Columbia Sportswear Co. reported earnings rose 13.6 percent to $36 million, or 51 cents a share, from $31.8 million, or 45 cents, a year ago, but the company slightly scaled back its earnings and sales guidance for 2017.
Net sales reached $543.8 million for the first quarter ended March 31, 2017, a 4 percent increase compared with net sales of $525.1 million for the first quarter of 2016.
Chief Executive Officer Tim Boyle commented, “Our first quarter results provide a good start to a year that presents many challenges, especially in the U.S., which has been impacted by customer bankruptcies, liquidations and ongoing efforts by U.S. retailers to rationalize their store fleets and square footage. We were encouraged by the Columbia brand’s continued growth in Europe-direct markets during the first quarter and by the Sorel brand’s successful launch of an expanded Spring assortment. In addition, our direct-to-consumer businesses were a source of growth in every region.
“Our updated 2017 outlook anticipates up to 4 percent earnings growth on approximately 3 percent net sales growth, driven by contributions from three of our four brands and all four of our geographic regions. In the midst of changing consumer shopping patterns, our portfolio of powerful brands and strong balance sheet give us the ability to continue to drive sustainable, profitable growth.”
First Quarter Results
First quarter consolidated net sales increased 4 percent driven by:
- 16 percent net sales growth (17 percent constant-currency) in the LAAP region to $118.3 million, driven by growth in net sales to LAAP distributors combined with growth in China and Japan, partially offset by a net sales decline in Korea;
- 8 percent net sales growth (10 percent constant-currency) in the EMEA region to $55.4 million, including growth in the company’s Europe-direct business, partially offset by a decline in net sales to EMEA distributors; and
- 3 percent net sales growth (1 percent decline constant-currency) in Canada to $36.9 million;
These increases were partially offset by:
- a U.S. net sales decrease of 1 percent to $333.2 million, due to a decline in wholesale net sales, partially offset by an increase in direct-to-consumer net sales.
Global Columbia brand net sales increased 3 percent to $449.1 million. Global SOREL brand net sales increased 50 percent to $27.2 million. Global Mountain Hardwear brand net sales increased 10 percent to $27.7 million, and global prAna brand net sales decreased 7 percent to $38.7 million.
Global Apparel, Accessories and Equipment net sales increased 1 percent, to $440.0 million. Global Footwear net sales increased 14 percent (15 percent constant-currency), to $103.8 million.
First quarter income from operations increased 8 percent to $48.0 million, or 8.8 percent of net sales, compared to $44.3 million, or 8.4 percent of net sales, for the same period in 2016.
The effective income tax rate was 20.1 percent in the first quarter of 2017, compared to 22.5 percent for the same period in 2016.
First quarter net income increased 13 percent to $36.0 million, or $0.51 per share, compared with first quarter 2016 net income of $31.8 million, or $0.45 per share.
The company ended the quarter with $590.5 million of cash and short-term investments, compared with $451.2 million at March 31, 2016.
Consolidated inventories of $398.8 million at March 31, 2017 were 3 percent lower than the $412.2 million balance at March 31, 2016.
Share Repurchases And Dividends
During the first quarter, the company repurchased 616,152 shares of common stock for a total price of $33.0 million.
The board of directors authorized a regular quarterly cash dividend of $0.18 per share, payable on June 1, 2017 to shareholders of record on May 18, 2017.
Updated 2017 Financial Outlook
The company currently expects 2017 net sales growth of approximately 3 percent compared with 2016 net sales of $2.38 billion, including approximately 1 percentage point negative effect from changes in foreign currency exchange rates. The company’s U.S. direct-to-consumer channel is expected to account for a majority of the projected full year 2017 global net sales increase.
The company expects fiscal year 2017 gross margins to improve by approximately 30 basis points, and for selling, general and administrative (“SG&A”) expenses to increase at a rate slightly higher than net sales, resulting in approximately 30 basis points of SG&A expense deleverage, including a planned increase in global demand creation spend. The full year effective tax rate is expected to be approximately 23 percent.
Based on the above assumptions, the company expects 2017 operating income to increase approximately 3 percent, to between $256 million and $265 million, resulting in anticipated 2017 operating margin of approximately 10.8 percent. Net income after non-controlling interest is expected to increase up to 4 percent to between approximately $192 million and $199 million, or approximately $2.72 to $2.82 per diluted share. The company’s anticipated growth in full year 2017 operating income and net income is expected to occur in the second half. This outlook does not include any financial impact from activities associated with the previously announced operating model assessment that was initiated during the first quarter of 2017.
The outlook is slightly moderated from its guidance given on February 9. At that time, Columbia forecast net sales growth of approximately 4 percent. Operating income growth was targeted at up to 5 percent, to between $260 million and $270 million, representing operating margin of up to 10.9 percent of net sales. The effective tax rate is now expected to be approximately 24.0 percent. Still, Columbia still expects net income between $192 million and $200 million, or approximately $2.72 to $2.82 per diluted share.
Photo courtesy Columbia