Samsonite International SA’s chief executive officer, Ramesh Tainwala, stepped down after a short-seller’s concerns about accounting practices and corporate governance rattled investors of the world’s largest branded-luggage maker.
Tainwala is stepping down for personal reasons effective May 31, Samsonite said in a statement Friday. Samsonite’s board said Kyle Francis Gendreau, chief financial officer, succeeds Tainwala as CEO. The company also released a detailed response to the report by short seller Blue Orca Capital LLC, repeating that the allegations are “one-sided and misleading” and the “conclusions drawn in the report about the company and its financial results are incorrect.”
Blue Orca, founded by former Glaucus Research Group research director Soren Aandahl, questioned related-party transactions between Samsonite and Indian entities controlled by Tainwala and his family, and a revolving door of auditors at the luggage maker’s South Asia unit. Tainwala was also accused of fraudulently claiming to hold a doctoral degree in business.
The short seller also alleged Samsonite concealed slowing growth with debt-funded acquisitions, including its 2016 purchase of Tumi, and inflated profit margins with questionable accounting linked to its takeovers.
“The company’s board of directors stands behind its track record of transparency and corporate governance,” Samsonite said in the statement. “The company’s consolidated financial statements and the related notes to the consolidated financial statements, which are audited by KPMG LLP, are in accordance with International Financial Reporting Standards.”
The company said its purchase accounting associated with the acquisitions of Tumi, and Tumi’s distribution network in certain markets in Asia, was done in conformity with international accounting standards, and operating margins accurately reflect the strong underlying performance of the business.
Tainwala’s departure is the latest fallout from the short-seller’s questions about the dominant player in the $19 billion luggage market, claiming a CEO who has helped steer the company’s growth through acquisitions since taking over in 2014. Samsonite’s shares almost doubled over the past two years, driven by a spate of deals including the $1.8 billion purchase of Tumi Holdings Ltd.
The Mansfield, Massachusetts-based company’s shares plunged 21 percent on Thursday and Friday last week after the report was issued, erasing $1.3 billion in market capitalization. Trading in Hong Kong, which has been halted this week, is expected to resume Friday morning.
Tainwala, 59, started off as a commodities trader before getting into the luggage business as a maker of the plastic sheets that are molded into suitcases. His ties as a supplier to Samsonite led to a joint venture in the late 1990s, Samsonite South Asia, to manufacture international-quality luggage in India. Tainwala subsequently rose within the ranks at Samsonite, becoming head of Asia-Pacific by 2011 and CEO in 2014.
Samsonite Chairman Timothy Parker supported Tainwala as recently as last week, saying in a statement, “I have full confidence in Ramesh’s capabilities as CEO.”
— With assistance by Daniela Wei, and Rachel Chang
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