Samsonite Corporation

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Samsonite Corporation

founded: 1910

Contact Information:

headquarters: 11200 e. 45th ave.
denver, co 80239 phone: (303)373-2000 fax: (303)373-6300 url: http://www.samsonite.com

OVERVIEW

Samsonite Corporation, headquartered in Denver, Colorado, is one of the world's largest and most influential designers, manufacturers, and distributors of luggage. Its products are marketed under a number of brand names, the best known of which are Samsonite and American Tourister. The company manufactures a wide range of luggage and luggage-related products, including suitcases, garment bags, business cases and portfolios, computer cases, sports bags, and casual bags. The company's line of luxury luggage, casual bags, shoes, and accessories is marketed under the Hedgren and Samsonite Black Label brand names. In addition to its own line of manufactured products, Samsonite licenses its brand names for use on such products as travel accessories, leather goods, clothing, furniture, and handbags.

Most of Samsonite's products are designed at the company's research and development and design centers in the United States and Europe. The products themselves are manufactured either at one of the company's 12 global manufacturing facilities or by third-party suppliers. Samsonite's products are marketed in more than 100 countries worldwide at a wide range of retail outlets, including department stores, mass merchants, specialty stores, warehouse clubs, and catalog showrooms, as well as at the chain of about 200 Samsonite-operated stores in the United States, Canada, Latin America, Europe, and Asia. Customers may also purchase Samsonite products through the Web sites of several of the company's retailers.

COMPANY FINANCES

Economic and market conditions have colored Samsonite's financial performance in recent years, obscuring to some extent the positive progress the company has achieved. For example, although net sales in 2001 climbed 2.1 percent to $783.9 million from $767.7 million in 2000, the company's bottom line showed a net loss of $6.8 million compared with a net loss of $1.9 million the previous year. Part of the company's loss can be attributed to the weakness of most European currencies against the U.S. dollar. The company's sales in Europe jumped almost 12 percent in 2001, the third consecutive year of double-digit sales growth in Europe. However, taking the currency differential into account, European sales were $9.8 million behind their performance in 2000. The company also managed to scratch out a 1.7 percent sales gain in the United States, against the backdrop of an economy in recession. Samsonite's sales in Mexico and Canada climbed 16 percent and 18 percent respectively. Sales in Asia were also strong, climbing 50 percent in 2001, on the heels of a 55 percent increase in 2000.

In 1999, Samsonite reported a net loss of $88.8 million on revenue of $697.4 million. In the 52 weeks ended March 31, 2002, the company's stock traded in a range of $0.85 to $4.00.

ANALYSTS' OPINIONS

As of early 2002, most security analysts were essentially neutral in their rating of Samsonite Corporation, which translates to a recommendation of "hold" on the company's stock.

HISTORY

Samsonite has its roots in Colorado, where Colorado native Jesse Shwayder in 1910 founded the Shwayder Trunk Manufacturing Company using his life savings of $3,500. Shwayder quickly used up his modest start-up capital and was forced to borrow money to keep his company going. He was later joined by his brothers, Maurice, Sol, Ben, and Mark, each of whom took over a specific segment of the company's operations. By 1917, the company was selling $76,000 of luggage annually throughout the American West, forcing the Shwayders to expand their manufacturing facility to keep pace with soaring demand for their products. To better convey the strength and durability of their luggage products, the Shwayders dubbed their product line "Samson." In 1918, the company took its products national, and by 1924, annual sales had soared to $300,000. That same year, the brothers moved their manufacturing operations into an 80,000-square-foot factory in South Denver. Demand for their products continue to climb, and by the end of the 1920s, annual revenue had jumped to more than $1 million.

With the arrival of the Great Depression, demand for the Shwayders' luggage collapsed, dropping by 50 percent within just a few years. To help face the challenge of the Depression, the brothers diversified their product lineup to include card tables, license plates, sand-boxes, and stilts, and changed the company name to Shwayder Brothers, Inc. Their strategy paid off, and the company survived the lean years of the 1930s. In 1939, the company introduced a unique suitcase that was marketed under the name "Samsonite." The suitcase, which was a predecessor to the company's Samsonite Stream-lite line, was covered with a durable vulcanized fiber that was used with a leather binding.

To meet the needs of American armed forces, much of the Shwayders' manufacturing capacity was converted during World War II to the production of war materiel. But when the war ended, the brothers quickly got back to the business of making luggage and folding furniture, incorporating some of the tricks they'd picked up during the years of wartime production. Annual sales climbed to $7 million in 1946.

During the 1950s and early 1960s, the company continued to market its popular line of Samsonite luggage, expanding its product line to include attaché cases and specialized travel cases. In 1965, the company's name was officially changed to Samsonite Corporation to capitalize on the growing popularity of its Samsonite product line. By the early 1970s, Samsonite had established itself as the world's largest manufacturer of molded luggage and attaché cases. Global distribution was made easier through a number of factories and sales offices that had been established in Europe and Japan during the previous decade. As demand continued to soar, Samsonite opened a growing network of manufacturing facilities throughout the United States and abroad.

In 1973, corporate giant Beatrice Foods acquired Samsonite from the Shwayder family. For the rest of the decade, Samsonite continued to grow through the introduction of new products and aggressive overseas expansion. However, the growth surge had ended by the early 1980s, as Samsonite began to feel the impact of low-cost foreign competition. In 1983, Beatrice brought in British-born Malcom Candlish to whip the company into shape. Candlish cut the size of Samsonite's work force and launched an aggressive program of cost-cutting. In 1986, Beatrice sold Samsonite to Kholberg, Kravis & Roberts, who 15 months later spun the company off into a newly established company dubbed E-II. Six months later, E-II was bought out by American Brands, which itself was purchased not long thereafter by billionaire Meshulam Riklis. Through it all, Candlish hung on as CEO.

After E-II filed for bankruptcy and was reorganized in the early 1990s, Samsonite ended up as a subsidiary of a new company called Astrum International Corporation. Steve Green took over as Samsonite's CEO, and under his direction the company purchased American Tourister, another major U.S. luggage manufacturer. The company regained its independence in 1995 when Astrum announced it would split into two companies, one of which would be the independent, publicly owned Samsonite Corporation.

STRATEGY

Samsonite's strategy is to use its existing assets, including its quality products, strong brand names, and global capabilities, to expand sales and improve profitability. Key tactics in the company's strategy include expanding its channels of distribution, expanding product offerings, creating innovative products, enhancing brand image, continuing international expansion, and improving its product marketing execution.

FAST FACTS: About Samsonite Corporation

Ownership: Samsonite is a publicly owned company traded on the NASDAQ small cap market.

Ticker Symbol: SAMC

Officers: Luc Van Nevel, Pres. and CEO, 55, 2001 base salary $382,041; Richard H. Wiley, CFO, Treas., and Sec., 45, 2001 base salary $275,000; Thomas R. Sandler, Pres. The Americas, 55, 2001 base salary $325,000

Employees: 7,150

Principal Subsidiary Companies: To properly oversee its worldwide business, Samsonite has a number of subsidiary or joint venture companies outside the United States. These include Samsonite Mercosur, Ltd. headquartered in the Bahamas; Samsonite Asia, Ltd. based in Hong Kong; Samsonite Mauritius, Ltd. on the island of Mauritius; Samsonite Singapore Pte., Ltd. in Singapore; Samsonite AG in Switzerland; and Lonberg Express S.A. in Uruguay.

Chief Competitors: Competition within the worldwide luggage market is very fragmented. In the U.S. market, Samsonite competes based on brand name, product innovation, consumer advertising, product quality, differentiation, customer service, and price. In Europe, competition in the luggage market is based on the company's premium brand name, product design, product quality, access to established distribution channels, new product offerings, and price. Because manufacture of soft-sided luggage is labor intensive but not capital intensive, the barriers to entry into this segment of the luggage market are relatively few, which means that competition for Samsonite in this market is relatively intense. Because the manufacture of hard-sided luggage is much more capital intensive, the number of competitors in this market segment are considerably fewer. Some of the company's major competitors worldwide are LVMH, Moet Hennessy, Louis Vuitton S.A., Brown-Forman Corporation, which produces Hartmann luggage, and Land's End, Inc.

In the realm of distribution channels, the company has moved to increase its presence in those channels in which it is presently underrepresented. This will be done by using targeted sales efforts that are tailored to each specific channel. As to the expansion of product offerings, Samsonite is designing, manufacturing, and marketing more casual and sports bags, luxury luggage, computer cases, clothing, shoes, and accessories. In recent years, the company has added the upscale brand names of Hummer, Hedgren, and Samsonite Black Label to its product lineup. Recent innovations in the company's product line have included Ziplite, a lightweight, hard-sided luggage made from ultra-thin, flexible polypropylene, and Carbon 2010, a hybrid luggage that incorporates attractive features of both hard-sided and soft-sided luggage.

To enhance its brand image, Samsonite plans to introduce more upscale products under its Hummer, Hedgren, and Samsonite Black Label brand names and to open flagship stores in major international cities. Although it has enjoyed an international presence for decades, Samsonite hopes to expand further abroad, focusing on the emerging foreign markets of India, China, Latin America, and the Pacific Rim. To improve product marketing execution, the company is concentrating its resources on the improvement of forecasting, brand positioning and advertising, product development, and customer service.

INFLUENCES

Serving a global marketplace has required Samsonite to quickly adjust its marketing strategies to changing buying patterns in its various markets. In Europe, for example, the company has seen consumer preferences shift from hard-sided luggage, beauty cases, and attaché cases to soft-sided suitcases and casual bags. To stimulate and revive sales of its hard-sided products, the company has devoted considerable capital to the development of innovative, lightweight, hard-sided suitcases, including its Ziplite, Hardlite, and D'Lite brand names.

Another negative factor in the European market has been the weakness of European currencies against the U.S. dollar in recent years. To lessen the negative effects of this foreign exchange differential, Samsonite has moved more of its production from the Far East to plants in Eastern Europe to take advantage of the resulting savings in production costs.

In the domestic market, Samsonite has seen U.S. demand for hard-sided luggage deteriorate significantly. This prompted the company to discontinue manufacturing operations at its Denver facility. The company will continue to market hard-sided luggage in the United States but the product will be sourced from Samsonite's foreign-based manufacturing facilities. To further address the problem of weaker demand in the United States, Samsonite plans to reduce the total number of retail outlets it operates by eliminating those that have proven unprofitable.

CURRENT TRENDS

A growing trend worldwide has been the decline in demand for Samsonite's hard-sided products. The company's sales of soft-sided suitcases and garment bags accounted for 46 percent of total sales in 2001, compared with 21 percent for hard-sided luggage. So sharply has the company's U.S. demand for hard-sided luggage declined that Samsonite in 2001 halted manufacturing at its Denver facility. The much-diminished demand for hard-sided product will henceforth be met with supplies from the company's foreign-based manufacturing facilities.

In the company's view, part of the reason for the sharp drop in demand for hard-sided product has been the growing consumer preference for lighter weight luggage. To satisfy this consumer preference while continuing to produce a hard-sided suitcase line, Samsonite has invested heavily in research and development to come up with innovative new materials to meet customers' needs. Some of the so-called hybrid products that have emerged from such research include the company's Hardlite, D'Lite, and Ziplite product lines. These hard-sided products are made with newly developed materials and production processes, and satisfy consumer demands for a lighter weight product.

CHRONOLOGY: Key Dates for Samsonite Corporation

1910:: Shwayder Trunk Manufacturing Co. founded
1918:: Shwayder begins marketing nationally
1941:: Shwayder introduces Samsonite Streamlite
1946:: Annual sales top $7 million
1965:: Shwayder changes name to Samsonite
1973:: Samsonite is acquired by Beatrice Foods
1995:: Samsonite regains corporate independence

PRODUCTS

Although Samsonite is most closely identified with its luggage products, the company produces a wide range of other products, including casual bags, business and computer cases, footwear and clothing, and other products. Approximately two-thirds of the company's sales in 2001 were accounted for by hard-sided and soft-sided luggage products. Soft-sided suitcases and garment bags accounted for 46 percent of total sales, while hard-sided suitcases made up 21 percent of total sales. Casual bags accounted for 11 percent of sales, while business and computer cases made up another 8 percent. Footwear and clothing accounted for 3 percent of sales, with the remaining 11 percent made up by other products.

The company's products are marketed under a number of brand names. Samsonite Black Label products are directed at the high-end luxury market, while Lark products target the luxury market. Products bearing the Samsonite label are directed to consumers looking for high-quality, innovative goods. The sport luxury market is targeted by products bearing the Hedgren brand name and American Tourister products are targeted at consumers seeking quality and value.

GLOBAL PRESENCE

More than half of Samsonite's annual sales are made in markets outside the United States. To meet this worldwide demand for its products, the company operates a network of 12 company-owned manufacturing facilities. Another large segment of its product line comes from third-party suppliers, most of whom are located in the Far East, Eastern Europe, and Dominican Republic. In 2001, less than 40 percent of Samsonite's revenue from soft-sided luggage products came from products manufactured in its own facilities. The rest was supplied by third-party vendors outside the United States. Company-owned manufacturing facilities are located in Belgium, France, Hungary, Italy, the Slovak Republic, Mexico, Spain, India, and China.

EMPLOYMENT

Samsonite employed approximately 7,150 employees worldwide as of Decemer 31, 2001. Of those, about 1,850 worked in the United States. While most of the company's 2,780 European employees are unionized, only a small percentage of those in the United States belong to a union.

WHAT'S IN A NAME?

When Jesse Shwayder and his brothers first began marketing luggage from their Denver factory, they dubbed it "Samson" after the super-strong character in the Bible. This, they felt, would reflect well upon their products and give potential customers a sense of their quality and durability. To further demonstrate the strength of their suitcases, four of the Shwayder brothers and their father posed for an advertising picture standing on a wooden plank that had been positioned atop one of their suitcases. The caption read, "Strong Enough to Stand On." The Shwayer brothers' luggage was first marketed nationally in 1918. The name "Samsonite" first appeared as the brand name of a unique new suitcase introduced by the Shwayders in 1939. Their company had developed a sturdy vulcanized covering for the new product. It was the birth of a name that was to outlast the name of Shwayder. In 1965 the Shwayder Trunk Manufacturing Company officially changed its name to Samsonite Corporation.

SOURCES OF INFORMATION

Bibliography

2001 annual report of samsonite corporation. denver: samsonite corporation, 2002. "samsonite corporation." hoover's online. available at http://www.hoovers.com.

"samsonite corporation - history." gale business resources. available at http://galenet.galegroup.com/servlet/gbr.

samsonite corporation home page, 2002. available at http://www.samsonite.com.

"snapshot report: samsonite corporation." multex investor available at http://www.marketguide.com.