Columbia Sportswear reported last week it expects its 2013 sales to be flat on the heels of another disappointing winter. The company reported consolidated net sales reached $501.1 million for the quarter ended Dec. 31, 2012, down 5 percent from the same period in 2011. Mild winter weather in North America during most of the holiday shopping period and general consumer caution resulted in reduced retail traffic and a more promotional environment in key markets, which caused higher order cancellations and fewer reorders from wholesale customers, as well as lower than expected direct-to-consumer sales, primarily in the U.S. Exchange rates had a neutral effect on the net sales comparison.
Columbia Sportswear reported last week it expects its 2013 sales to be flat on the heels of another disappointing winter.
The company reported consolidated net sales reached $501.1 million for the quarter ended Dec. 31, 2012, down 5 percent from the same period in 2011. Mild winter weather in North America during most of the holiday shopping period and general consumer caution resulted in reduced retail traffic and a more promotional environment in key markets, which caused higher order cancellations and fewer reorders from wholesale customers, as well as lower than expected direct-to-consumer sales, primarily in the U.S. Exchange rates had a neutral effect on the net sales comparison.
The decline also reflected approximately $9 million of factory-direct shipments of international distributors Spring 2013 advance orders shifted into the first quarter of 2013.
Fourth quarter net income increased 8 percent to $39.5 million, or $1.15 per diluted share, compared with net income of $36.7 million, or $1.08 per diluted share, for the same period in 2011.
Until the holiday shopping season began in late November, it looked as though we would achieve our outlook for a slight increase in full year operating margins, despite a flat top line, said President and CEO Tim Boyle. However, December delivered mild weather, causing us to fall short of our expectations in our North American wholesale and direct-to-consumer businesses.
Columbia brand net sales declined $16.0 million, or 4 percent, to $400.5 million, primarily due to lower sales of cold weather products. Sorel brand net sales declined $7.8 million, or 12 percent, to $56.5 million, also primarily due to lower sales of cold weather footwear. Mountain Hardwear and Montrail net sales each declined less than $1.0 million.
Net sales declined 7 percent in the United States and 20 percent in the Europe/Middle East/Africa (EMEA) region, net a 300 basis point negative impact from changes in foreign currency exchange rates. The declines were partially offset by a $7.7 million, or 6 percent, increase in Latin America/Asia Pacific (LAAP) region net sales, with a neutral effect of changes in currency exchange rates. Net sales in Canada increased $1.5 million, or 5 percent, primarily attributable to the positive impact of changes in currency exchange rates.
Gross margin fell 120 basis points to 41.3 percent, even as selling, general and administrative expenses dropped 11.1 percent to $158.8 million.
Driving down price points for new technology
In our initial launches of these differentiating technologies, weve tended to put them out with the most premium quality materials and the most premium features on the garments, which makes them relatively expensive against other competitive products, said Boyle. Our focus is going to be on bringing these products – bringing these features and innovations into products that dont have all the bells and whistles that weve been adding. So there is where we think we can have a more popular price point, more people can utilize the technologies, and the company will have a higher margin.
Leaning toward lighter weight apparel and footwear
An historic spring launch of Omni Freeze Zero
Mountain Hardware, meanwhile, will launch Cool.Q Zero in early April, with a campaign featuring print advertising, social media and in-store events, targeting the running community and specialty running accounts. Cool.Q Zero uses a visible technology comprised of tiny blue circles that are embedded into the fabric of the apparel. The circles contain a unique cooling polymer that, when exposed to sweat or moisture, causes the rings to swell, creating an instant and prolonged cooling sensation that helps minimize heat.
Were highly focused on spring and summer product, not only because it’s a big opportunity for us, but if you look at a heat map of the globe, there’s more people living in warm areas than there are people living in cold areas, Boyle said.
COLM expects 2013 net sales to be comparable to 2012 net sales of $1.67 billion and forecast full year operating margin of between 7.5 percent and 8.0 percent of sales.
We expect retailers to be cautious as they place advance orders for fall 2013; and in turn, were also planning conservatively in building inventories, said Boyle. Under that scenario, if weather cooperates, we should all benefit from a greater proportion of full price sales, better gross profit margins, and cleaner inventory levels exiting the year.
In the first quarter of 2013, the company expects net sales comparable to net sales of $333.1 million in the first quarter of 2012. Gross margin is expected to decrease between 120 and 170 basis points, more than offset by anticipated SG&A leverage of between 100 and 150 basis points and increased licensing income, resulting in first quarter operating margin expansion of up to 50 basis points from first quarter 2012 operating margin of 1.6 percent.
COLM will plow $50 million into capitalizing its new joint venture in China in the coming four to five quarters as it transitions its distribution there from an independent distributor model to a joint venture operation, that will begin operations Jan. 1, 2014.
We know we cannot continue to cost cut our way to success, said Boyle. We will continue to aggressively pursue catalysts to grow our top line profitably. We will continue to invest in our brands, products, and our people, and initiatives that we believe can grow Columbia Sportswear Company into a much larger business.