Wednesday, March 9, 2016

Tumi or Samsonite...or Both?

Recently, I read about Tumi and Samsonite joining forces in the luggage business. Check out this from The Washington Post...
Two of the biggest names at the baggage claim are about to join forces.
Samsonite, the world’s largest luggage company, said Friday that it agreed to pay $1.8 billion to acquire Tumi, a deal that would bring together an every man’s travel brand with an ultra-luxe one whose suitcases start at around $500. Samsonite hopes the purchase will allow it to become a more dominant force in the upscale corner of the market.
“We always wanted to have a play in this segment, but we have never been able to do it in a very credible way,” said Ramesh Tainwala, Samsonite’s chief executive, on a conference call with investors.
David Schick, a retail analyst at Stifel, said the move was a logical one for Tumi, which pulled in $548 million in sales last year.
“What we see in the evolution of luxury is that brands understand that they can only get so big,” Schick said.  
In other words, at a certain point, it’s helpful for them to become part of a larger suite of brands if they want to increase scale and find operational and logistical efficiency. 
Tumi’s stock was up 2 percent in Friday’s trading session, though its stock was up about 35 percent for the week since rumors of the tie-up had been circulating in preceding days.
Tumi, founded in 1975 and headquartered in South Plainfield, N.J., is known for inspiring serious customer loyalty.
“It’s the perfect suitcase,” said Justin McNulty, 34, who lives in Austin and runs the travel blog Justin Does. “It fits in every overhead compartment, it’s durable and it looks cool.”
When the handle fell off his previous suitcase, McNulty took it to a Tumi store. “A week later, I got a phone call saying ‘we’re going to send you a brand-new suitcase. Tell us which one you want.’” McNulty said the deal with Samsonite made him worried that such customer service might be affected.
“Just like with any other consolidation of companies, you worry. Are we going to get higher prices and less quality, just like with the airline mergers?” McNulty said.
Still, Samsonite seems committed to maintaining Tumi’s premium positioning in the marketplace, saying that the acquisition made sense in large part because Tumi brought something different to Samsonite’s portfolio:  In addition to its flagship brand, Samsonite also includes Hartmann, American Tourister, High Sierra and other travel bags that aren’t at Tumi’s upscale price point and aren’t as focused on the needs of business travelers.
Samsonite said it intends to expand Tumi’s reach in international markets. Currently the brand gets 68 percent of its sales in North America, with just 17 percent coming from Asia and 14 percent from its Europe, Middle East and Africa division. Tainwala also said it thinks Tumi could do a stronger business in hardside luggage, which today makes up a relatively small share of the brand’s sales.


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