak terminal consumption, the company's net profit to mother in 2024-2026 was lowered to 0.389/0.436/0.49 billion US dollars (0.422/0.457/0.497 billion US dollars before adjustment, respectively). The current stock price corresponds to PE 9/8/7 times, respectively, maintaining an increase rating.

Q3 Sales weakened and profits were under pressure. Due to weak global consumer demand, Q3 revenue was $0.88 billion, -8.3% YoY/-6.8% at a fixed exchange rate. Due to the decline in the Asian region and TUMI's share of revenue, where profit margins are high, gross margin was -0.3 pct to 59.3%. Combined sales expenses were more rigid. Net profit to mother was 0.066 billion US dollars, or -39.1% compared to the same period last year. The adjusted profit margin was 17.6%, -2.7 pct year over year, lower than the previous forecast of 19%.

Samsonite brands are resilient, and TUMI is being pressured by the downturn in consumption. 1) By brand: Q3 Samsonite/TUMI/US Travel revenue of 0.48/0.19/0.14 billion dollars, -3.9%/-17.0% year-on-year, excluding exchange -2.2%/-8.9%/-15.1%. In the context of a high base in 2023, Samsonite maintained relative resilience; TUMI fluctuated greatly in the US and Asia, and maintained a steady growth trend in Europe; US travel was under pressure in the short term due to increased market competition and increased promotions, but maintained a double-digit growth target in the medium term. 2) Channel division: Q3 wholesale/DTC revenue was 0.53/0.35 billion US dollars, -11.5%/-3.1% year over year, excluding -10.4%/-0.8% of foreign exchange; in the context of weak consumption, wholesalers were more cautious in picking up goods, and the company continued to gain strength in the DTC channel. The net number of self-operated stores grew by 21 to 1104, and DTC achieved positive growth in many regions. 3) By region: Q3 Asia/North America/Europe/Latin America revenue of 3.3/0.3/0.21/0.05 billion dollars, -12%/-8%/-2%/-8% year-on-year, excluding exchange -12%/-8%/-2%/+14%.

Sales have improved marginally since October, and the outlook for 2025 is optimistic. As the high base effect waned, sales growth had been positive since October. Among them, Double Eleven sales in China also increased by nearly double digits.

Revenue guidance for 2024 is flat year over year (fixed exchange rate). Looking ahead to 2025, the company will continue to focus on brands, channels, and regions with higher profit margins, and revenue and profit are expected to grow steadily.

Risk factors: terminal consumer demand falls short of expectations, industry competition increases risk