Samsonite International SA (1910), the
largest branded-luggage maker, is pulling its Tokyo Chic line to
replace handles after reports they contained carcinogens.
The Mansfield, Massachusetts-based company said in a
statement it has “absolute conviction” the Tokyo Chic line is
safe to use and the recall is aimed at ensuring consumer
confidence. The cost of the replacements will amount to no more
than $500,000, Ramesh Tainwala, the company’s president for Asia
Pacific and Middle East, said yesterday in Hong Kong.
Samsonite shares plunged 16 percent in the city on June 15
after Choice Magazine, a monthly publication of the Hong Kong
Consumer Council, reported that handles of some Samsonite
luggage contained materials which could cause cancer. Samsonite,
Prada SpA (1913) and Burberry Group Plc are increasingly counting on
China for growth, as consumers in the world’s most populous
nation become more affluent.
“The impact on sales is very small,” said Alfred Ying, a
Hong Kong-based analyst at Piper Jaffray Asia Securities Ltd.,
who has an “overweight” rating on the stock. “It’s a
positive and speedy action that they’ve taken. Consumers will be
more comfortable in using their products in the future.”
Samsonite fell 0.2 percent to HK$12.96 at 9:48 a.m. Hong
Kong time. The stock is down 11 percent from its initial public
offering price last June.
Hong Kong is a popular shopping location for Chinese
tourists, who would have to pay luxury goods taxes in the
mainland. Retailers recorded an average 17 percent sales gain
for jewelry, watches and valuable gifts in the first three
months of the year in the city, compared with a year earlier.
Report Dispute
The Consumer Council report is “irresponsible” and based
on “isolated statistics,” Tainwala said.
The magazine, which mentioned Samsonite’s Tokyo Chic,
Cubelite and Westlake lines, had said the immediate danger was
minimal. Samsonite said on June 18 it was recalling the Tokyo
Chic line from Hong Kong, after stating June 15 that all three
brands were safe.
“Whether they decide to pull their products or not is
their decision,” Christina Wong, a spokeswoman for the council,
said today. “The most important thing about our test report is
to educate the public.”
The council’s tests were organized by global consortium
International Consumer Research and Testing and were according
to “objective standards,” she said.
Test Results
Samsonite sent random samples of the products to
laboratories in Germany and Hong Kong to assess the levels of
polycyclic aromatic hydrocarbons in the handles, it said. The
test results found levels that were “significantly lower” than
those reported by the consumer council, Samsonite said.
Customers who have bought the luggage range can return the
product to any Samsonite store to have the side-carrying handle
replaced, it said.
Tainwala said in January he expects China to overtake the
U.S. as the company’s largest market in the next three to five
years. China contributed about 10 percent to the group’s total
revenue in 2011, while the U.S. accounted for 25 percent.
Sales of discretionary goods in China will grow by a
compounded annual rate of 13.4 percent between 2010 and 2020, as
shoppers in the world’s second-largest economy become richer,
McKinsey Co. said in a report in March.
China’s urban disposable income rose 14 percent to about
21,810 yuan ($3,400) in 2011.
To contact the reporters on this story:
Wendy Mock in Hong Kong at
wmock3@bloomberg.net;
Simon Lee in Hong Kong at
slee936@bloomberg.net
To contact the editor responsible for this story:
Frank Longid at
flongid@bloomberg.net
Article source: http://www.businessweek.com/news/2012-06-19/samsonite-pulls-tokyo-chic-luggage-amid-carcinogen-claims