Columbia Posts Strong Q1 on Sportswear Sales…

Columbia Sportswear’s continued investment in building an infrastructure to support a multi-brand outdoor holding company seems to be paying off with strong first quarter results for the company. First quarter income outpaced sales by a three to one ratio due to better margins and lower SG&A expenses as a percentage of sales. Excluding changes in currency exchange rates, consolidated net sales increased 9.6%. Shipments of Columbia branded Sportswear in the U.S., Europe, and international distributor markets drove growth for the brand. Outerwear shipments in the U.S. and distributor markets also contributed to growth in the quarter.

Sportswear was the largest and fastest growing product category for Columbia in the first quarter. Strong growth in knit and woven tops, shorts and pants drove growth in the category. Sportswear growth was strong in the U.S., Europe, and international distributor markets. U.S. Spring season sportswear shipments continue to be the primary driver of first quarter sales even as sell-through rates starting slowly this year due to unseasonably cool weather conditions. In regions not affected by unseasonable weather, management said that sell through rates have generally been good, particularly in shorts and sandals.

Fall and Spring backlog increased 4.7% to $888.7 million, with Fall season product backlog comprising $742.1 million of the total, representing a 4% increase compared to the prior year at quarter-end. Excluding changes in currency exchange rates, Fall backlog increased 1.6%. Fall sportswear pre-orders increased in the double-digits due to strength in the U.S. and international distributor markets. In the U.S., Men's sportswear continued to have steady pre-order growth. Bookings for women's and youth sportswear were described as “very good.” Sportswear orders in international markets were “exceptional.”

Columbia’s footwear brands saw considerable gains with Sorel sales increasing 12.9% to $3.5 million and Montrail sales increasing 8.9% to $4.9 million. First quarter shipments of Spring sandals and close-outs of cold weather boots drove growth in the first quarter. Footwear sales in international distributor markets led the growth in the category during the first quarter. Footwear sales decreased slightly domestically with softness in Columbia-branded styles offsetting an increase in close-outs of cold weather Sorel styles.

Management also strengthened the footwear sourcing and development processes with personnel to execute sourcing and product delivery initiatives. This includes a new VP of footwear, Mark Neenow, who will oversee all aspects of Footwear product creation for the Columbia, Sorel and Montrail brands. Neenow came from Brooks Sports, where he held the position of VP global footwear merchandising. Prior to that post, he was the product manager for Nike ACG trail running footwear.

Mountain Hardwear sales grew 9.9% to $17.7 million during the first quarter. Mike Wallenfels, MTH president, told SEW that Q1 2007 was the first quarter in which sportswear shipments surpassed outerwear shipments. Sportswear was the fastest growing category during the quarter with sales more heavily weighted towards women. Outerwear also had nice sales growth with light weight rain shells and fleece leading the category. Equipment sales were said to be challenging at traditional retailers, but growing on-line. Equipment also received a boost from MTH daypacks, which are a new category. The brand has been keeping its existing distribution strategy intact and most growth came from more volume through existing customers coupled with higher ASP’s. The only challenges during the quarter were in Europe where weather slowed the brand’s growth rate.

Pacific Trail had sales of $600,000 in the first quarter, but U.S. Pacific Trail outerwear orders decreased significantly for Fall 2007. Fall 2006 product did not sell through well and the Fall 2007 line was “not well received by customers.” Both product lines were designed by the previous owners of Pacific Trail. In addition, the company experienced challenges integrating sales operations, but it made changes to the management and product development teams. Columbia moved much of the responsibility for merchandising to teams that are in-house to “make quick movements and adjustments” for next season.

Gross margins for the first quarter of 2007 expanded due to the improvements in sportswear margins, and easier comparisons due to the negative impact of liquidating Montrail inventory last year. For the first quarter, the company's SG&A expenses as a percentage of sales decreased 140 basis points to 31.2%. These factors pushed Columbia’s net income up over 30% for the quarter.

Second quarter 2007 consolidated revenue growth is expected to be approximately 6% to $224.3 million with EPS of approximately 18 cents per diluted share compared to 13 cents last year. Full year 2007 revenue growth should be approximately 5% to $1.35 billion with EPS at approximately $3.65 per diluted share compared to 2006 EPS of $3.36.