Columbia First Quarter Driven by Owned Retail; Backlog Jumps 20%

Geographically, sales increased in every market except for the Europe, Middle East & Africa (EMEA) region. Retail operations in the US, Korea and Japan provided the majority of the extra top-line growth. Because of these results, Columbia issued a considerably more up-beat guidance for the remainder of 2010, but at the same time warned that high unemployment and restricted access to credit make the market more unpredictable.

 

Overall, COLM net sales increased 10.8% to $300.4 million, including a three percentage point positive effect from changes in foreign currency exchange rates. In spite of flat wholesale results, The U.S. drove most of the sales growth due to expanded direct-to-consumer operations. Columbia executives said that this reflects a stronger consumer spending environment than last year’s first quarter, aided by favorable weather this year.

 

Columbia brand sales increased 10.8% to $267.7 million for the quarter. Management said they were pleased with the results from Columbia branded footwear this year, which landed in stores such as Nordstrom, Neiman Marcus, EMS and a large number of independent outdoor and running specialty stores in the U.S. and Europe who have never before carried the Columbia brand.

 

Sales of Sorel showed the strongest growth-likely due to the late winter weather experienced by many retailers in the quarter. Sales for the Sorel brand were up 33.3% to $4.0 million. Columbia will be reintroducing spring season Sorel product assortments for spring 11 as the company seeks to establish Sorel as a year-round brand.

 

Mountain Hardwear brand sales increased 10.3% to $25.6 million.

 

Together, Mountain Hardwear and Montrail logged double-digit growth in their fall 2010 backlog. During a conference call with financial analysts, Columbia President and CEO Tim Boyle spoke about the opportunities for Montrail and Mountain Hardwear under the new leadership of Topher Gaylord who officially joined the Columbia team in early April.

 

Boyle said, We believe these brands are poised to play a very important role in our next growth phase and look forward to working with Topher and his team to make that a reality.

 

While Montrail is currently managed under the Mountain Hardwear umbrella, the brand is still included in Columbias Other Brands segment on their financial statements with the Pacific Trail brand. Sales in the division were said to be insignificant during the first quarter declining

26.2% to $3.1 million.

 

Looking at the different categories where Columbia does business, Accessories and equipment remain the smallest category but grew the fastest. Every category except sportswear showed double-digit growth during the quarter.

 

Management spent a great deal of time discussing the new Omni-Heat line of products for fall, pointing out that every major customer who has access to the product has placed significant orders. Boyle told analysts, Were not making additional speculative buys to try and catch every last order… We have a finite amount of Omni-Heat and we hope were going to run out. That is our goal.

 

Global fall 2010 wholesale order backlog was $725.3 million at quarter-end, a 19.3% increase compared with March 31, 2009, including a three percentage point positive effect from changes in foreign currency exchange rates. This growth reflects double-digit growth across each of Columbias major brands, each product category and each region.

 

Management said that fall backlogs for the Mountain Hardwear and Montrail brands showed healthy growth.

 

Regionally, Canadas wholesale backlog increased in the mid-30% range and the EMEA region wholesale backlog increased in the mid-teens. This increase was a very positive sign for management since it was the region’s first positive backlog growth since 2006. Among Columbias Europe-direct markets, Germany, France and the U.K. reported the strongest backlogs.

 

From a channel perspective, specialty sporting goods across the region were strongest. The Latin America, and Asia Pacific region wholesale backlog increased in the mid-20% range.

 

Consolidated wholesale backlog, which includes both global Spring and Fall orders, was $872.1 million, 20.8% higher than the 2009 quarter-end consolidated wholesale backlog of $721.6 million.

 

Columbia is expecting some changes in the companys channel mix going forward. The company is looking at a very slight reduction in the department store channel, as specialty store channels and sporting goods channels are growing. The biggest single change in channel would be the specialty independent footwear stores with the uptake in Sorel and the higher penetration of Columbia’s trail-running products.

 

Looking ahead, COLM executives expect a high-teen percentage increase in second quarter 2010 sales, driven by incremental direct-to-consumer and U.S. wholesale sales and a higher volume of international distributor shipments in the quarter. The company expects to incur a higher operating loss in the second quarter of 2010 compared to the second quarter of 2009.

 

Columbia management expects full year 2010 net sales to increase in the 12% to 14% range compared with 2009. Gross margins in 2010 are expected to increase approximately 100 basis points while SG&A expenses are expected to increase approximately 100 basis points as a percentage of sales. Full year 2010 operating margin is expected to approximate full year 2009 operating margin of 7%.