Citing greater-than-expected demand for Fall season products in the U.S., Columbia Sportswear reported its first quarterly sales gain in seven quarters and forecast first quarter sales would rise by 4% to 5% for the period. Earnings came in well above Wall Street expectations. “We exceeded our fourth quarter sales outlook thanks to great reorders and a return to more normal cancel rates in our wholesale business after a difficult Spring 2009, along with growth in our expanded direct-to-consumer operations,” boasted company President and CEO Tim Boyle on a conference call with analysts.
The 1% revenue gain in the quarter was aided by a 3 percentage point foreign currency exchange benefit but easily outdistanced the high-single decline the company had forecast in October.
By region, U.S. sales increased 5.1% to $215.5 million, driven by the addition of 11 outlet stores and the launch of e-commerce sites for its Columbia and Sorel brands, as well as the anniversary effect of stores opening in 2008. That increase was partially offset by a mid-single digit decline in the U.S. wholesale business, which was better than expected as reorders accelerated and cancellation rates moderated versus Q4 2008.
Internationally, EMEA (Europe, Middle East & Africa) sales declined 22.9% to $46.2 million including a 5 percentage point currency benefit. The EMEA distributor business tumbled 60%, reflecting difficult macroeconomic conditions in its largest distributor regions as well as a shift in some spring shipments to Q1 2010. EMEA direct sales increased in the mid-single digits, aided by a 9 percentage point currency benefit and healthy reorders.
Sales in the Latin America/Asia Pacific region (LAAP) climbed 15.7% to $72.9 million, including an 11 percentage point currency benefit. Japan grew high-teens and Korea soared high 40s on a percentage basis, both aided by mid-teen currency benefits. LAAP distributors showed a 22% decline resulting primarily from a shift in timing of shipments to Latin America distributors coupled with lower Spring 2010 orders.
Sales in Canada declined 12.2% to $23.7 million despite a 5 percentage point currency benefit due to soft Fall 2009 orders that included planned reductions in some channels of distribution.
By product, Outerwear sales were essentially flat at $171.5 million. Sales increases in U.S. retail, as well as in Korea, and Japan matched declines in North American and European wholesale businesses and its independent distributor businesses. Sportswear sales fell 12.9% to $93 million, mostly related to Columbia brand and declines in the U.S.
wholesale and EMEA distributor businesses. Footwear sales jumped 18.6% to $70.9 million, mostly related to increased Sorel and Columbia brand sales in its U.S. and European direct-to-consumer businesses, partially offset by EMEA distributor declines. Accessories and equipment sales grew 38.0% to $22.9 million.
By brand, Columbia brand sales decreased 2.3% to $298.6 million for the quarter, while Mountain Hardwear gained 19.4% to $28.9 million and Sorel revenues jumped 27.2% to $29 million. Other sales (Montrail and Pacific Trail) were down 21.7% to $1.8 million.
Mountain Hardwear surpassed the $100 million mark last year and will launch an e-commerce site in 2010. Sorel’s resurgence is being helped by being more style-driven with a new focus on the female customer and gaining shelf space at higher-end stores.
Overall gross margins were essentially flat at 42.1% as lower gross margins in the North American wholesale and European direct businesses were offset by improved gross margins in the growing direct-to-consumer segment.
SG&A expense increased to 35.2% of sales from 32.2% as a result of lower sales in the N.A. wholesale and distributor businesses, coupled with increased fixed cost base due tied to its retail expansion.
Fourth quarter net income reached $23.1 million, or 68 cents a share, easily topping Wall Street’s consensus estimate of 39 cents a share. Year-ago earnings of $18.6 million, or 55 cents a share, included an impairment charge of 46 cents per diluted share.
Looking ahead, Q1 sales are expected to grow 4% to 5%, including 4 percent currency benefit.
