Columbia Sportswear Company appears to be as healthy and vibrant as its octogenarian COB Gert Boyle, who was off on a fishing trip in the Florida Keys with some customers, as the company posted yet another robust quarter that saw all key indicators in sales, earnings, and backlog point to another solid year.
But analysts saw the picture a bit differently as COLM maintained a conservative position in its guidance for the balance of the year, prompting some to lower estimates and sending shares 7.6% lower for the week to close at $53.24 on Friday. If history holds true, Columbia is well positioned to easily beat their current projections.
Excluding the benefits of foreign exchange rates and the weaker dollar, Columbia posted a 16.5% sales increase in the quarter. The period also included $9.7 million in sales from Mountain Hardwear that was not in the numbers in Q1 last year. Mountain Hardwear added over 75 new specialty retailers during the first quarter. Sorel had sales of $3.5 million in Q1.
FX rate benefits lifted gross margins, which ended up flat in the quarter, offsetting lower GM in the U.S. due to sales of older fall close-out product and a continued strengthening of the lower-margin Sportswear and Footwear categories.
In the U.S., Sportswear sales were driven by strength in shorts and bottoms, with the Roc Short and Roc Pant continuing to perform well. The company said that footwear sell through was “very good” for the quarter and pointed to the Sawtooth Light Hikers number one position in SportScanINFOs sales rankings for both dollars and units. They also highlighted sandals and slip-ons as “selling very well” right now.
Boyle said U.S. fall backlog was “strong, particularly in the Sportswear and Footwear categories”, but he was noticeably disappointed in the Outerwear numbers for the period. He said that Sportswear bookings for the region were particularly strong in mens bottoms, while Footwear category bookings were strongest in the cold weather, hiking, and trail categories.
COLM said is will overhaul the youth Outerwear offering for fall 2005, essentially turning over 90% of the product. Adult Outerwear will see 85% of its product changed for fall 05.
Sales in Canada in Q1 increased 8.2% on a currency-neutral basis and the relative strength of the Canadian dollar helped push fall bookings higher as well. Strong Columbia brand Footwear bookings were said to have offset softer bookings in Outerwear on a currency-neutral basis. The company will continue to look to the Sorel brand in Canada where it saw strong growth in Outerwear, Sportswear and work safety Footwear bookings.
European sales increased 14.5% in the first quarter, excluding the FX rate gain, driven by spring footwear sales in the sandal and trail categories. COLM said they are seeing “brisk” re-orders in Europe. Fall bookings in Europe were said to be up, but the company the increases there fell short of the company average when reported in currency-neutral terms. COLM said booking “increased nicely” in France and Spain, and in the Outerwear and Footwear categories, offsetting “weakness” in the U.K. and Germany.
Boyle said there were “some product issues and some people issues in the U.K.” The company also announced that John Evans, GM for Columbias European subsidiary, had resigned to return to his native Canada.
“Other” international increased 31.9% in the quarter excluding the FX rate benefit, led by a 17.4% increase in Japan to $10.1 million, or a 5.9% increase in currency-neutral terms. International distributors, which for the most part post sales in U.S. dollars, saw sales increase by two-thirds to $11 million. The increase also hurt margins as the distributor business carries margins roughly half the normal margins for the company.
Consolidated worldwide backlog at quarter-end, which includes open spring orders, increased 14.3% to $777.3 million compared to consolidated backlog of $680.1 million at quarter-end LY. Fall product backlog was up 12.7% to $664.0 million. Excluding the benefits of the weaker dollar, consolidated backlog increased 10.4% at quarter-end, while fall product backlog increased 8.9% versus last year. Mountain Hardwear bookings are included in the figures for both years.
Apparel made up roughly 90% of fall bookings for Mountain Hardwear, with SnowSports-related outerwear described as “especially strong”. Boyle also said the brands first Sportswear offering for fall was “received very well.”
Sorel bookings for fall were said to be “very strong” in the U.S. and Canada, with particular strength in styles like the Caribou boot. Boyle said fall orders for Sorel Outerwear and Sportswear “increased significantly”, especially in Canada.
Mr. Boyle laid out an estimate of revenue growth in the 8% to 10% range for the second quarter with net income “flat” to Q2 2003. Full year net income is seen growing approximately 10% versus last year on sales growth in the 11% to 12% range.
>>> It was this conservative guidance that had analysts up in arms, as many questioned the guidance based on the current fall backlog figures, as sales generally outpace backlog. Boyle also said the company was increasing its excess inventory position for fall above its historical position at 5% above bookings, but said it would not reach the 10% level…
