Columbia Sportswear saw U.S. sales grow just 4.1% in the second quarter, but strength in the footwear category and surging International sales are indicators of an improving overall business that should see the company level out its business across the calendar.

COLM shares rose 5.2% for the week to close at $52.36 on Friday after the company handily beat street estimates of 20 cents EPS for the quarter, posting net income growth of 25.3% and EPS growth of 21% to 23 cents. Total sales grew 17.8% in constant dollars.

In a conference call with analysts following the release of their Q2 results, Columbia CEO Tim Boyle said that footwear “may be the biggest product opportunity” for the company, quipping that the category could be more than $500 million before long.

Footwear was up a whopping 60.8%, outpacing the apparel categories by 47 percentage points of growth.

The excitement over the prospects for footwear has the company building a new 400,000 square foot state-of–the-art distribution center in the Midwest to better service the footwear fill-in needs of the east coast retailers. The $40 million DC, which is expected to be operational in 2005, will be able to handle other product categories as well.

Diversification is also the key with Columbia as its traditional mid price-point products come under increasing pressure from retailers’ private label programs. The increased focus on the international business, the footwear category, and other categories gained through acquisition are critical to continued growth.

Non-domestic business was roughly 40% of the business in the second quarter of this year, compared to 30% in the year-ago period. On a currency neutral basis, Canada grew 38.3%, Europe gained 10.4%, and “Other International” sales increased 92.5% for the quarter. International distributor sales, including Russia, accounted for most of the growth in the segment.

Newly acquired Mountain Hardwear contributed $6.3 million in sales in Q2 . Equipment sales, a new category for Columbia consisting of tents and sleeping bags sold by MH, were $2.5 million in the quarter.

Gross margin took a bit of a hit in the quarter, down 100 basis points due to higher mix of international distributors and negative impact of MH re-pricing. Footwear and sportswear GM is in the “low forties” and outerwear GM is in the “high forties”.

Boyle, ever the pragmatist, cautioned against too much excitement about Q2, noting it is the company’s smallest quarter for business. COLM expects third quarter revenue growth in the 9% to 11% range and net income growth between 4% and 6%. Full year revenues are expected to be up 12% to 14% and earnings should be up in 10% to 12% range.