Columbia Sportswear Company COLM posted third-quarter 2024 results, wherein the top and bottom lines deteriorated year over year. Earnings surpassed the Zacks Consensus Estimate but net sales missed the consensus mark. The weak sales performance resulted from reduced wholesale net sales and soft consumer demand in the United States. This was somewhat led by warm weather and outdoor category headwinds.
The company has introduced the ACCELERATE Growth Strategy, which intends elevate its Columbia label and customers’ perception about the brand. This strategy revolves around various consumer-centric shifts and advanced ways of working. COLM has strengthened its consumer-segmentation framework to outline the future growth opportunities. Columbia Sportswear continues to serve the existing consumers with accessible outdoor needs apart from bringing young and more active consumers into the brand. On a combined basis, accelerate product, marketing and marketplace strategies look forward to get the right products to the right customers at the right place on time.
Across its direct-to-consumer (DTC) e-commerce business, the company has started to evolve columbia.com as the brand’s best expression. In the brick-and-mortar stores, COLM is expanding the assortments and in-store presentations to capture extra sales. The company’s Europe direct business is on track to be one of its fast-growing markets in 2024.
Shares of this Zacks Rank #4 (Sell) company have lost 5.8% in the past six months against the industry’s 1.6% growth.
An Insight Into COLM’s Q3 Performance
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted quarterly earnings of $1.56 per share, down 8.2% from $1.70 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $1.36.
Net sales declined 5% to $931.8 million and missed the consensus mark of $947 million. Net sales dipped 5% at constant currency (cc).
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
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The gross margin increased 150 basis points (bps) to 50.2%, mainly reflecting gains from lower inbound freight costs as well as favorable channel and region net sales mix, somewhat offset by unfavorable foreign exchange hedging rates.
SG&A expenses were up 2.7% to $361.2 million from $351.6 million reported in the year-ago quarter. As a percentage of sales, the same increased 310 bps to 38.8%. The most significant changes in SG&A expenses were increased DTC and incentive compensation costs, somewhat offset by reduced supply-chain and demand creation costs. Columbia Sportswear reported an operating profit of $112.5 million, down 16.4% from the year-ago quarter. Also, operating margin contracted 160 bps to 12.1%.
COLM’s Channels & Regional Segments
In the United States, net sales fell 10% to $571.3 million. Net sales increased 10% to $141.8 million in Europe, Middle East and Africa (EMEA). Latin America and Asia Pacific (LAAP) net sales rose 17% to $135 million. In Canada, net sales plunged 21% to $83.7 million.
During the quarter, DTC sales inched up 2% year over year to $326.6 million. Wholesale channel sales went down by 9% to $605.2 million.
COLM’s Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category inched up 1% to $735.4 million, while Footwear net sales fell 23% to $196.4 million.
Columbia, SOREL and prAna brands registered a sales decline of 1%, 39% and 7%, respectively. Sales for the Mountain Hardwear brand increased 2%.
Other Financial Updates of COLM
The company ended the quarter with cash and cash equivalents of $306.7 million, short-term investments of $67.2 million and shareholders’ equity of almost $1,787.5 million. It had no debt on its balance sheet as of Sept. 30, 2024. Inventories fell 10% to $798.2 million as of the same date.
For the nine months ended Sept. 30, 2024, Columbia Sportswear’s cash provided by operating activities was $76.6 million and capital expenditures were $41.7 million. For 2024, COLM expects an operating cash flow of at least $300 million. Capital expenditures are envisioned to be in the band of $60-$70 million.
The company bought back 2,916,970 shares of common stock for $230.9 million in the first nine months of 2024. On Oct. 24, 2024, its board has approved a $600-million increase to its share repurchase authorization. As of Sept. 30, 2024, $114.5 million was available under its share-repurchase authorization.
Management announced a quarterly cash dividend of 30 cents per share, which is payable Dec. 4, 2024, to shareholders of record as on Nov. 20.
What to Expect From COLM Ahead?
Several external risks, including outdoor industry and U.S. consumer headwinds, geopolitical conflicts, weather, supply-chain issues and the upcoming U.S. elections, are likely to adversely affect the company’s operations and consumer demand. Nevertheless, its profit-improvement program is on track to generate nearly $90 million in cost savings.
For 2024, Columbia Sportswear expects net sales to drop 5-3% to the $3.31-$3.38 billion band, down from $3.49 billion recorded in 2023. Earlier, it had projected net sales to decline 4-2% to the $3.35-$3.42 billion band. The company expects foreign currency translations to hurt net sales modestly . Management expects the gross margin to expand 40-90 bps to the band of 50-50.5%, up from 49.6% seen in 2023. The company had earlier expected the metric to expand 40-60 bps to the band of 50-50.2%. As a percentage of net sales, SG&A expenses are anticipated to be in the range of 42.8-43%, up from the 40.6% reported in 2023. Earlier, the metric was anticipated to be in the range of 42.4-43%.
For 2024, the operating income is expected to be in the band of $257-$284 million compared with $256-$288 million expected earlier. The operating margin is still expected to be in the range of 7.7-8.4%. In 2023, COLM reported an operating margin of 8.9%. Net interest income is likely to be around $30 million and effective income tax rate is anticipated to be in the band of 24-25%. It envisions earnings per share (EPS) to be in the range of $3.70-$4.05 compared with $3.65-$4.05 expected earlier. Columbia Sportswear expects foreign currency translation to lower EPS by nearly 1 cent.
For the fourth quarter, COLM anticipates a net sales decline of 2% to the $1,040-$1,110 million range compared with $1,060 million recorded last year. The company expects to deliver an operating income in the band of $123-$151 million, with operating margin of 11.8-13.6% , up from 10.7% delivered in 2023. Management expects to deliver EPS in the range of $1.68-$2.03 , indicating a decline from $1.55 in the year-ago period.
Based on Spring 2025 orderbook, management estimates mid-single-digit percent rise in global wholesale sales for the first half of 2025, showing growth in all regions, as well as strength in the Columbia, prAna and Mountain Hardwear brands.
Key Picks
Some better-ranked companies are G-III Apparel Group GIII, Gildan Activewear GIL and lululemon athletica LULU.
G-III Apparel sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 118.2%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 sales indicates an increase of 3.3% from the year-ago period’s level.
Gildan Activewear carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.5%, on average.
The consensus estimate for Gildan Activewear’s current financial-year sales and EPS indicates growth of 1.5% and 14%, respectively, from the year-ago levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS indicates growth of 9.2% and 9.8%, respectively, from the year-ago figures. LULU has a trailing four-quarter earnings surprise of 7.9%, on average.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
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Columbia Sportswear Company (COLM) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report
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