Columbia’s Q1 Driven by 11% Surge in U.S. Sales

Columbia Sportswear Company announced net sales of $300.4 million for the quarter ended March 31, 2010, an increase of 10% compared to net sales of $272.0 million for the same period of 2009, with 3 percentage points of that increase resulting from changes in foreign currency exchange rates.

Tim Boyle, Columbia‘s president and chief executive officer, commented, “Our first quarter results were driven by an 11% sales increase in the U.S., resulting primarily from our expanded direct-to-consumer operations. We also benefited from continued growth in our Latin America/Asia Pacific (LAAP) region and renewed growth in Canada. We are encouraged by this early momentum against a backdrop of improved consumer spending and favorable spring weather and, when combined with a 19% increase in our fall wholesale backlog, expect to generate record sales in 2010.”

First Quarter 2010 Results

The 10% increase in first quarter 2010 sales compared with the first quarter of 2009 was driven by 11% growth in the U.S. to $173.2 million; 22% growth in the LAAP region to $56.1 million, including an 8 percentage point benefit from changes in foreign currency exchange rates; and 22 percent growth in Canada to $24.2 million, including an 18 percentage point benefit from changes in exchange rates. These increases were partially offset by a 6% decline in EMEA region sales to $46.9 million, including a 4 percentage point benefit from changes in exchange rates. (See “Geographical Net Sales” table below.)

Compared with the first quarter of 2009, first quarter 2010 outerwear sales increased 14%to $87.6 million, sportswear sales increased 6 percent to $146.4 million, footwear sales increased 15% to $46.1 million and accessories and equipment sales increased 19% to $20.3 million. (See “Categorical Net Sales” table below.)

Columbia brand sales totaled $267.7 million in the first quarter of 2010, an 11% increase compared with the first quarter of 2009. Mountain Hardwear brand sales increased 10% to $25.6 million. Sales of Sorel, Montrail and Pacific Trail brand products were insignificant during the first quarter of both years. (See “Brand Net Sales” table below.)

The company ended the first quarter of 2010 with $415.8 million in cash and short-term investments, compared with $299.8 million at March 31, 2009. Inventories were essentially unchanged at $222.7 million at March 31, 2010, compared to $223.7 million at March 31, 2009.

2010 Financial Outlook

The current economic environment, which involves high unemployment rates in many of our key markets and restricted credit markets for consumers and retailers, among other challenges, increases the unpredictability of retailer and consumer demand. In addition, the company’s annual financial performance is heavily reliant on second-half sales volumes, limiting the visibility and predictability of future results. All projections related to anticipated future results are forward-looking in nature and are based on backlog and forecasts, which may change, perhaps significantly.

The company expects full year 2010 net sales to increase between 12 to 14% compared with 2009, based primarily on the 19% increase in Fall 2010 order backlog, incremental direct-to-consumer sales, actual first quarter results, and the estimated effect of changes in foreign currency exchange rates.

2010 gross margins are expected to increase approximately 100 basis points compared to 2009 gross margins of 42.1%, due to a higher proportion of full price sales in our wholesale business, an increased proportion of direct-to-consumer sales, and more favorable foreign currency hedge rates, partially offset by a higher proportion of sales to international distributors and increased costs to expedite production and delivery to customers of the greater-than-planned Fall orders.

Selling, general and administrative expenses are expected to increase approximately 100 basis points as a percentage of sales due to a combination of several factors, including the effect of the company’s retail expansion, reinstatement of personnel and benefit programs that were curtailed or postponed in 2009, incremental costs related to IT infrastructure initiatives in preparation for a new multi-year ERP implementation, increased marketing investments to support the global launch of the company’s Fall 2010 products, transitional costs associated with internalizing the sales organizations in North America and Europe, and the translation effect of foreign currencies.

As a result, full year 2010 operating margin is expected to approximate full year 2009 operating margin of approximately 7%. The company currently expects a full-year income tax rate of approximately 28%.

The company expects a high-teen percentage increase in second quarter 2010 sales compared with the second quarter of 2009, driven by incremental direct-to-consumer and U.S. wholesale sales and a higher volume of international distributor shipments in the quarter. The second quarter is the company’s lowest volume quarter of the year, which amplifies the effect on income of changes in the timing of shipments and the incremental fixed cost structure of the company’s operations. Consequently, the company expects to incur a higher operating loss in the second quarter of 2010 compared to the second quarter of 2009.

Dividend and Share Repurchase Program

The board of directors approved a dividend of $0.18 per share, payable on May 27, 2010 to shareholders of record on May 13, 2010.

During the first quarter of 2010, the company repurchased approximately 89,500 shares of common stock at an aggregate purchase price of $3.8 million. Through March 31, 2010, the company has repurchased a total of approximately 9.0 million shares at an aggregate purchase price of $411.2 million since the inception of the stock repurchase program in 2004 and approximately $88.8 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.