Columbia Sportswear Company said net sales declined 4% in the third quarter as retailers cut their orders for the holiday season. The company said wholesale sales declined in the high-single-digits but were partially offset by a doubling of retail sales thanks to the opening of 11 of its own outlet stores through September.
COLM reduced its wholesale inventory by 6%, or about $19 million, and is on track to have 28 outlet stores opened by year-end, up from 13 at the end of last year.
* at quarter-end
Columbia Sportswear Third Quarter Results | |||
(in $ millions) | 2008 | 2007 | Change* |
Total Sales | $452.4 | $471.1 | -4.0% |
U.S. Sales | $271.3 | $284.2 | -4.5% |
Canada Sales | $56.8 | $57.8 | -1.7% |
EMEA Sales | $78.2 | $87.3 | -10.4% |
Latin Amer/Asia | $46.1 | $41.8 | +27.7% |
Outerwear | $208.6 | $215.8 | -3.3% |
Sportswear | $157.5 | $161.9 | -2.7% |
Footwear | $63.6 | $71.4 | -10.7% |
Access & Equip | $22.7 | $22.0 | +3.2% |
Gross Margin | 44.7% | 43.2% | +150 bps |
SG&A % | 26.7% | 23.8% | +290 bps |
Net Income | $58.3 | $62.6 |
Columbia Pushing Ahead with Owned-Retail Openings as Retailers Cut Back OrdersColumbia Sportswear Company said net sales declined 4% in the third quarter as retailers cut their orders for the holiday season. The company said wholesale sales declined in the high-single-digits but were partially offset by a doubling of retail sales thanks to the opening of 11 of its own outlet stores through September. COLM reduced its wholesale inventory by 6%, or about $19 million, and is on track to have 28 outlet stores opened by year-end, up from 13 at the end of last year. The company said it expects fourth quarter net sales to decline between 6% and 10%. The companys spring 2009 backlog of $370.9 million was off 11% from a year earlier. The declining backlog reflects falling first quarter wholesale revenues-a decline that will likely be magnified by a strengthening dollar.  Company CEO Tim Boyle said price increases on cotton products appeared to have cost the company some sales, but that sell through appears to be stronger thanks to brighter colored signage placed in outdoor retail stores. While cool spring weather and the weakening retail environment resulted in “unusually high cancellations” of orders for its inaugural line of Omni-Share apparel at the end of the Spring 08 season, bookings for the Spring 09 line are up 8% in the United States and comprise 60% of spring 09 bookings compared to 48% a year ago. COLM expects to make up some of its lost wholesale business by selling more through its growing network of first-line and outlet stores. First quarter gross margins are expected to improve thanks to a higher proportion of those higher margin sales and currency hedging. COLMs outerwear and sportswear net sales declined 3% and footwear sales decline 11%, in part due to timing of exports. Accessories and equipment sales, however, rose 3%, indicating steady demand for outdoor gear. Net sales for the Columbia and Sorel brands decreased 5% (-$23 million) and 1% respectively. Mountain Hardwear net sales rose 19% to $35.2 million, buoyed by “increased penetration in the strategic U.S. specialty channel.” Combined, net sales of Montrail and Pacific Trail brand products did not comprise a significant percentage of sales in the third quarter of either year. Pointing to the sales growth at Mountain Hardwear, Boyle emphasized that the outdoor market remains resilient and that sales growth continued in Japan and Korea. COLM said favorable currency exchange rates accounted for six points of the revenue growth in the EMEA region, but were insignificant on a consolidated net sales basis. Boyle said he does not expect the companys direct business in EMEA to improve until it launches a new product line in fall 2009. About 75% of the gross margin improvement came from favorable foreign currency hedge rates and the rest from fewer closeout product sales and a higher proportion of retail sales. SG&A expenses rose as the company ramped up spending on marketing Omni-Shade and opening stores. COO and Interim CFO Bryan Timm said he expects COLM to give up much of the gross margin gains made in Q3 in the current quarter as retailing becomes “a little promotional” compared to Q3 and as the dollar strengthens. He expects gross margins to contract about 120 points to 41%. Fourth quarter earnings are expected to decline to the 60% to 70% range from the $1.12 in comparable earnings reported a year earlier. For all of 2008, COLM expects gross margins to go unchanged on a 3% to 4% decline in revenues from fiscal 2007. Earnings for the year are projected to come in at $2.80 to $2.90 per share, up from pervious guidance of $2.60 to $2.70. Boyle continued to emphasize how Columbias low debt and strong cash position allow it to move ahead with strategic plans set two years ago to boost owned-retail and advertising. Advertising spend is expected to hit 5.5% of sales this year. The company has no long-term debt and ended the quarter with $145.3 million in cash, up by about 25%. Future plans include opening four first-line new stores next month in Portland, Minneapolis and Seattle and as many as ten next year. “Frankly, our balance sheet is so strong it puts us in a position that we can really take advantage of weakness in the retail sector and make some great deals with landlords based on our strength,” said Boyle when asked if the company might scale back if the economy worsens. The company also expects to launch an e-commerce site in the middle of next year.
|
