Sam­sonite ex­pects trade war to hit China sales

Firm sees un­cer­tainty lead­ing into sec­ond half of the year

The Star Malaysia - StarBiz - - Foreign News -

HONG KONG: The world’s top lug­gage maker Sam­sonite In­ter­na­tional SA says the trade war be­tween the US and China is damp­ing sentiment among Chi­nese con­sumers and will play into slower sales growth in its sec­ond-big­gest mar­ket, in another sign of the fall­out from the tit-for-tat tar­iffs.

“All the noise of trade wars cre­ates a lit­tle bit of sentiment on Chi­nese con­sumers,” Kyle Fran­cis Gen­dreau, the com­pany’s new chief ex­ec­u­tive of­fi­cer, said in an in­ter­view. “We saw a lit­tle bit of un­cer­tainty in China lead­ing into the sec­ond half of the year.”

The lug­gage gi­ant ex­pected to see over­all tar­iffs on its lug­gage and travel prod­ucts rise an ad­di­tional 10% – ef­fec­tively in­creas­ing levies on its prod­ucts to 30% – if the US en­acted the next round of tar­iffs on up to US$200bil worth of Chi­nese goods, said Gen­dreau.

Its prod­ucts had been sub­jected to an over­all 20% tar­iff for a while now, he said.

Sam­sonite, based in Mans­field, Mas­sachusetts and listed in Hong Kong, has faced a dif­fi­cult year. Crit­i­cism of the com­pany’s man­age­ment by a short seller led to the res­ig­na­tion of Ramesh Tain­wala as CEO, while lug­gage and hand­bags have be­come a tar­get in the trade war be­tween China and the US. Its shares have tum­bled 14% this year.

Still, the com­pany said its busi­ness “did not miss a beat” af­ter short seller Blue Orca Cap­i­tal LLC at­tacked the com­pany’s cor­po­rate gov­er­nance, ac­count­ing linked to its takeovers and Tain­wala’s cre­den­tials. Sam­sonite re­sponded with a point-by-point re­but­tal in June, and shares have re­bounded af­ter an ini­tial plunge.

Sam­sonite shares jumped as much as 8.5% in early trad­ing in Hong Kong yes­ter­day. That’s the big­gest one-day in­crease since Tain­wala stepped down on June 1, though the stock has yet to fully re­cover from Blue Orca’s at­tack on the com­pany.

The com­pany posted net in­come of US$67.8mil for the first half on Wed­nes­day, with strong net sales growth in all of its key brands.

Sales growth in China would likely soften to a mid-sin­gle digit per­cent­age in the third quar­ter, with full-year growth of 7% to 9%, Gen­dreau said. China an­nual sales growth typ­i­cally should be around 10%, he said.

A lack of progress in trade talks is set­ting the stage for the Trump ad­min­is­tra­tion to push ahead with the next round of tar­iffs while China has said it plans to re­tal­i­ate. The tar­iffs would lead to higher prices for con­sumers as the in­dus­try fac­tored in the added costs, Gen­dreau said.

If the next round of tar­iffs took ef­fect in Oc­to­ber or Novem­ber, the in­dus­try would start to feel the im­pact the be­gin­ning of next year, he said, sug­gest­ing that’s when some com­pa­nies may look to raise prices.

Sam­sonite had been shift­ing pro­duc­tion from China to Viet­nam and Thai­land and would con­tinue to do so as part of a long-term strat­egy, he said.

“Tar­iffs are a cost in the busi­ness,” said Gen­dreau. “I don’t think we should make rad­i­cal changes to the way we think about the busi­ness be­cause this is a com­po­nent of cost, just like any other cost. The shame of this is it’s hard to pre­dict.” — Bloomberg

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