|Shares Out. (in M):||68||P/E||23||17.2|
|Market Cap (in $M):||1,425||P/FCF||22x||17x|
|Net Debt (in $M):||0||EBIT||99||132|
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TUMI is a leading premium-lifestyle brand that designs and sells travel and business-related products and accessories in multiple categories. Over the past decade, it has shifted its business model from primarily distributing luggage through “mom&pops” stores, to becoming a lifestyle brand in the niche travel and business segment with a broader and more innovative product offering mainly sold through its own retail stores. The business achieves retail-leading unit economics (~35% “4-wall” EBITDA margin and ~80% cash-on-cash returns) and has the potential to become a unique global retail growth story in the coming years through the opening of stores domestically and internationally, increasing brand awareness, growing the women’s category and essentially following the prior playbook of other global accessory brands. TUMI has a clear path to grow earnings by 20% for the foreseeable future.
While at $21/sh. TUMI trades at ~20x 2015 Consensus EPS TUMI (and 17-18x our estimates), and hence is not cheap on an absolute basis, we believe that TUMI’s underleveraged brand, high quality reputation and clear sightlines to growth and margin expansion should lead to a doubling of the stock in three to five years. Specifically, unlike other high-growth accessory brands, TUMI is not reliant on fashion trends but rather on highly-functional, innovative and IP-protected products for the business traveler. The Company will finish 2014 with ~150 retail stores globally which can generate at least $1.10 in EPS in 2016, which we believe deserves at least a $15/sh. value for the current store base. Moreover, to an extent, EPS in 2014 was understated due to the transition away from its third party e-commerce provider to its own in-house operations, which should save 25 cents on the dollar for each sale.
Under management’s current growth plan – which we believe is not aggressive and may even be conservative -- TUMI should generate an additional $1.00-$1.50+ in EPS in 3-4 years while still having ample runway for growth, all of which should justify a share price in excess of $35. The Company is currently unlevered and funds growth with cash from operations.
Business Overview and History
High quality business
Major Retail Growth Opportunity
Top tier and aligned Management Team
Risks and Mitigating Factors
Potential takeout (Samsonite for example)
Continued execution of store rollout
JV/partnerships/acquisitions in Asia
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