Already a Bloomberg.com user?
Sign in with the same account.
Tumi Holdings Inc. (TUMI), the luggage maker owned by Doughty Hanson & Co., surged more than 50 percent after raising $338 million in its initial public offering, pricing higher than the proposed range.
Tumi and Doughty Hanson sold 18.8 million shares at $18 apiece, according to a statement yesterday, after offering them for $15 to $17. The stock rose as high as $27.85 by 11:11 a.m. in New York, giving South Plainfield, New Jersey-based Tumi an enterprise value of $2.2 billion, which includes debt.
That’s about 31 times 2011 earnings (TUMI) before interest, taxes, depreciation and amortization, compared with the 13 times leather-handbag maker Coach Inc. traded at yesterday, Bloomberg data show. Tumi’s strong brand recognition and ability to command consistently high product prices -- such as $895 for expandable carry-ons -- were attractive qualities for investors, said Brian McGough, an analyst with Hedgeye Risk Management LLC.
“Investors are looking past troubling global macroeconomic factors like housing, Spain, Japan, toward micro stories like this,” McGough said in an e-mail today. “There are company- specific factors that will allow the company to grow outside of powerful macro cross-currents.”
Hedgeye is an independent equities research firm in New Haven, Connecticut.
Doughty Hanson bought a majority stake in Tumi for $276 million in 2004. The firm, co-founded in 1985 by Richard Hanson, has owned its Tumi stake for more than seven years, longer than private-equity firms typically keep investments, based on figures from Seattle-based researcher PitchBook Data Inc. The firm’s previous investments in retail include Umbro Plc, the maker of sportswear, and watchmaker TAG Heuer International SA.
Sales of high-end goods may climb 10 percent in 2012, half last year’s rate, and 9 percent in 2013, according to Antoine Belge, an analyst at HSBC in Europe. China, which generated 10 percent of 2011 sales, will account for a third of this year’s increase as growth slows in Europe, he estimates.
Tumi plans to use proceeds from the sale to repurchase outstanding stock from London-based Doughty Hanson. The company, led by Chief Executive Officer Jerome Griffith, planned to offer 17.56 million shares, while stockholders including Doughty Hanson and HVB Capital Partners AG planned to offer 1.22 million.
The shares began trading today on the New York Stock Exchange under the symbol TUMI. Goldman Sachs Group Inc., Credit Suisse Group AG and JPMorgan Chase & Co. led the offering.
Nick Bastin, a spokesman for Doughty Hanson, declined to comment, as did an outside spokeswoman for Tumi.
Luggage industry sales in 2011 returned to pre-recession levels, with U.S. consumers spending an estimated $21.2 billion on travel goods, up 14 percent from 2010, according to the Travel Goods Association. Luggage unit sales last year grew 4.4 percent by volume and 17 percent by value, as prices kept recovering from discounting during the previous few years, according to the Princeton, New Jersey-based trade group.
Tumi, whose suitcases and bags are sold at about 1,600 locations in more than 70 countries, is focusing on expansion in Asia, Eastern Europe and South America. Net income probably amounted to as much as $1.7 million in the three months through March 25, compared with a loss in the year-earlier period, as sales in North America and Asia picked up and profit margins improved, according to a regulatory filing. Sales increased 31 percent to $330 million in 2011 from a year earlier.
“It’s known, it’s a brand, it’s an opportunity to invest,” said Christopher Casey, a managing director at SuttonBrook Capital Management LP, the New York-based hedge fund. “You’re not getting in on the ground floor, but you can still get in early enough that you can get a pretty nice ride over the next couple of years if they execute.”
The IPO follows the successful offering of Michael Kors Holdings Ltd. (KORS) in December and a share sale by Tumi’s biggest rival, Samsonite International SA, last year. Kors stock has more than doubled (KORS) since that offering, while Samsonite jumped 25 percent this year through yesterday.
As of yesterday, Michael Kors had an enterprise value of about $8.2 billion, or 33 times Ebitda of $251 million in the 12 months through Dec. 31, Bloomberg data show.
Tumi sees an opportunity to increase revenue by building a bigger presence online, the source of 10 percent of net sales last year, according to its filing. To generate growth in the future, Tumi will need to add more fashion-focused products beyond its signature black luggage, McGough said.
“The Tumi bag I’m looking at right now next to my desk was bulletproof six years ago when I bought it, and it’s still bulletproof today,” he said. “Balancing exceptional durability with a fashion infusion will be an interesting exercise.”
To contact the reporters on this story: Lee Spears in New York at email@example.com; Cotten Timberlake in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jennifer Sondag at email@example.com