Columbia Sportswear continued to log double-digit gains in both net income and sales in the third quarter despite continued softness in the companys U.S. Outerwear business. COLM said that consumers were shifting away from Outerwear and more toward their Fleece product, which the company classifies as Sportswear. The declines in Outerwear were more than offset by large increases in Sportswear and Footwear, which again led all category growth.
On a currency-neutral basis, total sales for the company increased 9.3% for the quarter. The company said FX rate benefits had a 140 basis point positive impact on gross margin, while the growth in their Sportswear and Footwear product sales had a 210 basis point negative impact, netting the 70 bps drop.
The company continues to see a large potential upside in international expansion and has brought Paul Gils, former GM for Nike Germany, on board as their Europe GM. Columbia posted large sales increases in the European market, but Columbia president & CEO Tim Boyle told analysts in a conference call that Spring 05 bookings were “disappointing” for the region.
Columbia continues to see growth in France and Spain, but Boyle said that they are seeing continued weakness in the “wealthy northern countries.” He is hoping that Gils ten years of experience in the area with Nike will help push the larger retailers in this region to take the company more seriously.
In the U.S., Sportswear sales were said to be “outstanding” and sell-through of mens and womens value-oriented Fleece was strong right now. Canada sales dropped 4.1% on a currency-neutral basis, impacted by a shift in timing of some of the fall-related product shipments. Europe saw Q3 sales increase 18.9% on a currency-neutral basis, which the company said was driven by Footwear and Sportswear while sell-through of fleece and soft-shells were also strong.
In the Other International segment, currency-neutral sales climbed 47.8% for the period, due in large part to strength in the companys Hong-Kong, Russian, and South American distributors. International Distributors, which are the largest part of this segment, saw sales increase 75.5% to $28.6 million compared to $16.3 million. Japan saw a 3.4% increase in sales for Q2 on a currency-neutral basis, or 11.5% in local currency, to $9.7 million.
Mountain Hardwear posted an incredibly strong quarter with a sales increase of 40.8% to $18.3 million. BOSS spoke with Mike Wallenfels, VP of sales and marketing at MH, who said that the brand has seen “very strong” bookings in 05 because of their efforts at targeting, opening up and developing product for SnowSports use. “Weve had a great response from SnowSports retailers,” said Wallenfels. “Our expansion into new distributions channels worked. Our new product worked.” Walenfels also told BOSS that while the hard-shell market is relatively flat, soft-shells are continuing the growth they showed last year. Fleece products were said to be very strong as well as “more stylized synthetic insulated pieces.”
Mountain Hardwears European offices have under development for the past nine months, but the company has yet to see the benefits of the direct sales structure.
Wallenfels said that this quarter most of the sales went through various distributors, but going forward, MTH will be selling their spring line directly to retailers.
Wallenfels said that backlog was “very strong” going into spring and the new & expanded apparel and sportswear lines have been very well received at retail.
At Sorel, sales increased 36.1% in the quarter to $19.6 million. The company said they have “a strong plan in place” to bring Sorel to the forefront of the cold weather market.
COLM upped its Q4 and fiscal 2004 guidance, now forecasting fourth quarter revenue growth of 13% to 14% and net income growth of 17% to 20%, or revenues in a range of $290.9 million to $293.4 million and net income between $37.7 million and $38.6 million. Full year revenue growth is now expected to be at 14% while net income will grow 14% to 15%. Previous 2004 guidance called for net income growth of roughly 10% to 11% on net sales growth in the 12% to 13% range.