Samsonite On The Hunt For More Brands: CEO
Luxury labels. Sports labels. You name it! Hong Kong-based luggage designer Samsonite is on a buying frenzy. Affluent Asia is the sweet spot for the luggage industry as this region is its biggest market. During an interview, CEO Tim Parker shares his genius on acquiring brands of all sorts. First, he shares a little more on his favorite piece.
Tim Parker: “This without question is my favorite. This cosmolite case, super light, super strong, I’ve been using it for at least five years this particular model. Never let me down.”
Booming in North America
Reuters Reporter Tara Joseph: “So we’re standing here in your Samsonite shop, one of many, and you’re on target, I think, to hit $2 billion dollar in sales overall this year. Interestingly growth is highest in North America, not here in Asia. Why is that and are you on target for that to continue?”
Tim Parker: “A couple of reasons. One, is we made some acquisitions in America so we’re getting the benefit of those acquisitions but our underlying growth in America is currently around 11 or 12 percent which is fantastic for a market which is quite mature.”
Reuters Reporter Tara Joseph: “But you listed in Hong Kong, Asia is seen as the growth place, it’s a very brand-intensive culture here. It shows that actually your American Tourister brand, which is the sort of lower-tier level, is what’s actually selling in Asia. Certainly that has to be a bit of a surprise?”
Tim Parker: “Not to me and I think not to the rest of the team. Our Samsonite brand in Asia has a very high share of its product category. And American Tourister addresses a very broad market, a much more accessible market. And that’s the reason, I think, why American Tourister has been growing in China, Korea, Indonesia.”
Reuters Reporter Tara Joseph: “But those are very brand intensive places, wouldn’t you expect that Samsonite would be the big growth engine here in Asia.”
Tim Parker: “They are brand-intensive places but there’s only so many cases that you can sell at a higher price category. And if you go into any department store in Asia, I guarantee you’ll find a good sort of 20 or 30 percent of the space is Samsonite. So we have the placement, we have the customers buying our products, but you do at some point come up against some limitations on what you can achieve in terms of growth.”
Reuters Reporter Tara Joseph: “Let’s go to the other end of your suitcase business which is the top end. Hartmann, you bought it for $35 million in cash, and you had said that earnings would hit an earnings per share in 2013. What are we seeing in terms of earnings per share, how much is it contributing now?”
Tim Parker: “Hartmann is still only a very small part of our company, we did signal when we bought it that 2013 would be a year of reorganization and we need to get the brand sorted out and the product sorted out, so I have very low expectations in terms of its contribution this year. Next year, though, we’ve got very high hopes of quite a substantial expansion. We’re launching the brand here in Asia, we’ve got a store that will be going up in Madison Avenue, so it’s ready to go.”
Reuters Reporter Tara Joseph: “So when will it actually contribute to earnings?”
Tim Parker: “It will make a contribution next year.”
What’s the Next Acquisition?
Reuters Reporter Tara Joseph: “Moving also into all your acquisitions: Hartmann’s one, you also had Sierra, you’ve got Samsonite, you have American Tourister. What else could you possibly buy?”
Tim Parker: “Our market’s very fragmented, and although we occupy a very good chunk of the luggage market, there are areas such as handbags, business cases, we’re looking at the whole outdoor segment – all of these represent very interesting opportunities for us because one of the strengths of our company is this enormous world-wide distribution platform. So we have a huge logistics capability, we’ve got a lot of experienced management, and we have established relationships with the key distribution channels. So we want to buy brands and really develop them internationally.”
Reuters Reporter Tara Joseph: “So it sounds like in a way you’re going to grow beyond suitcases. And with so many different tiers as well, is that a little bit of a worrying business model to try and handle different tiers, different types of bags etc.?”
Tim Parker: “Well, in my view, we do have different tiers of operation in our traditional luggage business which I think we understand very well. We will only go step by step into some of these other areas. Personally I’m very optimistic, I think we’ve got a business with very good organic growth prospects, but I think also we can add some real value to local brands which we can realize the potential of internationally.”
Reuters Reporter Tara Joseph: “So give me a hint, your next acquisition? An Asian brand? A handbag brand?”
Tim Parker: “We’re looking at brands in Asia, we’re looking at brands in Europe, we’re looking at brands in America.”
Reuters Reporter Tara Joseph: “That’s very general, which one will it be?”
Tim Parker: “And which one will reach the finishing line first I have no idea. But we will, I think, I hope have some interesting developments in the next few months.”
There’s no stopping luggage giant Samsonite. Soon enough it’s next acquisition will be making headway. For now, we can only speculate which will be next.