The luxury goods category is a great market to be in. The likes of Michael Kors (NYSE: KORS), Tiffany & Co. (NYSE: TIF) and Movado Group (NYSE: MOV) have shown what a great play it can be for investors. All three have outperformed the S&P 500 over the past two months.

However, for many investors, the focus is on finding the next great luxury brand for their portfolios — ideally, a company that enjoys high brand recognition and fits into the “affordable luxury” category.

This is especially true as the demand for luxury goods continues to be strong from emerging markets like China. There’s one company that should be on every investor’s radar: Tumi Holdings (NYSE: TUMI), a maker of luxury travel bags.

Shares have been rangebound over the past year and a half, but there could be a breakout above old highs within the next few months.

#-ad_banner-#Sales Gains From New Products, Online
Tumi just launched its Alpha 2 collection of luggage and travel accessories. To help promote the collection, the company is launching an interactive “digital concierge” marketing campaign to help its customers find the right Tumi product. Later this year, Tumi plans to debut its Tegra-Lite Max line, which features Tegra-Lite, Tumi’s strongest and lightest material.

What Tumi has done online is very encouraging. Last year, sales on Tumi.com and through third-party retailers were up 23% year over year. This year should also see the rollout of Tumi’s new e-commerce platform, which should offer greatly improved functionality.

E-commerce sales account for 14% of its global direct-to-consumer business, and Tumi grew its e-commerce database by 33% last year. The beauty here is that Tumi can use that database and the new e-commerce platform to increase sales in the higher-margin e-commerce business.

Targeting Growth In 2 Key Segments
Taking a page from the playbook of Michael Kors, Tumi is planning to increase its number of offerings geared toward women with new colors and styles. One example is its newly launched collection from Jonathan Adler, known for his colorful and modern interior design work. Tumi also plans to introduce a women’s business collection called Sinclair and update its core women’s line with new colors and silhouettes.

	Flickr/clotee_allochuku
	Tumi is making a huge push to draw more female customers.

All of these initiatives will help attract the all-important female clientele to the Tumi brand. The potential growth of its women’s line is something that the market might be overlooking. This is especially true when you consider that the women’s line represents only 12% of sales, the same as its accessories business.

Another potential growth driver for Tumi is the prospect of increasing air travel worldwide. A stronger global economy means more air travel, which obviously would be a big positive for Tumi. Both the major travel booking sites, Expedia (Nasdaq: EXPE) and Priceline.com (Nasdaq: PCLN), are expected to see sales growth of more than 12% in 2014 and 2015.

The World Travel Monitor expects trips out of Asia Pacific to increase 9% this year. This emerging region is expected to be a key growth driver for many companies over the next decade. China currently makes up less than 5% of total Tumi sales, but the company plans to continue expanding its presence in Asian markets, particularly in China. For context, the U.S. Commerce Department expects visitor volume for China to the U.S. to grow 229% from 2013 to 2017.

Risks to Consider: A slowdown in air travel would likely hurt demand for Tumi’s travel bags. There is also the risk that competitors — including the likes of Michael Kors and Coach — may make a greater push into the travel bag market and capture some of Tumi’s market share.

Action to take –> Buy Tumi Holdings with a price target of $28, for upside of close to 20%. That’s a price-to-earnings (P/E) multiple of 25 on next year’s earnings estimates. The 25 multiple is in line with Michael Kors’ forward price-to-earnings ratio, but still below the 28 to 36 P/E range shares have traded at since its 2012 IPO.

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