Wall Street was impressed by the consumer- and product-led strategies Columbia Sportwear top executives addressed in its Investor Day held last week; however, several Wall Street analysts felt that near-term macroeconomic pressures would present challenges for Columbia.

At the meeting, held in Columbia’s headquarters in Portland, OR, the company set longer-term growth targets for the first time and introduced its three-year financial targets aimed for a 9 percent to 11 percent organic sales growth and 12 percent to 15 percent EPS growth on a Compound Annual Growth Rate (CAGR) from 2022 to 2025.

The company targets a 13 percent to 17 percent total annual shareholder return over the three years spanning 2023/25.

By brand, Sorel will lead growth CAGR basis from 2022 to 2025, climbing 20 percent to 22 percent followed by an annual growth rate of 9 percent to 11 percent for Mountain Hardwear, 7 percent to 9 percent for the Columbia brand, and 3 percent and 4 percent for Prana.

By geography, growth on a CAGR basis from 2022 to 2025 is expected to be 8 percent to 10 percent in the U.S., 12 percent to 14 percent in Canada, 11 percent to 13 percent in the EMEA; 9 percent to 11 percent in the LAAP, and mid-teens in China. 

By 2025, International is expected to expand two percentage points to 35 percent of sales.

By Channel, growth on a CAGR basis from 2022 to 2025 is expected to be led by DTC e-commerce, climbing from 13 percent to 15 percent; followed by wholesale, 9 percent to 11 percent; and DTC brick & mortar, 6 percent to 8 percent.

By 2025, wholesale is expected to represent 55 percent of sales, DTC brick & mortar, 25 percent and dtc.com, 20 percent.

Shares of Columbia closed at $68.16, down $1.88, last Thursday on the day the meeting occurred.

The analysts weighed in on Columbia’s Investor Day.

Citi analyst Paul Lejuez wrote, “In our view, the targets for revenue and EBIT margin seem somewhat optimistic (though perhaps somewhat more attainable than what other companies have targeted recently). The day highlighted the authenticity and power of the Columbia brand while also giving a deeper look into COLM’s other brands, Mountain Hardware, Prana and Sorel. Of these, we see the greatest growth potential at Sorel.”

Lejuez noted the target of a 9 percent to 11 percent revenue CAGR from FY22 to FY25 compared to the company’s growth from 2016/19 CAGR of 9 percent, a 2016/21 CAGR of 6 percent and Citi’s estimated CAGR of positive low-single-digits from FY22 to FY25.

Columbia’s target for an EBIT margin of 14 percent in FY25 compares to the peak EBIT margin in FY21 of 14.4 percent,which was 200 basis points higher than its pre-pandemic peak gross margin. Lejuez wrote that the record margin seemed “more the result of the uniquely non-promotional environment across retail in F21.”

Citi has a “Neutral” rating on Columbia’s stock with a price target of $80. 

Lejuez wrote, “Led by its Columbia brand (82 percent of revs), COLM has a strong brand portfolio (including Sorel, Prana, Moutain Hardwear) that we believe can continue to grow in the U.S. and internationally. However, we believe there will be near-term challenges in the retail sector and the macro environment that result in a balanced risk/reward.”

Jim Duffy at Stifel noted that the rationale for Columbia to hold its first investor day in its 24 years as a public company was “confidence in brand portfolio prospects” and indicated Columbia’s three-year growth objectives “represent both accelerations from historical growth rates and a significantly more optimistic growth view.”

Among brands, Duffy said Columbia brand’s democratic positioning and success recruiting younger and more diverse consumers has left the brand “well-positioned globally to capitalize on secular growth drivers for the portfolio, including increasing interest in outdoors, health and wellness, and increasing casualization. Underdeveloped opportunities of footwear, international, and digital are credible growth drivers.”

Sorel’s growth potential “stands out as particularly compelling” with its “function-first fashion” approach connecting with the female consumer. Mountain Hardwear and Prana are at “different stages of a brand reset” and expected to contribute modestly to growth.

Duffy noted, however, that go-forward growth targets are above Stifel’s and Wall Street estimates, calling for mid-single-digit growth in 2023.

Duffy wrote, “FY25 objectives are cohesive and rational assuming a supportive macroeconomic environment. With the current macro pressures and the risk of recession in 2023, however, a setback could render these 3-year goals lofty ambitions and a challenge to credibility.”

The analyst further wrote that Columbia management’s comments on Spring 2023 wholesale orders seeing “modest growth” year over year imply the need for accelerated growth in the second half of 2023 and thereafter to meet the 2025 plan.

Stifel retained its “Hold” rating at an $81 price target.

Duffy wrote, “We are encouraged by secular tailwinds and opportunities for the brand portfolio (particularly Sorel) but expect the market views the growth goals with skepticism, and we remain comfortable with our Hold rating until clarity on 4Q and 2023 prospects improve.”

At UBS, Mauricio Serna said Columbia officials delivered a “bullish” Investor Day, and UBS anticipates its portfolio of brands “will deliver solid long-term growth.” However, Serna sees macroeconomic pressures as a major headwind in the near term.

Serna wrote, “We believe COLM has multiple top-line levers, including; (1) outdoor category tailwinds such as casualization and health & wellness trends; (2) share gains potential in footwear; and (3) international sales acceleration. However, we believe macro headwinds like inflationary pressures, rising interest rates, supply chain disruption, geopolitical uncertainty, and F.X. volatility will linger into 1H23.”

The analyst doubts Columbia’s retail partners will grow at a 9 percent to 11 percent rate in line with Columbia’s predicted wholesale growth, but he sees “potential for meaningful share gains given COLM’s product innovation and several competitors’ shift to DTC.”

Serna modeled Columbia’s margins to stabilize at 13 percent, below its 14 percent FY25 target but believes higher scale in footwear and international business could drive significant SG&A leverage for Columbia.

UBS kept its “Neutral” rating at an $80.00 target price. 

Serna wrote, “Our view is COLM’s solid portfolio of outdoor brands will generate good, but not great growth post-COVID-19. We forecast the company to deliver a 5 percent, 5-year EPS CAGR (8 percent CAGR post FY22E). We believe this type of outlook is mostly priced into the stock.”

At Baird, Jonathan Kompf wrote that Columbia’s Investor Day “outlined a three-year profitable growth framework that in our view should help to better define the longer-term investment thesis for investors. 

Specifically, we believe COLM’s attractive portfolio of purpose-led brands is positioned to capitalize on secular outdoor/active industry tailwinds and rising preference for comfort/casualization, to maintain leading product innovation at broadly appealing price points and to capture several untapped opportunities (footwear, digital, international).”

Kompf called out moves by the Columbia brand to emphasize go-to-market by activity (Hike, Trail Run, Snow, Fish & Hunt, Everyday Outdoor) while doubling down on innovation, digital/loyalty, and key wholesalers. Columbia officials noted that Columbia brand’s Top 50 retailers accounted for 75 percent of revenues.

Komp also said Sorel is “aiming to become a global footwear force,” with growth supported by year-round offerings across multiple categories.

However, Komp added that in the near term, 2023 expected headwinds could pressure Columbia’s larger incremental dollar drivers, such as apparel and U.S. wholesale, to reach its ambitious growth targets.

Baird reiterated its “Neutral” rating at a $77 price target.

Komp wrote, “While management expressed comfort in delivering healthy results in a range of economic scenarios (strong value proposition, execution), we see risk that rising economic pressures and elevated inventories restrict results into 2023E, especially since the greatest incremental dollar growth is expected from Columbia apparel, wholesale and the U.S.”

Photo courtesy Sorel x Prana