Columbia Sportswear Company announced record fourth-quarter net sales of $717.4 million for the quarter ended December 31, 2016, a 3 percent increase (2 percent constant-currency) compared with net sales of $699.4 million for the fourth quarter of 2015. Fourth-quarter 2016 operating income increased 22 percent to a fourth quarter record $100.4 million. Fourth-quarter 2016 net income increased 34 percent to a fourth-quarter record $84.7 million, or $1.20 per diluted share, compared with fourth-quarter 2015 net income of $63.4 million, or 90 cents per diluted share.

Full-year 2016 net sales increased 2 percent (2 percent constant-currency), to a record $2.38 billion. Operating income increased 3 percent to a record $256.5 million, representing operating margin of 10.8 percent compared with operating margin of 10.7 percent in 2015. Full-year 2016 net income increased 10 percent to a record $191.9 million, or $2.72 per diluted share, compared with full-year 2015 net income of $174.3 million, or $2.45 per diluted share.

Chief Executive Officer Tim Boyle commented, “We are very proud of our fourth quarter and full year 2016 performance against a challenging backdrop in many of our largest markets. Record net sales, record gross margins, record operating income, expanded operating margin, and record net income reflect our powerful brand portfolio, robust operational platforms and disciplined prioritization of investments.

“We are particularly encouraged by the strong results we achieved in our Europe-direct markets, completing a second consecutive year of mid-20 percent constant-currency sales growth and returning that business to profitability after several challenging years. We also grew in the U.S., despite significant headwinds from customer bankruptcies, changing consumer shopping behavior, unseasonably warm weather, and cautious wholesale customers.”

Boyle concluded, “Our 2017 outlook anticipates up to 4 percent earnings growth on 4 percent net sales growth, driven by contributions from three of our four brands and all four of our geographic regions. As part of our focus on relentless improvement, the senior management team and I are engaging a leading consulting firm to assist us in performing a thorough assessment of our operating model. Our goal is to ensure that our business is aligned and organized to successfully execute our strategic plan. We remain confident in our ability to continue to drive sustainable profitable growth through our powerful brand portfolio.”

Fourth-Quarter Results

Net Sales
Fourth-quarter consolidated net sales growth of 3 percent (2 percent constant-currency) was driven by:

  • 2 percent net sales increase in the U.S. to $455.4 million, primarily reflecting growth from the Columbia brand
  • 20 percent net sales increase in the Europe/Middle East/Africa (EMEA) region to $70.1 million, including low-20 percent net sales growth in the company’s Europe-direct business and a 17 percent increase in net sales to EMEA distributors
  • 1 percent net sales increase (1 percent decline constant-currency) in the Latin America/Asia Pacific (LAAP) region to $151.9 million, including net sales growth in Japan and China, partially offset by declines in Korea and in sales to LAAP distributors.

These results were partially offset by a 12 percent net sales decline (11 percent constant-currency) in Canada.

Global Columbia brand net sales increased 4 percent to $552.3 million. Global Sorel brand net sales decreased 1 percent (2 percent constant-currency) to $103.8 million. Global Prana brand net sales increased 2 percent to $28.2 million, and global Mountain Hardwear brand net sales decreased 11 percent (12 percent constant-currency) to $31.3 million.

Global Apparel, Accessories & Equipment net sales increased 4 percent to $535.8 million, and Footwear net sales decreased 1 percent (2 percent constant-currency) to $181.6 million.

Profitability
Fourth-quarter operating income increased 22 percent to a fourth-quarter record $100.4 million, or 14 percent of net sales, compared to $82.3 million, or 11.8 percent of net sales, for the same period in 2015. Gross margins improved to 47.1 percent of sales from 45.3 percent.

Fourth-quarter net income increased 33.7 percent to a fourth-quarter record $84.7 million, or $1.20 per diluted share, compared to $63.4 million, or 90 cents per diluted share, for the same period in 2015.

Fiscal Year 2016 Results

Net Sales
Consolidated 2016 net sales increased 2 percent to a record $2.38 billion, compared with 2015 net sales of $2.33 billion.

Consolidated 2016 net sales growth of 2 percent included:

  • 3 percent net sales increase in the U.S. to $1.51 billion
  • 9 percent net sales increase in the EMEA region (10 percent constant-currency) to $253.5 million, reflecting a low-20 percent increase (mid-20 percent constant-currency) in the company’s Europe-direct markets, partially offset by a low-double-digit decline in net sales to EMEA distributors

These results were partially offset by a 3 percent net sales decrease in the LAAP region (4 percent constant-currency) to $453.7 million, reflecting a low-20 percent net sales decline in Korea and a high-teen percentage decline in net sales to LAAP distributors, partially offset by low-double-digit percentage growth in Japan (low-single-digit constant currency) and low-single-digit percentage growth in China (high-single-digit constant currency). They were also affected be a 2 percent net sales decrease in Canada (1 percent growth constant-currency) to $164.6 million.

Global Columbia brand net sales increased 2 percent (3 percent constant-currency) to $1.91 billion. Global Sorel brand net sales increased 2 percent (1 percent constant-currency) to $213 million. Global prAna brand net sales increased 12 percent to $139.9 million. Global Mountain Hardwear brand net sales declined 11 percent (10 percent constant-currency) to $104 million.

Global Apparel, Accessories & Equipment net sales increased 2 percent (3 percent constant-currency) to $1.87 billion. Global Footwear net sales increased 1 percent to $511.6 million.

Profitability
Full-year 2016 operating income increased 3 percent to a record $256.5 million, or 10.8 percent of net sales, compared with full-year 2015 operating income of $249.7 million, or 10.7 percent of net sales.

Full-year 2016 net income increased 10 percent to a record $191.9 million, or $2.72 per diluted share, including an unfavorable impact of approximately (24 cents) per diluted share resulting from the strengthening of the U.S. dollar. This currency impact primarily consists of lower gross margins within many of Columbia’s foreign subsidiaries as a result of increased local currency costs of inventory purchased in U.S. dollars. Full-year 2015 net income totaled $174.3 million, or $2.45 per diluted share.

Balance Sheet, Cash Flow And Share Repurchase Activity
During the year ended December 31, 2016, the company generated a record $275.2 million in operating cash flow, invested $50 million in capital expenditures and paid dividends of $48.1 million.

At December 31, 2016, cash and short-term investments totaled $551.9 million, of which approximately 49 percent was held in foreign jurisdictions from which a repatriation of those funds to the United States would likely result in a significant tax cost to the company.

Consolidated inventories increased 3 percent to $488 million at December 31, 2016 compared to $473.6 million balance at December 31, 2015, consisting primarily of current fall 2016 styles, partially offset by later receipt of spring 2017 production.

As of December 31, 2016, approximately $173.5 million remained available under the current repurchase authorization, which does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.

Dividend
The board of directors authorized a regular quarterly dividend of 18 cents per share, payable on March 22, 2017 to shareholders of record on March 9, 2017.

2017 Financial Outlook
The company currently expects 2017 net sales growth of approximately 4 percent compared with 2016 net sales of $2.38 billion, including approximately 1 percentage point negative effect from changes in foreign currency exchange rates.

The company expects fiscal year 2017 gross margins to improve by approximately 25 basis points, and for selling, general and administrative (SG&A) expenses to increase at a rate slightly faster than net sales, resulting in approximately 20 basis points of SG&A expense deleverage, including a planned increase in global demand creation spend from 5 percent of sales in 2016.

Based on the above assumptions, the company expects operating income to increase up to 5 percent, to between $260 million and $270 million, resulting in anticipated 2017 operating margin of up to 10.9 percent. Net income after non-controlling interest is expected to be between approximately $192 million and $200 million, or approximately $2.72 to $2.82 per diluted share.

Photo courtesy Columbia