Well to share my views on this as someone who is looking at the situation not only from Market perspective.
If you ask me, even in current situations I am upbeat on the travel and luggage industry. There are several reasons for this.
Looking at the history of mankind, humans have always been adventerous. If columbus was afraid that he might not return back although he knew that there were strange diseases and harsh environment, things would not have been as we see them now. So humans have always been aware of the hardships, dangers and unknown hiccups but still they choose to take the problematic path (logically everyone believes this to be problematic)
If we consider the modern day situation, even when Corona was spreading, the tours and travels industry in their last hope to breathe provided packagages amounting to 60%-70% discounts and were overbooked. Even when the cruise ships opened for booking they were overbooked 600% knowing that a cruise is the worst place to get stranded with a single covid suspect. Even with todayās figures the countries have not shut their borders completely. Yes checks has been put in place but borders are still open for most of them.
Regarding future of tours and travels, there are different viewpoints. Someone might argue that its going to be damn expensive, however, I see it as a question of survival. There are many countries where the majority of their economy is dependent on tourism. So can they afford to take further hit by making it inaccessible? I dont think so.
The only thing which I think will change is the way we look at the tours and travel industry. It will no longer be an exercise just to get the visas and tickets in place and your itenary ready. It would be an exercise involving better preparations all around. I can easily contemplate the following checklist for the future tours and travel itenaries.
Visa Checklist
Covid report taken 1 week prior to travel
Valid international medical insurance on mandatory basis - (This industry shall fly)
Check that you are not coming/going to containment areas.
Pandemic clauses - this might include all details which might become valid if someone is stuck due to pandemic or any other reason.
Travel Checklist
Would be mandatory to carry health certificates, sanitization items and travel light to incorporate necessary items
Few days quarantine in host country or getting checked for diseases might be the new normal.
I think safety would be the key. Companies/Tours who can arrange for travel with proper safety norms/social distancing will flourish so small players may either get wiped out or get merged with bigger players. Yes this disease is bad but it has also been blown out of proportion. it can be managed well for most being infected. People still travel to Africa where there is a chance of dying of maleria or getting maggots growing inside or your body and where we have diseases like Ebola. Again not undermining something but trying to highlight that no one can stop humans from their basic nature which is to EXPLORE even if its unknown.
Regarding luggage industry, i believe, there would be a spike in smart accessories, UV scanners, portable dispensors, low touch automatic strolling luggages. So yes things will evolve but i think after a small slowdown, manufacturers will produce good quality stuff in small numbers and still manage to earn profit. We might also see AMC contracts for luggages with iot devices and other smart technologies. So there is a whole new business model which might comeā¦
VIPs management is itās moat over Samsonite and hence why VIP will win. Sometimes it makes sense to study the competition in these kind of scenarios. Iāve studied Samsonite and the management seems a bit off
In 2018 their then CEO Ramesh Tainwala had to resign on being accused of falsifying his resume!
Samsonite were charged with profiteering regards gst last month and were fined 25 crore in a time when every rupee counts
Samsoniteās per store revenue is double that of VIP and they are forced to close 100 of them
As of September Samsonite had a huge debt of 3x.
They ended on the wrong side of the USA china trade war since their supply chain was affected and trump raised taxes on their imports
Itās a company that is really struggling. On the other side you have VIP with a Blue chip Piramal management, a shift to Bangladesh which decreases dependence on China and low fixed costs who are sitting in a position to come out a lot stronger and aggressively with their established brands(VIP, skybags, capresse) and their fledgling brands in the premium and mass market sectors with an improved bottom line. @arjunbadola
1 & 2 point is quite good to show that management does not have integrity.
I could not understand the 3 point. Double revenue surely means that in COVID time they would be affected a lot but if the company survives, double revenue is quite huge compared to VIP.
Point 4 is quite helpful as debt is always dangerous.
Point 5 where you say they will be affect by USA-CHINA trade war, I remember reading that Samsonite has plant in Nashik and I believe this would give them huge edge with lots of cost saving.
I would like to know your opinion on the same. @Malkd
Point 1 and 2 and 4 are all true. You can do a simple check online for the same. Point 3 was to show the amount of pressure theyāll feel during covid with the fine and then the revenue loss along with the debt. Samsonite is more of a worldwide company with India being a small part of it. Their main sales come from China and globally their main hub is in USA. Itās a double whammy for them. Iād sooner bet on all these issues causing Samsonite sales in India to decrease than them taking market share from VIP. Of course I could be wrong about all this ā¦ but at its CMP and lower itās worth accumulating imo.
Fair enough. I think now Samsoniteās focus would turn to saving itself rather than trying to get market share from VIP and being not debt free could be very difficult to fight as their competitors are financially stable.
Thanks man! It was nice discussing with you @Malkd !
It would be great if we could connect, I would discuss new ideas whenever I get one. Cheers!
Haha thanks for the mention arjun.i hope you fact checked everything I said and drew conclusions from the same accordingly ā¦ donāt forget each one of us has a different POV of the same situation.
To mitigate the effect of headwinds it has been facing in US Markets, Samsonite is banking on emerging markets. It has double digit growth in sales in constant currency terms in Turkey, Russia,Indonesia and India besides normal growth in other markets during the fiscal ended in Dec 19. Sales through E-Commerce too have gained considerable traction.
There is no doubt VIP is a worthy competitor in Indian market. Prolonged China vs Quad conflict may pose further headwinds to Samsonite. Can VIP use such geo-political conflict to become export competitive and garner market share in other emerging markets. Experts here would be able to say it well. If VIP confines itself to India,it will face the reality of loosing market share a few years down the line once the tide turns. I love to see VIP conquering other markets. It may be wishful thinking right now.
Hello all, Here is my research on VIP Industries. Given that this company makes up for a very interesting case study I wanted to share it with you. Thoughts and feedback are most welcome.VIP Industries.pdf (785.4 KB)
I think American Tourister has better brand image than Skybags but considering India as a value market most Indian would try to look for something cheaper but with no compromise on quality that means above Safari and below Samsonite that is where VIP comes in.
Also, I think luggage market depend much on advertising and to do so the company must be financially excellent. But as we discussed Samsonite is not financially well.
Could someone update me on how VIP is performing in international markets?
As far as E-commerce goes I remember the management had said in their con-call that they had not focus in E-commerce and that was a mistake but now they have started working on it.
Hello Guys, if somebody could help me out it would be great.
I recently noticed that in their Q4 presentation and con-call the management mentioned that their āgross marginā has increased from 48% to 58% for the year.
But I am having difficulty understanding that. Many websites I checked are showing NPM around 7% and OPM around 14% and I think we can expect gross profit margin to be around that.
When I calculated myself it came around 16%. I donāt know how management calculated 58% of āgross marginā.
Please refer to definition of Gross Margin which just takes into account cost of goods sold, unlike OPM which includes other costs like Employee cost, Distribution cost and NPM which includes interest cost, depreciation and amortization and also taxes.
For Q4 FY2020
Revenue from operations = 311.34 Cr
Cost of goods sold = Cost of Material consumed + purchase of stock-in-trade + Change in inventory of finished goods, work-in-progress and stock in trade = 102.97 + 89.80 + (-60.72) = 132.05 Cr
Gross Margin = (311.34-132.05)/311.34 = 57.58%
For FY2020
Revenue from operations = 1718.32 Cr
Cost of goods sold = Cost of Material consumed + purchase of stock-in-trade + Change in inventory of finished goods, work-in-progress and stock in trade = 357.24 + 382.01 + 66.67 = 805.92 Cr
Gross Margin = (1718.32 - 805.92)/1718.32 = 53.09%
I am well aware of the definition my friend.
My whole message above is based on the assumption that Gross Margin should be around Net profit margin.
But still if you do not understand could you please calculate the Gross Margin of VIP Industries and tell me your findings.
As per my calculation it is around 16%
This would be partially true if all the purchase happened on eCommerce. But even in eCommerce people select better brands as they believe better brands means more reliability. Common consumers donāt realize that all products are inherently the same.
Before Corona, most of the purchase used to happen offline, as people probably prefer to trial such bigger ticket purchases because they donāt want their luggage to contain a defect.
Personally, I never found any retailers stock more than 3 brands in their shops, as bags take large space. So, brands do have a role to play for retailers to stock them in the first place. The 3 brands are usually VIP, Samsonite and Safari / Private Label / Less known brand. So, having a good brand always helps in this game.
All this above discussion pertains to bigger bags. For office and school bags and ladies handbags stocking isnāt an issue but brand plays its usual role here too, more so in ladies handbags who usually tend to stick with a brand.
Added the calculation in the above thread. Please check.
Gross Margin might not be around Net profit margin, because Gross margin does not include other costs related to sales, such as employee cost, interest cost, depreciation, which is included in net profit margin.
But I am still confused. Why is it so that the Gross Margin of VIP is around 50% but there Net Profit Margin is around 6%? Which component is driving this much of difference in their ratios?
ā¦ donāt forget each one of us has a different POV of the same situation.