Columbia Sportswear turned in a stellar performance in the fourth quarter thanks to strong organic growth in the United States. Sales of Columbia-branded products grew by $100 million, while sales of Sorel footwear grew nearly 40 percent. Two thirds of the sales growth came from the United States with much of it coming via direct-to-consumer online sales.

Sales increased 23.4 percent to $527.9 million at Columbia and 39.5 percent to $92.1 million at Sorel to offset a 9.6 percent decline at Mountain Hardwear and generate an organic growth rate of 15 percent. An additional $20 million in incremental sales at recently acquired Prana added another $20 million.

Footwear sales grew by nearly $50 million, or 42.5 percent, despite unseasonably warm weather in Europe. Apparel, accessories and equipment sales grew by $94.1 million, or 22.6 percent.

Three quarters of the $144 million increase in sales came from the United States, where sales rose 31.4 percent to $404.6 million. Sales rose $37.1 million in the Latin American/Asia Pacific due largely to sales from COLM's new joint venture in China. Sales in EMEA dipped 0.4 percent to $68.3 million, although COLM grew its direct wholesale revenues in Europe in the mid-teens. In Canada, sales increased 27.0 percent to $48.9 million.

“Our weather in North America couldn't have been better, really,” said COLM President and CEO Tim Boyle, explaining that an early November cold snap allowed retailers to sell through COLM products at full price and reorder. “It was spectacular. However, we did not have the same sorts of great weather in Europe. Russia was actually pretty good and China was late, as well, is in terms of the weather arrivals.”

The growth reflected favorable weather, the opening of six new stores during the quarter and COLM’s growing ability to capitalize on surges in demand through its greatly enhanced U.S. e-commerce operations. That was countered, however, by intense competition in South Korea, where COLM is reshuffling management after creating reserves for inventory markdowns that dragged down fourth quarter gross margins by about 100 bps in the fourth quarter. Similar conditions caused COLM to create inventory reserves for its China business last year.
“We expect the difficulties to continue through 2015, but it’s still going to be a strong market,” Boyle said.
Boyle attributed the rapid growth of Sorel to growing popularity with fashion forward females in the United States and a greater selection of warm weather product that is extending the brand’s selling season. Sorel has not yet gained the same traction overseas, but Boyle sees that opportunity expanding as Sorel extends its warm weather assortment.
On the apparel side, the Columbia brand is taking share from retailers’ private labels, Boyle said.

Gross profits surged 29.2 percent and pushed up gross margin by 80 basis points (bps) to 45.4 percent as improved inventory turns in the United States and Canada helped offset a 100 bps hit from higher reserves for inventory markdowns in South Korea.  SG&A costs rose 20.7 percent due to the addition of Prana and a new joint venture in China, but still fell 170 bps as a percentage of sales to 33.5 percent.

Operating income jumped 57.4 percent to $82.1 million and net income grew 57.11 percent to $57.0 million. Diluted earnings per share reached 79 cents per share, up 49.1 percent.

COLM end the quarter and the year with inventory of $384.7 million, up 16.8 percent, and cash and cash equivalents of $413.6 million, down 5.5 percent.  North American inventories were cleaner than a year ago, but COLM continues to reserve against markdowns in Asia, where outdoor product sales slowed last year amid heightened competition from global and domestic brands. 

Outlook
COLM’s guidance for 2015 calls for net revenues to grow in the high teens in the United States and in the high single-digits (low double-digits c-n) companywide. Gross margin is expected to improve 20 bps net a 40 bps currency headwind. Growth in SG&A expenses is expected to track anticipated sales growth. Operating income is expected to grow in the low double-digit range and result in operating margin of approximately 9.7 percent. Net income, after non-controlling interest, is forecast to range between $150-to-$157 million, or approximately $2.10 to $2.20 per diluted share.

A stronger U.S. dollar will shave 13 cents off full year 2015 earnings per share due to increased costs of inventory for foreign subsidiaries and the resulting effect on gross margin, and to a lesser degree the translation of net income. Boyle said COLM will try to hold off raising prices overseas until 2016.

Boyle said he expects renewed growth at Mountain Hardwear will help offset slowing sales in South Korea.  
“We really focused on the product offering to make sure that we had products that we call gateway products, but fans of the brand could acquire without having to spend $300 on a jacket,” Boyle said of Mountain Hardwear. “We've built products which have lower entry price points to allow consumers that love the brand to get into them without taking out a mortgage.”