Luggage giant Samsonite suffers first-quarter loss of US$787 million as Covid-19 brings global travel to a standstill
- The ‘near-complete halt in travel and tourism worldwide’ will affect the company’s earnings for the rest of 2020, says CEO Kyle Gendreau
- The group’s supply chain has been affected as factories in China shut down for a prolonged period after Lunar New Year
Samsonite International suffered losses of over US$700 million from January to March, and warns coronavirus will hit full-year earnings, as the world’s largest travel luggage company reels from a pause in global travel.
The suitcase brand – which owns the likes of Tumi and American Tourister – recorded a net loss of US$787.3 million in the first three months of 2020, compared to a profit of US$22.8 million in the same period last year. Net sales dropped 27.7 per cent, or US$230 million, over the same time frame, to US$601.2 million.
Sales decreased across all regions. Samsonite said it will not pay a dividend to shareholders this year.
“The near-complete halt in travel and tourism worldwide has adversely affected the group’s performance in the first quarter of 2020, and is expected to continue to impact our business for the remainder of 2020,” said Kyle Gendreau, chief executive officer, in a statement.
The group’s supply chain has been affected as factories in China shut down for a prolonged period after Lunar New Year. Now reopened, production levels remain lower as demand has lightened globally while the virus spread.
As of March 31, the Hong Kong-listed group had a liquidity position of US$1.8 billion, with around US$1.2 billion of cash and cash equivalents. To help with financial flexibility, Samsonite borrowed US$810 million at the end of March under a credit facility, and secured a loan facility worth US$600 million last week.
Such liquidity, and actions to “preserve cash” will help Samsonite navigate the current headwinds and any prolonged downturn, said Gendreau, who became CEO in May 2018.
Why coronavirus will change tourism forever
The US-founded firm is reducing costs by cutting headcount and salaries, furloughing staff and closing stores, it said in a filing to the stock exchange after the market closed on Thursday.
Spending on marketing during the first quarter fell by almost a third to US$34.7 million “as the group began reducing advertising to help offset the negative impact of Covid-19,” it added.
The hammer blow to Samsonite’s business, and its need for further cash, comes as the outbreak of Covid-19 has rendered global travel and tourism almost non-existent, with countries worldwide in various forms of lockdown and under quarantine regulations. As consumer spending drops, everything from retail sales to airline and hotel bookings are being affected.
Chinese airlines may recover from travel slump before global piers
Also on Thursday, Hongkong and Shanghai Hotels (HSH)– owner of The Peninsula Hotels chain – said revenue per available room in Hong Kong fell 85 per cent in the first quarter when compared to the same period last year, to HK$616. Its average room rate in the city fell 26 per cent to HK$4,395, while occupancy rates slumped to 14 per cent from 70 per cent.
