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From the Survey: Tumi Holdings, Inc.
Tumi Holdings, Inc. (TUMI) is a premium, global brand company, which manufactures luxury travel and business products--primarily luggage and other bags--as well as a broad array of accessories. Founded in 1975, Tumi has risen to success as a result of the superior design, quality, and functionality of its products. Having just gone public in April of 2012, the company is still in a high-growth phase; compounded annually, the company increased net sales by 12%, and operating income by 17% on average, from 2005 to 2011.
Tumi has dedicated itself to meeting the demands of the sophisticated professional, and has the retail presence to do so. The company designs its products in its U.S. designer studio, and occasionally collaborates with international fashion designers on limited edition offerings. In staying true to its intent to meet the demands of fashion-forward shoppers around the globe, Tumi has focused on many of the main international travel-destinations: New York, San Francisco, Chicago, Paris, London, Rome, Tokyo, and Milan, to highlight a few.
The company has been able to expand past the constraints of a cursory industry segment, however. Tumi’s offerings now include small leather goods, travel electronics, and other accessories in tandem with its traditional travel bags, business cases, and a myriad of other bag products. Overall, management touts five founding principles for its ability to sustain strong growth. According to top brass, design, functionality, innovation, quality, and customer service are what, collectively, set the company apart from enterprises such as Coach, Inc. (COH), and the many successful, privately-held competitors in this industry segment.
Aside from an expansive product offering, the high-performance nature of its products has attracted a loyal consumer base that admires well-made goods. Innovation in design and technology is what allows Tumi Holdings to maintain its customer loyalty. The commitment to design has channeled investment capital into premium materials, dyes, and manufacturing tools. The company has many proprietary designs that have yielded more than 190 patents, while an additional 60 applications are pending. Limited edition collections are a key to maintaining excitement in the marketplace, and by offering a feeling of exclusivity to those customers willing to splurge for highly unique products. Collaborations with Ketel One Vodka and Monster (a premier headphone line), bring cutting-edge products to the market and are essential for the company to boost its presence.
Tumi’s products are divided into three major subdivisions. The Travel Products category totaled 46% of net sales in 2011, and includes the wheeled travel products typically used in air-travel. The Business Cases segment accounted for 40% of net sales in 2011, and includes soft cases, messenger bags, and other bags intended for daily commuting. Finally, the Accessories category brought in 14% of net sales in 2011 and features a wide variety of daily-use items, wallets being the most popular. Furthermore, these three categories offer products from five key product lines. Core offerings are intended for professionals and frequent travelers. Premium products are for high-income consumers and are made of high quality materials. The Trend/Sport line is for early adopters, the customers who seek out trends and modern designs. T-Tech is a line specifically intended for younger adults, who like everything about the Tumi brand, but have limited budgets. And finally, the company’s Women line is, obviously, made for female consumers.
Sales are made through both direct-to-consumer and indirect-to-consumer channels. Direct-to-consumer includes: company-owned retail stores that sell only Tumi-branded products; outlet stores located in the United States, the U.K., France, and Germany; and a successful e-commerce website, which operates in the U.S., the U.K., and Germany, and garners the attention of five million visitors per year. The indirect-to-consumer channels are: wholesale, Tumi products are sold in bulk to high-end department stores such as Macy’s (M) and Kohl’s (KSS); partner stores, operated by local retailers and carry only Tumi products; third-party e-commerce sites; and specialty markets that include incentive marketers.
Following the recent IPO, Tumi must continue growing. In order to hopefully reach new levels of profitability, the company will continue to expand its base of company-owned stores, as well as further expand wholesale distribution across the globe. It is also important that management continues to increase brand awareness. If Tumi can become as ubiquitous as Nike (NKE), steady, long-term top-line could well follow. Finally, e-commerce must remain a focus of the company as Internet-shopping becomes more popular. The company currently converts approximately 1% of its web traffic into sales, with an average order size of $300; increases to both of these figures should follow as international brand awareness grows.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.