Product and Service

Companies included in handbags& luggage sector in personal items industry primarily design, source, market, sell, and distribute handbag and luggage.


Demand for Product and Service

As indicated by typical sales data, the demand from products of companies in this sector seems to be very weak and continuingly declining in the past several years due to mismatch between growth in compensation and economy and to unfavourable retail environment. 

The Sector

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend
  1. The demand for handbag and luggage in US market seems to have been weak in the past three years as indicated by the continuingly declining same store sales of those typical companies in this sector.
  2. International market (Asia mainly) seems to have contribute to the general growth in sales for some of brands. However, this contribution seems to have been unstable and increasingly weaker after entering 2018.
  3. As a response to the soft same store sales/traffic, we have seen increasing consolidation activities in this sector and as well accelerating expansion of new stores. However, those strategies seem to have been hurting profitability of those companies due to the whole unfavourable environment in the industry.
Causes behind the trend
  1. Demand for products in this sector should have been fundamentally driven by factors such as population growth and household income. The decline in sale of both store and online may imply a general decline in purchasing power of consumers. However, while the basic demand is supposed to be still solid, purchase above the basic demand may be reduced due to less stores visits. Therefore, the slowing down store traffic (multiple reasons) can directly impact the sales of products in this sector. Slowing down pace of growth in China’s economy may be also behind the decline in sale of China.
Industry Future
  1. We will probably see continuingly weak but increasing sales of products of companies in this industry as economy recovers all across wealth distribution channels offset by the declining traffic.


General Financial Performance of Companies In the Sector

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.

Metrics, Benchmarks, and Multiples

Looking for  financial metrics, benchmarks, and growth measurements to help you make decisions in corporate operating and strategy?

Please click the button below.

Looking for  multiples to help you make decisions in pricing of PE, M&A, or distressed debt transactions?

Please click the button below.