Tumi's Long-Term Outweighs Recent Negatives

Luxury luggage brand Tumi (NYSE: TUMI  ) , a little more than one year since its IPO, has failed to achieve much in the way of capital appreciation. The company came out of the gates with a rich valuation, heavily influenced by the then-recent success of other high-line brands such as Michael Kors. Tumi is growing, and will continue to grow -- much of its performance (or lack thereof) in the market has been the typical story of overvaluation and overhype. In the just-released earnings, there is plenty of evidence of a fundamentally strong company with a long runway for growth, even if Wall Street analysts were expecting a little more. With a long-term mind-set, is Tumi a good stock?

Earnings recap 
For the second quarter, Tumi brought in net sales of $108.2 million -- a near-13% increase from 2012's $95.8 million. Certainly not bad, considering the slowing economy in China and a still-tepid U.S. spending atmosphere. On the direct-to-consumer front, including outlets such as the website, comparable sales rose 4.6%, a deep discount from last year's 8%. In the international market, Tumi's comparables rose an impressive 13.3%, but still shy of last year's 16.2%.

Further down the income statement, things looked better. Operating income rose a mouth-watering 48.4% to $17.9 million. The number includes a one-time termination charge related to a Web provider worth $1.5 million. However, investors should note that 2012's operating income included a $5.5 million one-time bonus to the company CEO. Excluded, last year's second-quarter operating income was $17.5 million. Net income went from $6.5 million to $11.2 million, or $0.16 per share.

The company opened two new stores, and while the domestic performance was modest and underwhelmed the Street, investors should keep in mind the strong performance in Europe, the Middle East, and Asia.

The future of Tumi
Like clockwork, Tumi's overpriced IPO dipped down for roughly 12 months before clawing back up to its original offering price. Currently, the stock is a few points below its introductory price, but the business has since grown.

The company's e-commerce and international businesses will continue to grow at an impressive clip. At 21 times forward earnings, Tumi is not as expensive a stock as it was just a year ago. The company holds roughly the same valuation as Michael Kors, and has many similar growth characteristics. A brand-hungry growing affluence in regions such as Asia and the Middle East will keep Tumi's luggage on the move, and profits rising. As things improve domestically, investors should expect better sales figures over the medium- to long-term.

By no fault of its own, Tumi has underwhelmed in its first year of trading and its near-term guidance is equally uninteresting, but the long-term fundamentals remain attractive. If short-term tepidity is of little concern to you, I'd suggest taking a look at this iconic luggage maker.

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