Columbia Sportswear Company reported fourth-quarter earnings came in far ahead of Wall Street’s estimates. Sales grew 23 percent to finish the full year ahead 25 percent. Columbia officials predicted sales growth for 2022 in the range of 16 to 18 percent and its board approved a 15 percent dividend increase.
Chairman, President and Chief Executive Officer Tim Boyle commented, “Fourth quarter and full year financial results were exceptional. Record financial performance reflects the strength of our brands and the tremendous efforts and resilience of our employees globally. In the quarter, robust consumer demand led to results that far exceeded our financial outlook driven by DTC outperformance and a highly favorable full price selling environment, which benefited gross margin. Throughout the season, our Fall 2021 sell-through rates have been outstanding, including the successful global launch of Omni-Heat Infinity.
“As we begin 2022, we are acutely focused on unlocking the growth opportunities we see across the business while mitigating supply chain and inflationary pressures. Our powerful brand portfolio is well positioned to connect active people with their passions and capitalize on the popularity of outdoor activities. Our 2022 outlook calls for 16 to 18 percent net sales growth, on top of 25 percent growth in 2021.
“I am confident we have the right strategies in place to drive profitable growth, and we are committed to 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.”
COVID-19 and Supply Chain Updates
The company’s top priority throughout this pandemic remains to protect the health and safety of our employees, their families, our customers and our communities. While there were isolated temporary store closures resulting from local regulations or safety concerns, the majority of the company’s owned stores remained open throughout fourth quarter 2021. Overall brick & mortar store traffic trends remain below pre-pandemic levels.
Supply chain constraints continue to impact operations, resulting in delayed receipt and delivery of products for our Fall 2021 and Spring 2022 seasons. Demand for ocean vessels and containers continues to far outstrip available capacity, resulting in significant year-over-year increases in ocean freight costs. Please refer to the CFO Commentary and Financial Review presentation for a detailed review of COVID-19 pandemic and Supply Chain related issues and our responses.
Fourth Quarter 2021 Financial Results
(All comparisons are between fourth quarter 2021 and fourth quarter 2020, unless otherwise noted.)
- Net sales increased 23 percent to $1,129.7 million from $915.6 million for the comparable period in 2020. The increase in net sales primarily reflects strong consumer demand, which fueled direct-to-consumer (“DTC”) growth and higher Fall 2021 wholesale shipments, as we anniversary prior year pandemic disruptions.
- Gross margin expanded 160 basis points to 52.2 percent of net sales from 50.6 percent of net sales for the comparable period in 2020. Gross margin expansion was primarily driven by lower DTC promotional levels, strong retail sell-through performance resulting in higher wholesale product margins, and favorable channel sales mix, partially offset by higher inbound freight costs and year-over-year changes in inventory provision activity.
- SG&A expenses increased 12 percent to $384.0 million, or 34.0 percent of net sales, from $343.3 million, or 37.5 percent of net sales, for the comparable period in 2020. The increase in SG&A expenses primarily reflects expenses to support the growth of the business including higher global retail, demand creation, incentive compensation and personnel expenses, partially offset by lower retail impairments and store closure charges compared to fourth quarter 2020, and the non-recurrence of a prAna trademark impairment.
- Operating income increased 71 percent to $211.6 million, or 18.7 percent of net sales, compared to operating income of $123.7 million, or 13.5 percent of net sales, for the comparable period in 2020.
- Income tax expense of $54.9 million resulted in an effective income tax rate of 25.9 percent, compared to a $27.5 million expense, or an effective tax rate of 22.3 percent, for the comparable period in 2020.
- Net income increased 64 percent to $157.0 million, or $2.39 per diluted share, compared to net income of $95.8 million, or $1.44 per diluted share, for the comparable period in 2020.
Earnings of $2.39 came in well ahead of Wall Street’s consensus estimate of $1.79. Sales of $1,13 billion came in ahead of Wall Street’s consensus estimate of $1.07 billion.
Full Year 2021 Financial Results
(All comparisons are between full year 2021 and full year 2020, unless otherwise noted.)
- Net sales increased 25 percent to $3,126.4 million from $2,501.6 million for the comparable period in 2020.
- Gross margin expanded 270 basis points to 51.6 percent of net sales from 48.9 percent of net sales for the comparable period in 2020.
- SG&A expenses increased 7 percent to $1,180.3 million, or 37.8 percent of net sales, compared to $1,098.9 million, or 43.9 percent of net sales, for the same period in 2020.
- Operating income increased 229 percent to $450.5 million, or 14.4 percent of net sales, compared to operating income of $137.0 million, or 5.5 percent of net sales, for the comparable period in 2020.
- Income tax expense of $97.4 million resulted in an effective income tax rate of 21.6 percent, compared to a $31.5 million expense, or an effective tax rate of 22.6 percent, for the comparable period in 2020.
- Net income increased 228 percent to $354.1 million, or $5.33 per diluted share, compared to net income of $108.0 million, or $1.62 per diluted share, for the comparable period in 2020.
Balance Sheet as of December 31, 2021
- Cash, cash equivalents and short-term investments totaled $894.5 million, compared to $791.9 million as of December 31, 2020.
- The company had no borrowings as of December 31, 2021 or 2020.
- Inventories increased 16 percent to $645.4 million, compared to $556.5 million as of December 31, 2020. Inventory at quarter-end primarily consisted of current and future season product. Aged inventories represent a manageable portion of our total inventory mix.
Cash Flow for the Twelve Months Ended December 31, 2021
- Net cash flow provided by operating activities was $354.4 million, compared to $276.1 million for the same period in 2020.
- Capital expenditures totaled $34.7 million, compared to $28.8 million for the same period in 2020.
Share Repurchases for the Twelve Months Ended December 31, 2021
- The company repurchased 1,655,407 shares of common stock for an aggregate of $165.9 million, at an average price per share of $100.23.
- At December 31, 2021, $316.3 million remained available under our current stock repurchase authorization, which does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.
Quarterly Cash Dividend
At its board meeting on January 28, 2022, the Board of Directors approved a 15 percent increase to the quarterly cash dividend to $0.30 per share, payable on March 21, 2022 to shareholders of record on March 11, 2022.
Full Year 2022 Financial Outlook
The company’s 2022 Financial Outlook is forward-looking in nature, and the following forward-looking statements reflect our expectations as of February 3, 2022 and are subject to significant risks and business uncertainties, including those factors described under “Forward-Looking Statements” below. These risks and uncertainties limit our ability to accurately forecast results. This outlook reflects our estimates as of February 3, 2022 regarding the impact on our operations of the COVID-19 pandemic; economic conditions, including inflationary pressures; supply chain disruptions, constraints and expenses; labor shortages; changes in consumer behavior and confidence; as well as geopolitical tensions. However, it is not possible to determine the ultimate impact on future operations, or whether other currently unanticipated direct or indirect consequences of the pandemic or the supply chain are reasonably likely to materially affect our operations. This outlook and commentary assumes no meaningful deterioration of current supply chain conditions, market conditions or the ongoing pandemic. Projections are predicated on normal seasonal weather globally.
- Net sales are expected to increase 16 to 18 percent to $3.63 to $3.69 billion from $3.13 billion in 2021.
- Gross margin is expected to contract approximately 160 basis points to approximately 50 percent of net sales from 51.6 percent of net sales in 2021.
- SG&A expenses are expected to increase at a slightly slower rate than net sales growth. SG&A expense as a percent of net sales is expected to be 37.2 to 37.5 percent, compared to SG&A expenses as a percent of net sales of 37.8 percent in 2021. Demand creation as a percent of net sales is anticipated to be 6.0 percent in 2022, compared to 5.9 percent in 2021.
- Operating income is expected to be $472 to $498 million, resulting in operating margin of 13.0 to 13.5 percent, compared to operating margin of 14.4 percent in 2021.
- Effective income tax rate is expected to be approximately 24.0 to 24.5 percent. The effective income tax rate may be affected by unanticipated impacts from changes in international, federal or state tax policies, changes in the company’s geographic mix of pre-tax income, other discrete events, as well as differences from our estimate of the tax benefits associated with employee equity awards and our estimate of the tax impact of various tax initiatives.
- Net income is expected to be $359 to $379 million, resulting in diluted earnings per share of $5.50 to $5.80.
Foreign Currency
Foreign currency is expected to have essentially no impact on earnings as favorable net sales growth of 120 basis points due to foreign currency translation impacts are anticipated to be offset by translation of cost of goods sold and SG&A expenses as well as negative foreign currency transactional effects from hedging of production.
Balance Sheet and Cash Flows
- Operating cash flow is expected to be at least $170 million.
- Capital expenditures are planned to be between $80 to $100 million.
First Half 2022 Financial Commentary
- Net sales growth of high-teens to low-20 percent, compared to first half 2021.
- Gross margin is anticipated to contract over 300 basis points compared to first half 2021.
- SG&A expenses are anticipated to grow slower than net sales growth, resulting in modest SG&A leverage.
- Diluted earnings per share of $0.90 to $1.10.
Columbia Sportswear owns the Columbia Sportswear brand, as well as Mountain Hard Wear, Sorel and Prana.