After experiencing significant gains in worldwide demand for performance outdoor apparel, a tightening economy has rained on Columbia Sportswear’s party. Columbia, which had sales of $1.35 billion in ’07, saw a 24% decline in first quarter ’08 profits and a downgrading of its stock by U.S. analysts at Citigroup and McAdams Wright Ragen. Columbia’s stock price is down 38% from its 52-week high of $70.93.


“While we certainly have had success and done a lot of good things in the 10 years since we went public, the slowing economy, with gas, food and other costs taking a bigger bite out of discretionary spending, suggests we take a new approach and be more effective in top line and operational strategies,” says Ron Parham, Columbia’s director of investor relations.


Over the past decade, Columbia’s sales experienced a 14% compounded growth rate, but in the last five years, that number has slowed to 10% to 11%. While the company’s top line grew 3% in the 2008 first quarter, three consecutive quarters of weak sell-through in Europe (single- to low-double-digits) have constrained top line growth and hurt the bottom line.


“We had made decisions in early fall to spend on key initiatives in 2008,” explains Parham. “A portion of that spending was in Q1, causing profits to decline as reported. Our first initiative was the implementation of key go-to-market strategies for each season, with the second being an expanded retail strategy. Expenses related to both of those initiatives showed up in our first quarter in general and administrative expenses.”


This past May, as part of a general cost-saving effort and re-allocation of resources, Columbia trimmed a small number of its staff of about 4,000 employees worldwide; more than half of those laid off were based at the company’s headquarters in Portland, OR.  (The company didn’t release the exact number of lay-offs, but indicated that it was slightly more than the 35 employees that were cut in 1999.)


“We needed to make sure we were allocating proper resources to our new marketing and retail strategies, so we had to make cuts in some other areas,” says Parham.  All departments, from marketing and design to customer service and sales, saw lay-offs, with the U.S. and European operations hit hardest.     

 

Other Portland, OR-based athletic and outdoor companies have also felt the negative impact of a slower economy. The pro-sustainability apparel startup, Nau, shut down operations in early May.  adidas America announced layoffs in April, and a few weeks later, Le Coq Sportif North America shut down its Portland headquarters.


In April, Columbia hired CA-based ad agency Butler, Shine, Stern & Partners, ending its 30-year relationship with Portland-based Borders Perrin Norrander Inc. Explains Dan Hanson, Columbia’s VP of marketing, “The move to BSSP was one of a number of changes we’ve made in the way we are going to market with branding communication. We want to own some emotional real estate with our brand. We have a strong brand with a fantastic foundation in its attributes in trust, comfort, durability, versatility-but emotional real estate with consumers is what we need to pull it all together.” He adds, “One of the first changes is the selection of Blue as Columbia’s new brand color, with the transition taking place in ’09.”


Columbia’s TV initiatives include partnerships with two Discovery Channel shows: “Into the Unknown” with Josh Bernstein, which airs in mid-August, and “Survivorman” with Les Stroud, which launches in late October. In addition to airing commercials during both shows, Columbia is the official outfitter of on-air talent.


On the retail side, Columbia is embarking on an aggressive strategy, and in 2009 will launch its first e-commerce site. The company is also expanding its owned-retail presence. In addition to operating its Portland store, Columbia plans to open five to six first-line stores in high-traffic areas such as Chicago’s Miracle Mile, The Mall of America, Manhattan and the Portland Airport.


“The first-line retail stores are about presenting our brand in very compelling environments and showcasing our product with great breadth and depth while building emotional connections,” explains Hanson. “We’re targeting international gateway cities and coincidentally, cities where some of our major wholesale accounts are headquartered and have buying staff so they can see how we manage and merchandize the brand on a seasonal basis.”


Of the half-dozen new stores planned for ’08, some will have adjacent Mountain Hardwear stores. Columbia plans to open 15 to 20 first-line stores in the next three to five years, with similar stores slated for the European market.


The second part of the new retail strategy is to open more stores in outlet malls. Columbia opened five such doors in 2007, bringing the company’s total to 12, and plans call for another 15 outlet stores to open over each of the next several years.


“Our target is to be in most of the 50 to 60 Class A outlet malls in the U.S.,” says Parham. “That part of our strategy has to do with managing inventory and providing a profitable channel for us to clear end-of-season goods, leaving our wholesale partners free to support major seasonal initiatives.”