Columbia Sportswear Co. reported sales increased 8 percent in the second quarter, to $290.4 million, compared with $268.0 million a year ago. Net sales of the Columbia Brand grew 9 percent, or twice the rate of premium sister brand Mountain Hardwear. That growth offset a decline for Sorel.
Changes in currency exchange rates reduced the reported sales increase by 1 percentage point.
Tim Boyle, Columbia's president and chief executive officer, commented, “Second quarter sales growth reflected improved operational execution and supply chain capacities which allowed us to deliver a larger portion of our international distributors' Fall 2012 advance orders in the second quarter. We are also in good position entering the third quarter to fulfill wholesale customers' orders on a timely basis because we have received Fall 2012 inventory earlier this year. Second quarter sales were also strong in Japan and in our U.S. direct-to-consumer business. Continued focus on expense management, reflected by lower SG&A expense, more than offset lower gross margins, resulting in meaningful improvement in our second quarter financial performance.”
Boyle continued, “Based on our performance through the first half of 2012, and despite increasing macro-economic headwinds in key markets, we are reaffirming our full year guidance for 2012 sales growth of up to 1 percent, and operating margins to approximate the 8.1 percent operating margins achieved in 2011. While we recognize the higher degree of uncertainty posed by today's macro-economic conditions, we remain focused on innovation, operational execution and expense control as we position our brands for renewed sales growth and improved profitability.”
Second Quarter Results
Net sales in the U.S. increased $3.1 million, or 2 percent, to $132.1 million; Latin America/Asia Pacific (LAAP) region net sales increased $7.5 million, or 10 percent, to $84.1 million, including a 1 percentage point negative effect from changes in currency exchange rates; Europe/Middle East/Africa (EMEA) region net sales grew $16.4 million, or 31 percent, to $70.0 million, including a 2 percentage point negative effect from changes in currency exchanges rates; partially offset by a $4.6 million, or 52 percent, decline in net sales in Canada, including a 1 percentage point negative effect from changes in currency exchanges rates. (See “Geographical Net Sales” table below.)
Apparel, Accessories & Equipment net sales increased $22.9 million, or 11 percent, to $240.9 million. Footwear net sales of $49.5 million were down 1 percent. (See “Categorical Net Sales” table below.)
Columbia brand net sales increased $21.6 million, or 9 percent, to $260.7 million, accounting for nearly all of the growth in the quarter.
Balance Sheet
The company ended the second quarter with $228.5 million in cash and short-term investments, compared with $298.3 million at June 30, 2011.
Consolidated inventories totaled $523.1 million at June 30, 2012, compared with $422.0 million at June 30, 2011. The increase was primarily attributable to a higher composition of Fall inventory, due in part to earlier receipts of Fall 2012 production. Higher average unit costs and changes in product mix accounted for almost all of the inventory dollar increase; unit volumes were up a low-single digit percentage compared to one year ago.
Reaffirmed 2012 Financial Outlook
The company continues to expect sales growth of up to 1 percent in fiscal 2012 and operating margin (including restructuring charges of approximately $4.0 million recognized in the first quarter of 2012) comparable to the 8.1 percent operating margin achieved in fiscal 2011. Full year gross margins are expected to contract approximately 30 to 50 basis points, offset by slight SG&A expense leverage.
The company expects a mid-single digit decline in third quarter net sales, primarily due to the timing shift of shipments to distributors in the second quarter and an anticipated decline in third quarter wholesale net sales, partially offset by higher direct-to-consumer sales. Third quarter gross margin is expected to decline approximately 25 basis points and anticipated flat SG&A expense is expected to result in SG&A deleverage of approximately 125 to 150 basis points, resulting in third quarter operating margin contraction of approximately 150 to 175 basis points.
The company's annual net sales are weighted more heavily toward the second half of the fiscal year, while operating expenses are more equally distributed, resulting in a highly seasonal profitability pattern weighted toward the second half.
Share Repurchase Program
During the second quarter of 2012, the company repurchased approximately 4,480 shares of common stock at an aggregate purchase price of $206,000. Approximately $59 million remains under the current repurchase authorization. The repurchase program does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.
Dividend
The board of directors authorized a third quarter dividend of $0.22 per share, payable on August 30, 2012 to shareholders of record on August 16, 2012.
COLUMBIA SPORTSWEAR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ -------------------------------------
2012 2011 2012 2011
------- ------- --------- ---------
Net sales $ 290,357 $ 268,030 $ 623,498 $ 601,116
Cost of sales 172,489 155,617 357,694 339,167
------- ------- --------- ---------
Gross profit 117,868 112,413 265,804 261,949
40.6% 41.9% 42.6% 43.6%
Selling, general, and administrative expenses 133,171 134,512 277,727 268,659
Net licensing income 4,555 3,459 6,530 5,990
------- ------- --------- ---------
Loss from operations (10,748) (18,640) (5,393) (720)
Interest income, net 191 461 438 784
------- ------- --------- ---------
Income (loss) before income tax (10,557) (18,179) (4,955) 64
Income tax benefit (expense) 2,656 4,621 952 (852)
------- ------- --------- --------- ---
Net loss $ (7,901) $ (13,558) $ (4,003) $ (788)
==== ======= ==== ======= ==== ========= === ========= ===
Loss per share:
Basic $ (0.23) $ (0.40) $ (0.12) $ (0.02)
Diluted (0.23) (0.40) (0.12) (0.02)
Weighted average shares outstanding:
Basic 33,780 33,956 33,743 33,878
Diluted 33,780 33,956 33,743 33,878
COLUMBIA SPORTSWEAR COMPANY
(In millions, except percentage changes)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
2012 2011 % Change 2012 2011 % Change
----- ----- -------- ----- ----- --------
Geographical Net Sales:
United States $ 132.1 $ 129.0 2% $ 325.1 $ 321.5 1%
Latin America & Asia Pacific 84.1 76.6 10% 160.9 143.9 12%
Europe, Middle East, & Africa 70.0 53.6 31% 108.1 98.0 10%
Canada 4.2 8.8 (52)% 29.4 37.7 (22)%
----- ----- ----- -----
Total $ 290.4 $ 268.0 8% $ 623.5 $ 601.1 4%
--- ----- --- ----- --- ----- --- -----
Categorical Net Sales:
Apparel, Accessories and Equipment $ 240.9 $ 218.0 11% 525.2 496.7 6%
Footwear 49.5 50.0 (1)% 98.3 104.4 (6)%
----- ----- ----- -----
Total $ 290.4 $ 268.0 8% $ 623.5 $ 601.1 4%
--- ----- --- ----- --- ----- --- -----
Brand Net Sales:
Columbia $ 260.7 $ 239.1 9% $ 553.8 $ 527.2 5%
Mountain Hardwear 23.7 22.7 4% 54.4 54.4 -
Sorel 2.9 3.7 (22)% 9.3 14.0 (34)%
Other 3.1 2.5 24% 6.0 5.5 9%
----- ----- ----- -----
Total $ 290.4 $ 268.0 8% $ 623.5 $ 601.1 4%
--- ----- --- ----- --- ----- --- -----
