Columbia Sportswear Co. joined a number of industry players reporting a loss in the second quarter amid significant sales declines due to the fallout from COVID-19, but results came in better than Wall Street targets.

Highlights of the quarter include:

  • Net sales decreased 40 percent to $316.6 million, compared to the second quarter of 2019. Wall Street was expecting consensus sales of $295 million.
  • In the direct-to-consumer channel, e-commerce net sales increased 72 percent year-over-year, partially offsetting brick & mortar store traffic and sales trends that remained well below pre-pandemic levels.
  • Loss from operations of $70.3 million, or (22.2) percent of net sales, compared to second quarter 2019 operating income of $16.4 million, or 3.1 percent of net sales.
  • Net loss per share of $(0.77), compared to the second quarter 2019 diluted earnings per share of $0.34. Wall Street was expecting a loss on average of 88 cents.
  • Cash and short-term investments totaled $476 million and total liquidity exceeded $1 billion at quarter-end.

Columbia said the lower net sales and profitability in the second quarter 2020 compared to the second quarter 2019 primarily reflect the negative impact of temporary store closures, including our wholesale customers’ stores, and lower consumer demand resulting from the ongoing COVID-19 pandemic.

Chairman, President and Chief Executive Officer Tim Boyle commented, “I’m extremely proud of our team of global employees who swiftly adapted to altered work environments while maintaining efficient and productive business operations during these challenging times. Second-quarter sales and profitability declines clearly reflect the global effects of the ongoing pandemic. A highlight was our outstanding e-commerce growth, which increased 72 percent year-over-year. Our financial position remains strong with $476 million in cash and short-term investments. Taken together with available credit capacity, total liquidity was greater than $1 billion exiting the quarter. It is clear that consumer interest in the outdoors has surged during the pandemic and we are well-positioned to equip these adventurers with innovative products as they recreate responsibly.”

“As of today, nearly all of our global store fleet is open. We remain acutely focused on cost containment while also continuing to invest in our strategic priorities. I’m confident our global team of employees, powerful brand portfolio, strong financial position and operating discipline will all contribute to Columbia Sportswear emerging from this crisis in a stronger competitive position. Although uncertainty remains unprecedented, we expect sales volume to remain below prior-year levels for the balance of the year. Absent further deterioration in trends due to the ongoing pandemic, we anticipate the second quarter will prove to be the steepest year-over-year quarterly percent decline in net sales of the year.”

“Our long-term commitment to driving sustainable and profitable growth has not changed and our strategic priorities remain to:

  • drive brand awareness and sales growth through increased, focused demand creation investments;
  • enhance consumer experience and digital capabilities in all our channels and geographies;
  • expand and improve global direct-to-consumer operations with supporting processes and systems; and
  • invest in our people and optimize our organization across our portfolio of brands.”

COVID-19 Update
Entering the second quarter, the vast majority of owned stores across the U.S., Europe, Japan, and Canada were closed due to the pandemic, in addition to many of the company’s wholesale customers and international distributors’ doors. Store reopening timelines in these markets varied by region and predominately occurred within the May and June timeframe. Exiting the quarter, nearly all of the company’s owned stores were open globally. Based on cost-containment actions and lower variable expenses, the company remains on track to lower 2020 operating expenses by more than $100 million, in comparison to last year, before any related one-time costs. The company continues to evaluate further actions to right-size the ongoing expense structure in 2021 and beyond. Although uncertainty remains unprecedented, the company expects sales volume to stay below prior-year levels for the balance of the year. Absent further deterioration in trends due to the ongoing pandemic, the second quarter is expected to be the steepest year-over-year quarterly percent decline in net sales of the year. Please reference the CFO Commentary exhibit for a detailed review of COVID-19 pandemic related issues.

Second Quarter 2020 Financial Results

  • Net sales decreased 40 percent to $316.6 million, from $526.2 million for the comparable period in 2019.
  • Among brands, sales declined 42 percent at Columbia, 12 percent fro Sorel, 28 percent for Prana, and 44 percent for Mountain Hardwear.
  • By region, sales were down 42 percent in the U.S., 34 percent LAAP, 36 percent in EMEA, and 56 percent in Canada.
  • By product category, sales were down 44 percent in Apparel, Accessories and Equipment, and 23 percent in Footwear.
  • By channel, sales were down 46 percent wholesale and 32 percent DTC.
  • Gross margin contracted 200 basis points to 46.2 percent of net sales, from 48.2 percent of net sales for the comparable period in 2019.
  • SG&A expenses decreased 10 percent to $217.7 million, or 68.7 percent of net sales, from $240.8 million, or 45.8 percent of net sales, for the comparable period in 2019.
  • Loss from operations of $70.3 million, or (22.2) percent of net sales, from operating income of $16.4 million, or 3.1 percent of net sales, for the comparable period in 2019.
  • Net loss of $50.7 million, or $(0.77) per share, from net income of $23.0 million, or $0.34 per diluted share, for the comparable period in 2019.

First Half 2020 Financial Results

  • Net sales decreased 25 percent to $884.8 million, from $1,180.8 million for the comparable period in 2019.
  • Gross margin contracted 280 basis points to 47.2 percent of net sales, from 50.0 percent of net sales for the comparable period in 2019.
  • SG&A expenses were essentially flat at $494.5 million, or 55.9 percent of net sales, compared to $492.5 million, or 41.7 percent of net sales, for the comparable period in 2019.
  • Loss from operations was $72.3 million, or (8.2) percent of net sales, from operating income of $104.3 million, or 8.8 percent of net sales, for the comparable period in 2019.
  • Net loss of $50.5 million, or $(0.76) per share, compared to net income of $97.2 million, or $1.41 per diluted share, for the comparable period in 2019.

Balance Sheet As Of June 30, 2020

  • Cash, cash equivalents and short-term investments totaled $475.8 million, compared to $524.3 million at June 30, 2019.
  • Short-term borrowings totaled $2.8 million. There were no short-term borrowings at June 30, 2019.
  • Including cash, cash equivalents and short-term investments and available credit capacity, total liquidity exceeded $1 billion at quarter-end.
  • Inventories increased 7 percent to $806.9 million, compared to $756.4 million at June 30, 2019.

Share Repurchases For The Six Months Ended June 30, 2020

  • In first-quarter 2020, the company repurchased 1,557,184 shares of common stock for an aggregate of $132.9 million, or an average price per share of $85.34. The company did not repurchase shares during the second quarter of 2020.
  • At June 30, 2020, $82.2 million remained available under the current stock repurchase authorization. As previously announced, the company has suspended share repurchases as part of a broader capital preservation effort resulting from the pandemic. Management may resume share repurchases in the future at any time, depending upon market conditions, the company’s capital needs, and other factors.

Quarterly Cash Dividend
As previously announced, the company’s Board of Directors has suspended quarterly cash dividends as part of a broader capital preservation effort resulting from the pandemic. The company’s Board of Directors will continue to evaluate the potential for future dividend distributions.

Photo courtesy Columbia Sportswear

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