Columbia Sportswear Co. on Thursday raised its outlook for 2019 after posting net sales for the first quarter grew 8 percent (10 percent constant-currency) to a record $654.6 million. That beat Wall Street’s estimates by $7.8 million.
The company also reported earnings per diluted share increased 67 percent to a record $1.07, compared to Q1 2018 earnings per diluted share of 64 cents and ahead of analysts’ estimates by 24 cents. Compared to non-GAAP first quarter 2018 earnings per diluted share of 77 cents, earnings per diluted share increased 39 percent.
Other highlights from Q1 include:
- Gross margin expanded 210 basis points to a record 51.4 percent of net sales, compared to first quarter 2018 gross margin of 49.3 percent of net sales.
- Operating income increased 48 percent to a record $88.0 million and operating margin expanded 360 basis points to 13.4 percent of net sales, compared to first quarter 2018 operating income of $59.3 million, or 9.8 percent of net sales. Compared to non-GAAP first quarter 2018 operating income of $70.3 million, or 11.6 percent of net sales, operating income increased 25 percent and operating margin expanded 180 basis points.
For 2019, Columbia now expects net sales of $2.98 to $3.04 billion (previously $2.97 to $3.03 billion), representing net sales growth of 6.5 to 8.5 percent (previously 6 percent to 8 percent). Net sales guidance includes a foreign currency translation impact that is anticipated to reduce net sales growth by approximately 70 basis points.
It also expects operating income of $378 to $391 million (previously $369 to $382 million), representing operating margin of 12.7 to 12.9 percent (previously 12.4 to 12.6 percent). And diluted earnings per share of $4.40 to $4.55 (prior $4.30 to $4.45).
President and CEO Tim Boyle said, “It is encouraging to see the momentum we created in 2018 continue into this year, with record first quarter net sales, gross margin, operating income, net income and earnings per diluted share. During the quarter, we experienced a strong finish to the Fall 2018 sales season as well as excellent early season sell-through of our Spring 2019 assortment. The Columbia brand generated double-digit growth in the U.S. across both direct-to-consumer and wholesale distribution channels and the SOREL brand grew an impressive 28 percent globally. We are also delivering on the financial value capture of Project CONNECT, which helped to fuel 210 basis points of gross margin expansion.”
“Above plan first quarter 2019 results as well as favorable advance Fall 2019 orders give us confidence to increase our full year financial outlook. It is important to note that we are delivering this profitable growth while at the same time making substantial investments to build on our strengths as a brand-led consumer-focused organization.”
“Our profitable growth trajectory and fortress balance sheet, with cash and short-term investments of over $700 million and no long-term debt, provide a foundation of strength and confidence from which we will continue investing in our strategic priorities to:
- drive brand awareness and sales growth through increased, focused demand creation investments;
- enhance consumer experience and digital capabilities in all our channels and geographies;
- expand and improve global direct-to-consumer operations with supporting processes and systems; and
- invest in our people and optimize our organization across our portfolio of brands.
“We are making these investments to enable sustainable long-term profitable growth, make us a more efficient company, and drive market share capture across our brand portfolio and geographic regions.”
Non-GAAP Financial Measures
Non-GAAP amounts in first quarter 2018 exclude $11 million in Project CONNECT expenses and discrete costs ($8.4 million net of tax) and $1.0 million in incremental income tax expense related to the Tax Cuts and Jobs Act (“TCJA”). These exclusions were not applicable in first quarter 2019.
First Quarter 2019 Financial Results
(All comparisons are between first quarter 2019 and first quarter 2018, unless otherwise noted.)
Net sales increased 8 percent (10 percent constant-currency) to $654.6 million, from $607.3 million for the comparable period in 2018.
Gross margin expanded 210 basis points to 51.4 percent of net sales, from 49.3 percent for the comparable period in 2018.
SG&A expenses increased $8.4 million, or 3 percent, to $251.8 million, or 38.5 percent of net sales, from $243.4 million, or 40.1 percent of net sales, for the comparable period in 2018. SG&A expenses increased $19.4 million, or 8 percent, from non-GAAP SG&A expenses of $232.4 million for the comparable period in 2018.
Operating income increased 48 percent to $88.0 million, or 13.4 percent of net sales, from $59.3 million, or 9.8 percent of net sales, for the comparable period in 2018. Operating income increased $17.6 million, or 25 percent, from non-GAAP operating income of $70.3 million for the comparable period in 2018.
Net income increased 64 percent to $74.2 million, or $1.07 per diluted share, from $45.1 million, or $0.64 per diluted share, for the comparable period in 2018. Net income increased 36 percent from non-GAAP net income of $54.5 million, or $0.77 per diluted share for the comparable period in 2018. First quarter 2019 net income includes the benefit of full ownership of our China business, which became a wholly owned subsidiary effective January 2019. In the first quarter of 2018 the non-controlling interest share of net income was $3.6 million, or $0.05 per diluted share.
Balance Sheet as of March 31, 2019
Cash, cash equivalents and short-term investments totaled $703.1 million, compared to $808.2 million at March 31, 2018.
Inventories increased 28 percent to $520.6 million, compared to $406.0 million at March 31, 2018.
Share Repurchases for the Three Months Ended March 31, 2019
The Company repurchased 195,681 shares of common stock for an aggregate of $19.1 million, or $97.47 average price per share.
Regular Quarterly Cash Dividend
At its regular board meeting on April 19, 2019, the board of directors authorized a regular quarterly cash dividend of $0.24 per share, payable on May 30, 2019 to shareholders of record on May 16, 2019.