Tumi: Zacks’ Bear of the Day Play

Tumi Holdings Inc. (TUMISnapshot Report) is struggling to differentiate itself in a field crowded with luxury bags. This Zacks Rank #5 (Strong Sell) recently lowered its full year guidance.

Tumi sells travel, business and lifestyle products and accessories including brief cases, tote bags and luggage in 300 stores across the world. It also sells in department stores and specialty and travel retail stores in 75 countries.

As of March 29, 2015, Tumi operated 155 company-owned stores.

Comparable Store Sales Declined in Q1

On May 6, Tumi announced its first quarter results and met the Zacks Consensus Estimate of 12 cents.

Net sales rose 1.7% to $110.5 million from $108.6 million a year ago. On a constant currency, net sales jumped 4.6%.

However, total comparable store sales for all Direct-to-Consumer channels, including the company’s website, fell 4.6% compared to a year ago.

It wasn’t much better if you just single out North America. Direct-to-Consumer North America comparable store sales fell 5.3% while outlet sales were a little bit better, rising 1.1%.

E-commerce sales, however, declined 14.1%.

Gross margin increased 3.5% to $65.3 million from $63.1 million.

Lowered Full Year Outlook

The company continued to see a high level of third party promotions in both department stores and online in the first quarter which hurt the brand and the bottom line.

Tumi is taking steps to lessen its involvement in these promotions which it thinks will strengthen the brand long term.

Given the competitive retail environment and the weak dollar, it revised its guidance down for 2015.

It now expects earnings between $0.90 and $0.95, down from its February 2015 guidance of $0.93- $0.98.

Tumi also lowered its comparable store outlook to the low-to mid single digits, down from the mid-single digits it saw in February.

Shares on a Roller Coaster

Shares have been up and down all year long and are recently off the latest lows.

But even with the sell off, shares aren’t exactly cheap. Tumi still trades with a forward P/E of 23.

Earnings are expected to grow just 8.5% this year so investors are paying a high price for single digit growth.

If you’re interested in investing in the luggage/handbag space, you may want to consider Coach (COHAnalyst Report) instead. While it has its own problems, it has a better valuation with a forward P/E of 18. It’s a Zacks Rank #3 (Hold).

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.


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