Upon releasing the results of its 2019 third quarter earnings on Wednesday, Columbia Sportswear CEO Tim Boyle said that the company’s results exceeded expectations, positioning it for another year of record growth.
In a Nutshell: On the whole, the company enjoyed record growth in the third quarter across geographic segments, spurred by high advance orders for its Columbia and Sorel brands heading into the winter season.
Due to harsh weather conditions in North America last winter, retailers experienced exceptional sell-through, and they’re stocking up on inventory in hopes of a similar result in the 2019 winter season.
The Columbia brand grew 14 percent during the third quarter, while Sorel grew by a strong 27 percent. Sorel’s growth was driven largely by an appetite for fall styles, demonstrating its growing recognition from consumers and retailers as a year-round brand.
Based in Portland, Ore., the company has updated its full-year financial outlook. Net sales are now expected to reach between $3.01 and $3.04 billion (up from $3.00 to $3.04 billion). Net sales growth is expected to reach 7.5 percent to 8.5 percent (revised from 7.0 percent to 8.5 percent). The net sales outlook includes a foreign currency translation impact that is anticipated to reduce net sales growth by approximately 90 basis points.
The company’s operating income is expected to increase as well, reaching $392 to $401 million, instead of the prior estimate of $388 to $396 million. The company’s operating margin has been revised to 13 percent to 13.2 percent, where previously it was projected at 12.9 percent to 13.0 percent.
Sales: Net sales for the third quarter ended Sept. 30, 2019 increased 14 percent to $906.8 million, up from third quarter 2018 results of $795.8 million.
Earnings: During the third quarter, net income increased 19 percent to $119.3 million, up from $100.2 million for the comparable period in 2018. Third quarter 2019 net income also includes the benefit of full ownership of the company’s China business, which became a wholly-owned subsidiary effective January 2019, Columbia said. In third quarter 2018, the non-controlling interest share of net income was $2.2 million.
Gross margin expanded 110 basis points to 49.3 percent of net sales, up from 48.2 percent from third quarter 2018. Operating income increased 18 percent to $152.0 million, or 16.8 percent of net sales, from $129.1 million, or 16.2 percent of net sales.
CEO’s Take: “Record third quarter results exceeded our expectations, with broad based growth across our geographic segments, channels and product categories. During the quarter, we were able to ship a greater portion of our Fall 2019 order book compared to the Fall 2018 season as retailers restocked depleted inventory positions after harsh winter weather and exceptional sell-through in North America last year,” Boyle said.
“Higher advance orders and earlier shipments contributed to 14 percent growth for the Columbia brand and 27 percent growth for the Sorel brand in the quarter. Sorel’s impressive growth was led by strong demand for fall fashion styles, further validating the brand’s success as a year-round fashion footwear brand. Our net sales growth momentum combined with Project CONNECT margin benefits drove earnings per share growth in excess of 20 percent with continued investment in our strategic priorities,” he added.
“As we enter our peak selling season, I’m confident that our powerful brand portfolio, globally diversified business model and the dedication and focus of our talented global team position us to deliver another year of record sales and profit,” Boyle said.