Columbia Sportswear Company saw fourth quarter net sales grow 4 percent, or 8 percent on a constant-currency basis, to $1.17 billion from $1.13 billion for the comparable period in 2021. The increase in net sales was said to be driven by Columbia brand growth, partially offset by declines in net sales in emerging brands. Full year net sales increased 11 percent to $3.46 billion, generating a 14 percent gain in constant-currency terms.
“By channel, our growth in 2022 is relatively balanced with both our wholesale and DTC business generating double-digit constant-currency growth,” said Chairman, President and CEO Tim Boyle during a conference call with analysts. “Our global DTC e-commerce business grew 10 percent constant-currency and represented 18 percent of total net sales. I believe these results are proof that our strategies are working.”
Direct-to-consumer (DTC) growth outpaced Wholesale growth for the quarter but Wholesale growth surpassed the DTC increase for the year. Globally, DTC represented 55 percent of revenues in the fourth quarter but 46 percent of sales for the full year.
U.S. net sales increased 2 percent to $780.8 million in the fourth quarter and 12 percent to $2.30 billion for the full year. In the quarter, COLM generated high-single-digit DTC growth balanced across its brick-and-mortar and e-commerce businesses. U.S. wholesale net sales decreased in mid-single-digits. Wholesale performance in the quarter was said to be unfavorably impacted by a greater portion of Fall 2022 orders shipping in the third quarter this year relative to last year.
“Looking at the third and fourth quarters combined, second half U.S. wholesale net sales increased high-single-digit percent, reflecting healthy retailer demand for our products,” Boyle said. “With that said, we know supply chain disruptions and resulting delivery delays tempered our Fall 2022 performance. We were unable to maximize early-season full price sales, and we experienced higher order cancellations resulting from the late receipts of inventories.”
Boyle revealed that on-time delivery percentage moving into Spring 2023 is greatly improved and is approaching pre-pandemic service levels. “U.S. Fall 2022 retail sell-through trends were generally positive. With the season almost complete, sell-through is tracking roughly in line with Fall 2021, which was exceptionally strong,” he shared.
Turning to the international business, Boyle reported that Latin America/Asia Pacific (LAAP) region net sales declined 5 percent (+11 percent constant-currency) to $164.0 million and 13 percent to $473.9 million for the full year. In reviewing constant-currency growth, China was up in mid-single-digits for the quarter led by strong DTC online performance. For the full year, China declined in mid-single-digits, primarily reflecting the impact of government efforts to contain Covid-19 outbreaks.
“I’d like to thank our team in China who overcame numerous supply chain and COVID-related challenges,” expressed Boyle. “I’m encouraged by the emerging momentum I see in this market as we started 2023. I believe the investments in talent and operational improvements we’ve made over the last several years position us to accelerate the business as China reopens. We know we have powerful brand recognition in China and that this market represents one of our largest geographic growth opportunities.’
Japan reportedly increased in the high-single-digits in the quarter and grew in the high-teens for the full year in constant-currency terms. For the quarter, net sales growth was reportedly led by DTC as traffic recovered and consumers embrace Columbia’s products.
Korea grew in the low-single-digits in the fourth quarter and posted high-single-digit growth for the full year in constant-currency terms. “There is sustained interest in outdoor products and activities in that market, and we are positioned for growth — continued growth in 2023,” Boyle said.
“Our new leadership in Korea is focused on managing the marketplace to optimize our DTC store fleet and retail partners distribution to further elevate the brand and drive productivity across all channels,” Boyle continued.
“The LAAP distributor markets were up in the low 80s for the quarter and high-70s for the full year,” Boyle detailed, expressing growth in constant-currency terms. “Growth in the quarter reflects higher Fall 2022 and Spring 2023 orders as well as favorable timing of shipments. With robust growth in 2022, our LAAP distributor business has returned to pre-pandemic sales levels.”
Europe, Middle East, Africa (EMEA) region net sales increased 17.3 percent (+32 percent in constant-currency terms) to $132.8 million for the quarter and 26 percent of the year. In constant-currency terms, Europe Direct grew in the low-30s in the quarter and for the full year, including strong demand across all channels.
“I’m extremely proud of our team and the progress they’ve made growing our business in Europe, while improving profitability,” Boyle shared. “If you’ll remember in 2015, Europe Direct represented just over €100 million in annual net sales and generated an operating loss. In 2022, we surpassed €300 million and its profitability is accretive to our consolidated operating margin. Our products, marketing and marketplace strategies are yielding powerful results. Europe Direct is expected to be one of our fastest-growing markets in 2023.”
Boyle said the EMEA distributor business was up high-30s in the quarter and up in low-teens for the full year on a constant-currency basis. Growth in the quarter was said to be driven by favorable timing of Fall 2022 and Spring 2023 shipments compared to last year. Columbia Sportswear Company has paused taking any new advanced orders for the Russian market for early last year.
“Our outlook for our EMEA distribution business does not include sales for Russia, but contemplates healthy growth in other distributor markets which will help offset a portion of these lost sales,” Boyle detailed.
Canada net sales were up 13 percent (+23 percent constant-currency) to $92.0 million in the quarter and grew 19 percent in constant-currency terms for the full year. Boyle said that growth was led by wholesale in the quarter, which benefited from favorably timed Fall 2022 shipments compared to last year.
Looking at performance by brand. Columbia brand net sales increased 8 percent (+13 percent in constant-currency terms) to $961.3 million in the fourth quarter and experienced 16 percent constant-currency growth for the full year, finishing with $2.86 million in U.s. dollar terms. During the quarter, growth was said to be “relatively balanced across apparel and footwear.”
Sorel brand net sales decreased 13 percent (-9 percent constant-currency) to $142.6 million in the quarter and increased 11 percent for the full year, finishing the year with $347.3 million in U.S. dollar terms. In the quarter, net sales were said to be “unfavorably impacted by a greater portion of Fall 2022 orders shipping in the third quarter as well as higher order cancellations.” Early season sell-through was reportedly challenged given delivery delays.
Prana net sales decreased 6 percent in the quarter, but were up 1 percent for the full year. Sales declines in the quarter were driven by softness in the wholesale business, which was impacted by late product deliveries partially offset by DTC growth. The clients, the HBO Max reality series sponsored Prana debuted in January.
Mountain Hardwear net sales decreased 12 percent (-9 percent in constant-currency) to $33.4 million in the quarter, but increased 5 percent for the year in constant-currency terms. In U.S. dollar terms, Mountain Hardware grew 3 percent to $109.5 million for the year. Similar to our other emerging brands, net sales were impacted by late product deliveries, which drove higher order cancellations.
Gross margin contracted 180 basis points to 50.4 percent of net sales in Q4 from 52.2 percent of net sales for the comparable period in 2021. The primary driver of gross margin contraction was increased promotional activity, compared to exceptionally low promotions in the comparable period in 2021.
SG&A expenses increased 5 percent to $405.1 million, or 34.6 percent of net sales, from $384.0 million, or 34.0 percent of net sales, for the comparable period in 2021. SG&A expense growth primarily reflects expenses to support the growth of the business, inflationary pressures, and investments to drive brand-led consumer-focused strategies.
COLM saw an impairment of goodwill and intangible assets related to Prana of $35.6 million.
Operating income decreased 27 percent to $155.4 million, or 13.3 percent of net sales, compared to operating income of $211.6 million, or 18.7 percent of net sales, for the comparable period in 2021.
Income tax expense of $34.0 million resulted in an effective income tax rate of 21.3 percent, compared to an income tax expense of $54.9 million, or an effective income tax rate of 25.9 percent, for the comparable period in 2021.
Net income decreased 20 percent to $125.7 million, or $2.02 per diluted share, in the fourth quarter, compared to net income of $157.0 million, or $2.39 per diluted share, for the comparable period in 2021.
Photo courtesy Columbia Sportswear
