Tracey Ryniec

Bear of the Day: Tumi (TUMI)

by

October 01, 2013 |

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Not all luxury brands are created equal. Tumi Holdings, Inc. (TUMI - Snapshot Report) lowered full-year earnings and sales guidance in August. This Zacks Rank #5 (Strong Sell) is expected to grow earnings only 6.6% in 2013.

Tumi operates 200 stores globally and sells premium travel and business products including totes, handbags and luggage.

Missed by 10% in Q2

On Aug 7, Tumi reported second quarter results and missed the Zacks Consensus by 2 cents. Earnings were $0.18 compared to the Zacks Consensus of $0.20. Revenue jumped 13% to $108.2 million from the year ago quarter.

However, comparable store sales comps came in at just 4.6% compared to 16.4% in the first quarter and 8% in the year ago second quarter. The comparable store sales included e-commerce sales.

Domestic store traffic slowed "modestly." This brought Direct-to-Consumer North America comparable store sales, excluding e-commerce, down to an increase of just 1.7% from 7.2% in the second quarter of 2012.

Full Year Guidance Revised Down

While Tumi maintained a positive outlook for the year, it also reduced both its earnings and revenue guidance.

Revenue growth is now expected at 16%-18% compared to its previous guidance of 18% to 20%.

Earnings guidance was revised down to a range of $0.76-$0.82 from $0.82-$0.86 with some of the revision due to the expense of redesign of the web site.

4 estimates were lowered in the last 60 days for 2013 as the analysts moved to get in-line with the new guidance. The Zacks Consensus Estimate fell to $0.81 from $0.87 in that time.

Shares Near 1-Year Low

Shares dropped on the earnings miss and guidance revision but they haven't yet recovered. They're attempting to test the 52-week low.

Despite the share pullback, they're not altogether cheap. Tumi trades with a forward P/E of 25.3 which is pricey for a stock with single digit growth.

However, the Zacks Rank is a short term recommendation of just 1 to 3 months. Double digit growth is expected to return in 2014.

Investors might want to consider other stocks in the luxury space instead. Michael Kors (KORS - Analyst Report) is a Zacks Rank #1 (Strong Buy) and is expected to grow earnings by 40% in 2013.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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