Columbia Sportswear Company reported net sales grew 29 percent to a record $152.2 million in the third quarter with nearly equal contributions from existing and new businesses.

Sales grew $152.2 million to $675.3 million in the third quarter ended Sept. 30, prompting COLM to raise its full year guidance. Organic growth, led by Columbia and Sorel, accounted for $73.3 million, or 48.2 percent of the growth.  Sales of Columbia branded products increased 29 percent to $555.4 million, while Sorel net sales increased 23 percent to $58.2 million. Those increases were partially offset by results at Mountain Hardwear, where net sales declined 24 percent to $31.0 million.

The remaining 51.8 percent of the new revenue came from new businesses. Sales by Prana, acquired in June, grew 19 percent and added $28.2 million of incremental net sales, while the company’s new joint venture (JV) in China contributed another $50.7 million.

Net sales in the United States increased 26 percent to $406.3 million with a major contribution from Prana. In Canada, net sales increased 34 percent (28 percent c-n) to $66.7 million. Latin America/Asia Pacific (LAAP) region net sales increased 72 percent (71 percent c-n) to $123.5 million, mostly due to the new JV in China and despite declines in the important South Korean market. In the Europe/Middle East/Africa (EMEA) region, net sales grew just 1 percent (flat c-n) to $78.8 million, as high, single-digit growth in direct sales by Columbia and Sorel in Europe countered a decline in shipments to EMEA distributors caused by a pulling forward of those shipment into the second quarter.

Footwear gaining traction
Footwear Apparel, Accessories & Equipment net sales grew 28 percent to $549.4 million. Footwear net sales increased 33 percent to $125.9 million, lead by Columbia’s growing assortment of trail shoes, which have been picked up by several very large retailers in Europe.  Sorel sales are up 18 percent year to date thanks to sales of lightweight styles to upscale department stores and fashion boutiques and through Sorel.com. On Oct. 30,  Sorel opened its first store, a pop-up store that will operate in New York’s Meatpacking District over the holidays.

Gross margins improved 100 bps during the quarter and are up 160 bps through the first nine months of the year. SG&A expenses grew 29.3 percent, including rising advertising costs that are on pace to increase by $34 million in 2014 and reach 5.4 percent of sales compared with 4.6 percent in 2013.

Income from operations increased 28 percent to $98.3 million, or to 14.6 percent of sales, including approximately $3.9 million of one-time costs related to the Prana acquisition. Excluding Prana’s operating results and those expenses, adjusted operating income increased to 15.1 percent of net sales, compared with 14.7 percent of net sales in the third quarter of 2013.

Third quarter net income increased 20.2 percent, to $65.6 million, or 93 cents per diluted share, compared with net income of $54.6 million, or 79 cents per diluted share, for the same period in 2013.

COLM ended the quarter with inventory valued at $494.8 million, up 20.7 percent from a year earlier, or up 9 percent excluding Prana.

Updated guidance
COLM’s updated guidance for 2014 calls for consolidated net sales to grow 22 percent, organic sales to grow 10 percent, gross margin to grow 130 basis points, SG&A margin to decline 15 basis points, operating margin to grow 90 bps to 8.7 percent, and net income to grow 35 percent.

Some of the growth will come from six new branded stores, including a Columbia store in Chicago, two Columbia stores in New York, PFG stores in Alpharetta, GA and Southlake Town Center Dallas and the Sorel pop-up store in New York. The lone laggard remains  Mountain Hardwear, where sales are on pace to decline for the third year in a row to the $120 million range – a level last seen in 2010.

In 2015, COLM anticipates net sales will continue growing at double-digit rates and operating  margins will advance toward its long-term goal of mid-teens. The bullish outlook is based on strong early Fall 2014 sell-through, coupled with growth in Spring 2015 advance wholesale orders, and plans for continued growth in  direct-to-consumer channels, which are expected to generate 34 percent of sales in 2014, or about the same percentage as 2013.

Columbia resurgent
“I think were seeing is a refocus on the Columbia brand from our most important retailers, a confidence in the company’s ability to create differentiated products, and to promote them to consumers so that we have significant demand for the product,” said Boyle. “And then, really, just the performance of the brand in the fall period in 2014. Weve had great selling already, and frankly we have virtually no weather anywhere in the world.”

Some of the growth will come at Kohl’s, which is looking to expand its assortments of Columbia apparel to take advantage of the wellness trend.

“We believe that weve invested the time and effort in products that can do well at sporting goods channel, as well as adapting some of those technologies to work very well for the Kohl’s consumer, which doesnt require the kind of high-tech feature set that consumers at a sporting goods operation would require,” explained Boyle.

COLM is also working with distributors in South America and the Middle East to kick off Prana’s international expansion.