Columbia Shakes Off Q4 Outerwear Cancels to Post Solid Quarter Performance…

January 31, 2005
SGB Update

Columbia Sportswear was the unfortunate recipient of a fair chunk of the downside from the unseasonably warm weather across the U.S. in the fourth quarter. Word on the street had a number of companies that provide outerwear to the chain sporting goods and moderate department store channel saw their back-up orders cancelled as goods better suited for a deep chill sat while much of the Upper Midwest and Northeast basked in warmer temperatures through December.

The effect on Columbia was a hit to the gross margin line as they moved to liquidate enough excess inventory before year-end to ensure they hit top-line and bottom-line targets. Inventories remained higher at year-end, but management felt confident much of it was already committed for January, while the balance will be set aside for fall deliveries.

For the fourth quarter ended December 31, sales jumped 17.2% to $301.8 million, compared to $257.4 million for the year-ago period. Currency-neutral sales rose 14.6%. Net income for the fourth quarter increased 22.4% to $39.4 million, or 97 cents per diluted share, versus net income of $32.2 million, or 79 cents per diluted share, for the year-ago period.

U.S. sales increased 15.4% to $181.1 million versus $156.9 million in Q4 2003. The U.S. market benefited from strong Sportswear growth, particularly in men’s and women’s fleece and heavier-weight sportswear. The strong sell-through of the Fall ’04 line is apparently having a positive effect on Fall ’05 bookings. U.S. Outerwear shipments were also up in Q4, but margins were tough as COLM moved goods at close-out prices. Management said that they felt consumers moved to lightweight, middle-weight fleece product instead of the heavy parkas and interchangeable jackets.

While the response to Fall’05 Outerwear has been positive, COLM still feels the trends for this past season may limit open-to-buy in the heavier-weight categories. Fall 04 Footwear sell-through was described as “generally healthy”.

Fourth quarter Canadian sales increased 15.2% to $32.6 million, compared to $28.3 million in the year-ago period. Excluding FX rate benefits from the weaker U.S. dollar, sales rose 6.5% for the period. Canada didn’t experience the same level of issues with Outerwear inventory in Q4, but did see weaker sell-though in Outerwear and Winter Footwear due to the warmer temps. The region was said to have a high penetration of the Outerwear category and sees most of its future growth coming from Columbia brand Footwear and Sportswear as well as Sorel Footwear and Apparel.

European sales increased 18.9% to $44.0 million in Q4, versus $37.0 million in Q4 last year, driven by “accelerating Outerwear sales”. On a currency-neutral basis, sales rose 9.7% in the quarter and increased 14% for the year.

COLM cited European strength in men’s attached insulated parkas and non-insulated shells from the Titanium line in Q4. Footwear sales were also said to be strong in the quarter as cold-weather boots and trail shoes led the gains.

Company president and CEO Tim Boyle said the biggest impact on the flourishing European business is the addition of Paul Gils as the region’s GM. Gils will need to do more work in Germany, Scandanavia, and the U.K. as the brand under-performs there and plays more of a market-share game due to the flat economic climate. France and Spain were cited as stronger countries for Columbia.

Other International, which consists of Japan and Korea, saw sales increase 25.3% to $44.1 million, compared to $35.2 million in the year-ago period. Currency-neutral sales were up 22.2% for the quarter and rose 21.7% for the year. Japan sales rose 5.3% to $15.8 million in Q4 and increased 11.4% to $43.1 million for the year.

On a category basis, Sportswear sales increased 37.5% to $80.7 million. Outerwear sales increased 10.5% to $154.7 million. Footwear sales increased 18.9% to $52.8 million. Equipment sales increased 11.1% to $1.0 million and Accessories sales decreased 6.0% to $12.6 million, compared to the fourth quarter of 2003.

For full year 2004, Columbia saw currency-neutral sales increased 12.1%. Excluding the FX rate benefits, Canadian sales increased 2.0%, European sales increased 14.0%, and Other International sales increased 21.7%.

Columbia Shakes Off Q4 Outerwear Cancels to Post Solid Quarter Performance…

SGB Update

Columbia Sportswear was the unfortunate recipient of a fair chunk of the downside from the unseasonably warm weather across the U.S. in the fourth quarter. Word on the street had a number of companies that provide outerwear to the chain sporting goods and moderate department store channel saw their back-up orders cancelled as goods better suited for a deep chill sat while much of the Upper Midwest and Northeast basked in warmer temperatures through December.

The effect on Columbia was a hit to the gross margin line as they moved to liquidate enough excess inventory before year-end to ensure they hit top-line and bottom-line targets. Inventories remained higher at year-end, but management felt confident much of it was already committed for January, while the balance will be set aside for fall deliveries.

For the fourth quarter ended December 31, sales jumped 17.2% to $301.8 million, compared to $257.4 million for the year-ago period. Currency-neutral sales rose 14.6%. Net income for the fourth quarter increased 22.4% to $39.4 million, or 97 cents per diluted share, versus net income of $32.2 million, or 79 cents per diluted share, for the year-ago period.

U.S. sales increased 15.4% to $181.1 million versus $156.9 million in Q4 2003. The U.S. market benefited from strong Sportswear growth, particularly in men’s and women’s fleece and heavier-weight sportswear. The strong sell-through of the Fall ’04 line is apparently having a positive effect on Fall ’05 bookings. U.S. Outerwear shipments were also up in Q4, but margins were tough as COLM moved goods at close-out prices. Management said that they felt consumers moved to lightweight, middle-weight fleece product instead of the heavy parkas and interchangeable jackets.

While the response to Fall’05 Outerwear has been positive, COLM still feels the trends for this past season may limit open-to-buy in the heavier-weight categories. Fall 04 Footwear sell-through was described as “generally healthy”.

Fourth quarter Canadian sales increased 15.2% to $32.6 million, compared to $28.3 million in the year-ago period. Excluding FX rate benefits from the weaker U.S. dollar, sales rose 6.5% for the period. Canada didn’t experience the same level of issues with Outerwear inventory in Q4, but did see weaker sell-though in Outerwear and Winter Footwear due to the warmer temps. The region was said to have a high penetration of the Outerwear category and sees most of its future growth coming from Columbia brand Footwear and Sportswear as well as Sorel Footwear and Apparel.

European sales increased 18.9% to $44.0 million in Q4, versus $37.0 million in Q4 last year, driven by “accelerating Outerwear sales”. On a currency-neutral basis, sales rose 9.7% in the quarter and increased 14% for the year.

COLM cited European strength in men’s attached insulated parkas and non-insulated shells from the Titanium line in Q4. Footwear sales were also said to be strong in the quarter as cold-weather boots and trail shoes led the gains.

Company president and CEO Tim Boyle said the biggest impact on the flourishing European business is the addition of Paul Gils as the region’s GM. Gils will need to do more work in Germany, Scandanavia, and the U.K. as the brand under-performs there and plays more of a market-share game due to the flat economic climate. France and Spain were cited as stronger countries for Columbia.

Other International, which consists of Japan and Korea, saw sales increase 25.3% to $44.1 million, compared to $35.2 million in the year-ago period. Currency-neutral sales were up 22.2% for the quarter and rose 21.7% for the year. Japan sales rose 5.3% to $15.8 million in Q4 and increased 11.4% to $43.1 million for the year.

On a category basis, Sportswear sales increased 37.5% to $80.7 million. Outerwear sales increased 10.5% to $154.7 million. Footwear sales increased 18.9% to $52.8 million. Equipment sales increased 11.1% to $1.0 million and Accessories sales decreased 6.0% to $12.6 million, compared to the fourth quarter of 2003.

For full year 2004, Columbia saw currency-neutral sales increased 12.1%. Excluding the FX rate benefits, Canadian sales increased 2.0%, European sales increased 14.0%, and Other International sales increased 21.7%.

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