Image source: Tumi Holdings.

Tumi Holdings (NYSE:TUMI) reported third quarter results on Nov. 4. The high-end luggage company limited promotional activity during the quarter -- a strategy that helped boost earnings even as foreign exchange dampened its international sales growth. Management also announced an acquisition and a new stock buyback program.

The raw numbers

Metric

Q3 2015

Q3 2014

YOY Growth

Sales

$131.013 million

$130.195 million

0.6%

Net Income

$14.869 million

$13.917 million

6.8%

Earnings Per Share

$0.22

$0.21

6.8%

Data source: Tumi Holdings Q3 2015 earnings press release.

What happened with Tumi Holdings this quarter?
Net sales increased 0.6% (and 4.4% on a constant currency basis) to $131 million, as Tumi opened nine new stores during the third quarter. Yet total comparable-store sales for all direct-to-consumer channels, including company-owned websites, decreased 2.8%.

In the DTC North America segment, a 3.8% decline in outlet comps and 8.2% fall in e-commerce comps offset a 1.3% increase in full-price comparable store sales.

The international DTC division, when measured in euros, saw full-price comparable store sales rise 5.5%, outlet comps increase 8.7%, and e-commerce website sales jump 25.4%. However, when translated to U.S. dollars, international DTC full-price comps decreased 12.1%, outlet comparable store sales fell 9.4%, and e-commerce sales increased only 4.6%.

Despite the tepid sales performance, Tumi was able to improve the profitability of its operations by curtailing promotional activity, which management believes also helped to strengthen Tumi's brand. Gross profit increased 3.9% to $79.3 million, as gross margin improved to 60.5%, up from 58.6% in the third quarter of 2014. On a constant currency basis, operating income increased 9.4% to $25.4 million, with operating margin rising to 18.7% from 17.9% for the year-ago period. And constant currency net income, aided by a lower effective tax rate, rose an even higher 16.6% to $16.2 million.

All told, constant currency earnings per share increased 16.5% year-over-year to $0.24.

"Tumi enjoyed an operationally strong quarter with positive direct to consumer comparable store growth in North America full price stores and all international direct to consumer channels in local currency," said CEO Jerome Griffith in a press release.

Capital return program
Tumi announced that it will purchase up to $150 million of its shares over the next 12 months. With the stock down nearly 30% so far in 2015, Griffith stated the company views "the recent market fluctuations as providing an opportunity to acquire our shares at an attractive price and return value to our shareholders."

Acquisition of Tumi Japan
Tumi also announced that it has entered into an agreement to acquire the remaining 50% stake in its Japanese joint venture, Tumi Japan. The company operates 13 Tumi stores, an e-commerce website, and distributes Tumi product across an additional 150 points of sale across Japan. Management expects the transaction to close in the first quarter of 2016.

"We strongly believe in the long-term economic prospects of the Japanese market and are excited to integrate this region into the business, sharing our expertise, brand power, and retail strategy to drive it to the next level," Griffith commented.

Looking forward
Management cut its full-year guidance, citing "an uncertain retail environment and unfavorable foreign currency fluctuations." The company now expects fiscal 2015 net sales to increase only 2% to 4% -- down from its previous forecast of 6% to 9% growth -- with total comparable store sales in the "negative low single digits to flat range." And full-year earnings per share are now projected to be in the range of $0.87 to $0.92, down from earlier guidance of $0.90 to $0.95.

The company did, however, increase its expected new store openings to 25 to 27 locations in 2015, up from prior estimates of 20 to 22 stores. 

"While we continue to face the same external headwinds that are impacting the global retail sector generally, we believe that the core tenets of our strategy are solid and we will continue to focus on expanding our brand and develop our superior product offerings to position us to deliver healthy, sustainable growth, and shareholder value over the long-term," said Griffith.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Tumi. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.