Columbia Sportswear Company has slashed its inventory in response to retailers’ conservative preseason orders and a renewed focus on freeing up cash. The company said it ended the second quarter with inventory valued at $423.8 million, down a whopping 19.0 percent from a year earlier.



“Our North American wholesale customers requested slightly later delivery dates, particularly with regard to outerwear and boots in response to two consecutive warm or late winters,” said CEO, President and Director Timothy Boyle. “As a result, we anticipate a mid-single-digit shift in fall North America wholesale shipments out of the third quarter into the fourth quarter, compared with our historical cadence. Concurrent with this shift, it's important to note that retailers have been more cautious with advanced orders for the fall and winter 2013 season, and we have bought less inventory in response.”

 

Executives said COLM’s renewed emphasis on inventory management, earlier than expected shipments of fall 2013 products and strong e-commerce results contributed to a slightly better than expected second quarter. The quarter, which ended June 30, typically accounts for just 15 percent of the company’s annual net sales and is therefore subject to relatively wide swings.

 

Net sales reached $280.5 million for the period, down 3 percent compared with the same period in 2012, including a 1 percentage point negative effect from changes in currency exchange rates. Gross margin rose 230 basis points to 42.9 percent from the second quarter of 2012. SG&A dipped by less than 1 percent to $131.9 million, or 47 percent of net sales, up 119 basis points from a year earlier. Second quarter net loss improved 10 percent to $7.1 million, or 21 cents per diluted share, compared with net loss of $7.9 million, or 23 cents per diluted share, for the same period in 2012.

 

Net sales in the U.S. increased $7.7 million, or 6 percent, to $139.8 million; Latin America/Asia Pacific (LAAP) region net sales decreased $2.9 million, or 3 percent, to $81.2 million, including a 5 percentage point negative effect from changes in currency exchange rates; Europe/Middle East/Africa (EMEA) region net sales declined $16.9 million, or 24 percent, to $53.1 million, including a less-than-1-percent negative effect from changes in currency exchanges rates; net sales in Canada, increased $2.2 million, or 52 percent, to $6.4 million, including a 6 percentage point negative effect from changes in currency exchanges rates.

 

 

Apparel, Accessories & Equipment net sales decreased $5.2 million, or 2 percent, to $235.7 million. Footwear net sales of $44.8 million were down $4.7 million, or 9 percent.

 

 

“Although the cool wet weather across the U.S. and Europe during the early part of the quarter depressed our sandal business, it drove strong sell-through of our fleece and rainwear products in all channels,” said Boyle.

 

 

Columbia brand net sales decreased $8.2 million, or 3 percent, to $252.5 million, and Mountain Hardwear net sales declined $1.2 million, or 5 percent, to $22.5 million.

 

 

Boyle said he was pleased with the launch of the company’s new Omni-Freeze Zero technology, but did not disclose sales figures. Columbia, Mountain Hardwear and PFG all launched Omni-Freeze Zero apparel this year with help from the largest spring marketing campaign in COLM’s history. In 2014, COLM plants to expand distribution beyond outdoor specialty, hook-and-bullet and marine chains by offering the technology at lower price points.

 

 

COLM expects 2013 net sales to decline up to 2.5 percent compared with 2012, including a 2-point negative effect from unfavorable exchange rates. Full year 2013 gross margin is expected to improve by up to 10 basis points compared to 2012, including the effect of deferring approximately $2.3 million of gross profit into 2014 as a result of the previously announced plan to transition to a joint venture in China, effective Jan. 1, 2014, from the current independent distributor arrangement. CFO Thomas Cusick said sales of Columbia’s products in China grew in the high double digits in 2012, but slowed this year.

 

 

“We're clearly still planning for that business to grow but just not at the rate it has the last few years, which was extremely high,” Cusick said.

 

 

Other headwinds in the back half include political tumult in Latin America, tepid wholesale orders in the U.S. and Europe and a weak yen. Boyle said civil unrest in Argentina and Venezuela has made it more difficult to import into those countries and convert their currencies into dollars.