This company, primarily designs, sources, markets, sells, and distributes women’ handbag, luggage, or fashion accessary, has been grouped into handbag& luggage sector in personal items industry.
It seems that, based on the typical company data, the demand for handbag and travel luggage in North America market in the past three years has been weak and declining quickly for some of brands, primarily attributable to declining store traffic from their own stores and stores of their wholesale clients. The trend seems to be worsening in the past three years as indicated by the continuingly decreasing same stores sales (decreased by -3%,-2%, and -7% for 2017, 2016, and 2015 respectively).
Sales from European and Asian market have been successfully offsetting the decline in same stores sales of North American market of those companies during the same period. However, the growth seems to be slowing down in Asian area entering 2018.
Companies, facing the unfavourable retail environment, have responded to the slowing down traffic by expansion of business (including acquisition and opening new stores) and lower price. However, while those methods seem to have worked better for some premium brands but their profitability seems to be damaged largely.
The typical companies’ gross margins are down to about average 61% in 2017. The SG&A as percentage of sales (including store occupancy and staffing costs) went up by about 480 basis points to about 53% in 2017; the typical operating margin went down from 13% to 8% in 2017. Companies’ cash flow thus significantly decreased during the same period.
The typical average stock price/cash flow ratio is about 38.
It seems that the demand for its products of this company has been weak and declining quickly in the past three years as indicated by its continuingly decreasing same stores sales and wholesale sales. The decline in wholesale sales seems to be accelerating.
The fiscal 2018 compared with 2017
Organic sales (excluding extra weeks) decreased 5.5%.
The same store sales decreased 6.7% (including e-commerce)/decreased 5.5% (excluding e-commerce) due to declining traffic.
The wholesale decreased 21%.
The fiscal 2017 compared with the 2016
Organic sales (excluding extra weeks) decreased 3.3%.
The same store sales decreased 7% (including e-commerce)/decreased 7% (excluding e-commerce) due to declining traffic and less promotions.
The wholesale decreased 13%.
The fiscal 2016 compared with 2015
Organic sales (excluding extra weeks) decreased 1.3%.
The same store sales decreased 10.6% (including e-commerce)/decreased 8.6% (excluding e-commerce) due to declining traffic and less promotions.
The wholesale decreased 13%.
Its gross margin (excluding store occupancy and staffs) has increased from around 53% in 2014 down to about 56% of 2017 as a result of reduction of sourcing cost and less promotion activities. With the significant increase in its SG&A as percentage of sales as a result of quick expansion of new stores, which went up from 41% to 53%, its operating margin thus decreased to about 3% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 38. We think that its stock is being relatively overvalued.
