Columbia Sportswear Company finished an otherwise flat 2013 with record fourth quarter sales and forecast 15-17 percent revenue growth in 2014 as its new joint venture in China and the introduction of lower-priced products kick in.
The company reported net sales of $533.1 million in the fourth quarter ended Dec. 31, 2013, up 6 percent compared with the fourth quarter of 2012. Net income for the quarter totaled $36.7 million, or $1.05 per diluted share, including a non-cash asset impairment charge of approximately $5.6 million after-tax, or $0.16 per diluted share. Fourth quarter 2012 net income totaled $39.5 million, or $1.15 per diluted share.
Full year 2013 net sales increased 1 percent to $1.68 billion and net income totaled $94.3 million, or $2.72 per diluted share, including a non-cash asset impairment charge of approximately $5.6 million after tax, or $0.16 per diluted share. Full year 2012 net income totaled $99.9 million, or $2.93 per diluted share.
“2013 concluded with strong sales momentum,” said Tim Boyle, Columbia’s president and CEO. “Increased consumer demand that became evident across our U.S. direct-to-consumer platform during the third quarter, well before seasonal weather arrived, has sustained through the fourth quarter of 2013 and into the first quarter of 2014.
“Our wholesale customers are exhibiting a greater appetite for broader and deeper assortments of our new Fall 2014 line, which feature our best innovations at more accessible prices,” Boyle continued. “As a result, we expect renewed growth in our wholesale businesses, continued expansion of our global direct-to-consumer business, coupled with incremental contributions from our new joint venture in China, to drive healthy growth in sales and operating income in 2014.
The company’s ended the year with cash and investments totaling $529 million, clean inventory, and no long-term debt, added Boyle, who noted that the company's confidence in the future potential of its brands was reflected in the board’s approval of a 12 percent increase in our quarterly dividend, to $0.28 per share.”
Fourth quarter results Consolidated net sales increased 6 percent to $533.1 million compared with net sales of $501.1 million for the same period in 2012. Changes in currency exchange rates had a 2 percentage point negative effect on the net sales comparison.
Fourth quarter U.S. net sales increased $34.1 million, or 12 percent. Europe/Middle East/Africa (EMEA) region net sales increased $6.6 million, or 11 percent, including a 3 percentage point benefit from changes in foreign currency exchange rates. Net sales in Canada increased $5.2 million, or 16 percent, including a 6 percentage point negative effect from changes in currency exchange rates. Those increases were partially offset by a $13.9 million, or 11 percent, decline in Latin America/Asia Pacific (LAAP) region net sales, including an 8 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
Apparel, Accessories & Equipment net sales increased $23.7 million, or 6 percent, to $416.0 million, and Footwear net sales increased $8.3 million, or 8 percent, to $117.1 million. (See “Categorical Net Sales” table below.)
Columbia brand net sales increased $27.3 million, or 7 percent, to $427.8 million. Sorel brand net sales grew $9.5 million, or 17 percent, to $66.0 million. Mountain Hardwear net sales declined $5.4 million, or 13 percent, to $37.3 million. (See “Brand Net Sales” table below.)
Fourth quarter net income totaled $36.7 million, or $1.05 per diluted share, including a non-cash asset impairment charge related to the company’s European distribution center in Cambrai, France of approximately $5.6 million after tax, or $0.16 per diluted share. Net income for same period in 2012 totaled $39.5 million, or $1.15 per diluted share.
Fiscal year 2013 results
Consolidated 2013 net sales increased $15.4 million, or 1 percent, to $1.68 billion, compared with 2012 net sales of $1.67 billion, including a 1 percentage point negative effect from changes in currency exchange rates.
U.S. net sales increased $24.6 million, or 3 percent. EMEA region net sales increased $10.1 million, or 4 percent, including a 2 percentage point benefit from changes in currency exchange rates. Canada net sales increased $3.9 million, or 3 percent, including a 4 percentage point negative effect from changes in currency exchange rates. Those increases were partially offset by a decline in LAAP region net sales of $23.2 million, or 6 percent, including a 7 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
Apparel, Accessories & Equipment net sales totaled $1.37 billion, an increase of $27.6 million, or 2 percent. Footwear net sales totaled $310.4 million, a decrease of $12.2 million, or 4 percent. (See “Categorical Net Sales” table below.)
Columbia brand net sales increased $21.8 million, or 2 percent, to $1.41 billion; Sorel brand net sales increased $1.7 million, or 1 percent, to $128.7 million; and Mountain Hardwear brand net sales declined $9.0 million, or 6 percent, to $132.5 million. (See “Brand Net Sales” table below.)
2013 net income totaled $94.3 million, or $2.72 per diluted share, including a non-cash asset impairment charge of approximately $5.6 million after tax, or $0.16 per diluted share. 2012 net income totaled $99.9 million, or $2.93 per diluted share.
Balance sheet
The company generated a record $274.3 million in operating cash flow during the year ended Dec. 31, 2013 and ended the year with $529.2 million in cash and short-term investments, compared with $335.4 million at Dec. 31, 2012.
Consolidated inventories of $329.2 million at Dec. 31, 2013 were 9 percent lower than the $363.3 million balance at Dec. 31, 2012. Excluding approximately $20.6 million of incremental inventory acquired by the company’s China joint venture that commenced Jan. 1, 2014, consolidated inventories at Dec. 31, 2013 were approximately 15 percent lower compared to Dec. 31, 2012.
Initial 2014 financial outlook
The company currently expects 2014 net sales growth of between 15 percent and 17 percent compared to 2013 net sales of $1.68 billion, with more than half of that growth anticipated to come from incremental sales by the new China joint venture and the remainder from the company’s global direct-to-consumer and wholesale businesses.
The company expects fiscal year 2014 gross margins to improve by approximately 50 basis points, and for selling, general and administrative expenses to increase approximately 16 percent, consisting of incremental operating costs of the China joint venture, increased investment in demand-creation, increased costs related to the company’s U.S. ERP implementation, and investments in continued expansion of the company’s global direct-to-consumer platform.
Based on the above assumptions, the company expects high-teen operating income growth, resulting in 2014 operating margin of approximately 8.0 percent of net sales.
