The Portland-based company said the 9% decrease in first quarter 2009 net sales consisted of a 24% decline in the Europe, Middle-East & Africa region (EMEA) to $49.8 million, including an 8% negative effect from changes in foreign currency exchange rates compared with the first quarter of 2008; a 26% decline in Canada to $19.8 million, including an 18% negative effect from foreign currency exchange rates; and a 6% decline in the Latin America & Asia Pacific region (LAAP) to $46.1 million, including a 4% negative effect from foreign currency exchange rates. First quarter 2009
Compared with the first quarter of 2008, first quarter 2009 sportswear net sales decreased 14% to $138.2 million and footwear net sales decreased 22% to $40.0 million. These decreases were partially offset by a 10% increase in outerwear net sales to $76.8 million and a 10% increase in accessories and equipment net sales to $17.0 million.
The company expects full year 2009 net sales to decline low double-digits on a percentage basis and operating income to decline approximately 300 to 350 basis points, compared to 2008 operating income, which included a $24.7 million impairment charge.
The company ended the first quarter with $299.8 million in cash and short-term investments, compared with $278.1 million at March 31, 2008. Inventories declined 6% compared with March 31, 2008, to $223.7 million, and were 13% lower than at December 31, 2008.
Tim Boyle, Columbia's president and chief executive officer, commented, “We managed our business well during the first quarter, against a very challenging retail environment in the U.S., Europe and Canada, and the headwinds created by a stronger U.S. dollar. First quarter 2009 operating expenses were lower than the first quarter of 2008, reflecting reduced selling expenses resulting from lower sales volumes and the effect of the cost control initiatives that we began implementing during 2008, including our decision to slow the pace of our branded retail store expansion and adjust our marketing investments in response to reduced 2009 revenue expectations.''
Backlog
As of March 31, 2009, fall 2009 wholesale backlog was $608.0 million, 15% lower than fall 2008 wholesale backlog of $714.4 million, including a 4% negative effect from changes in foreign currency exchange rates. The decline in wholesale backlog consisted of a mid-teens percentage decline in apparel orders and a low single-digit percentage decline in footwear orders.
Consolidated wholesale backlog, which includes both global spring and fall orders at March 31, 2009, was $721.6 million, 15% lower than 2008 consolidated wholesale backlog of $849.8 million, including a 4% negative effect from changes in foreign currency exchange rates.
Boyle commented, “Our fall wholesale backlog reflects, in part, the weak global retail environment during the first quarter, coupled with the financial and credit market challenges that have led many of our customers to continue reducing their planned inventory levels for the remainder of 2009. Despite the challenging macro-economic environment, the company's strong balance sheet is allowing our
2009 Financial Outlook
The company said “the dynamic nature of the current global economic environment and its impact on consumers and the financial health of our customers has reduced the predictive quality of the company's wholesale backlog and other factors on which the company has historically based its estimates of net sales, gross margin and operating expenses as a percentage of net sales, thus limiting the company's ability to estimate future results.”
The company expects full year 2009 wholesale net sales to decline in the mid-teens on a percentage basis compared with 2008, based primarily on the global wholesale backlog as of March 31, 2009 and the estimated effect of changes in foreign currency exchange rates. Including expected incremental sales from the company's direct-to-consumer business, the company expects total 2009 net sales to decline in the low double-digits on a percentage basis compared with 2008.
Full year 2009 operating margin is expected to decline approximately 300 to 350 basis points from 2008, which included a $24.7 million impairment charge. This expected decline is primarily due to fixed cost de-leverage caused by lower net sales, coupled with planned investments in our direct-to-consumer initiatives. Gross margins are expected to decline primarily due to a higher volume of close-out product sales, a more promotional retail environment, and unfavorable foreign currency hedge rates. The company currently expects a full-year tax rate of approximately 30%.
The company expects a low- to mid-twenty percentage decline in second quarter 2009 net sales compared with the second quarter of 2008. Contributing to this decline is an anticipated shift into the third quarter of a larger portion of fall 2009 shipments to international distributors compared to fall 2008 orders, of which a larger portion were shipped in last year's second quarter. The second quarter is the company's lowest volume quarter of the year, which amplifies the effect on income of changes in the timing of shipments, the fixed costs associated with sourcing, merchandising, distribution and administrative functions, and the incremental fixed costs associated with the company's expanded retail operations. Consequently, the company expects to incur a significantly higher operating loss in the second quarter of 2009 compared to last year's second quarter.
Dividend
The board of directors approved a dividend of $0.16 per share, payable on May 28, 2009 to shareholders of record on May 14, 2009.
