Despite a difficult retail environment, Columbia Sportswear Co. posted record net sales and net income for the first quarter ended March 31.
Net sales increased 4 percent to $543.8 million in the quarter compared with net sales of $525.1 million in the comparable quarter in 2016.
First quarter 2017 net income increased 13 percent to $36 million, or 51 cents per diluted share, compared to first quarter 2016 net income of $31.8 million, or 4 cents a share.
“Our first quarter results provide a good start to a year that presents many challenges, especially in the U.S., which has been impacted by customer bankruptcies, liquidations and ongoing efforts by U.S. retailers to rationalize their store fleets and square footage,” chief executive officer Tim Boyle said. “We were encouraged by the Columbia brand’s continued growth in Europe-direct markets during the first quarter and by the Sorel brand’s successful launch of an expanded spring assortment. In addition, our direct-to-consumer businesses were a source of growth in every region.”
Boyle said Columbia’s updated 2017 outlook anticipates up to 4 percent earnings growth on about a 3 percent net sales gain, driven by contributions from three of its four brands and all four of its geographic regions.
“In the midst of changing consumer shopping patterns, our portfolio of powerful brands and strong balance sheet give us the ability to continue to drive sustainable, profitable growth,” he added.
The first quarter net sales gains were driven by a 16 percent gain in the LAAP region (Australia, New Zealand, Latin America and Asia) to $118.3 million, led by growth distributors and in China and Japan, partially offset by a net sales decline in South. The EMEA region (U.S., Europe, the Middle East and Africa) posted eight percent growth to $55.4 million, including increases in the company’s Europe-direct business, partially offset by a decline in net sales to EMEA distributors, while a 3 percent gain $36.9 million was seen in Canada.
The overall picture was clouded by a U.S. net sales decrease of 1 percent to $333.2 million, due to a decline in wholesale net sales, partially offset by an increase in direct-to-consumer net sales.
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Global Columbia brand net sales increased 3 percent to $449.1 million. Global Sorel brand net sales rose 50 percent to $27.2 million. Global Mountain Hardwear brand net sales increased 10 percent to $27.7 million and global Prana brand net sales decreased 7 percent to $38.7 million.
Global Apparel, Accessories and Equipment net sales increased 1 percent to $440 million and Global Footwear net sales rose 14 percent to $103.8 million.
First quarter income from operations increased 8 percent to $48 million, or 8.8% of net sales, compared to $44.3 million, or 8.4% of net sales, for the same period in 2016.
The effective income tax rate was 20.1% in the first quarter of 2017, compared to 22.5% for the same period in 2016.
First quarter net income increased 13 percent to $36 million, or 51 cents per share, compared with first quarter 2016 net income of $31.8 million, or 45 cents per share.
The company ended the quarter with $590.5 million of cash and short-term investments, compared with $451.2 million at March 31, 2016. Consolidated inventories of $398.8 million at March 31 were 3 percent lower than the $412.2 million balance at March 31, 2016.
Columbia said it expects 2017 net sales growth of about 3 percent compared with 2016 net sales of $2.38 billion, including an estimated 1 percentage point negative effect from changes in foreign currency exchange rates. The company’s U.S. direct-to-consumer channel is expected to account for a majority of the projected full year 2017 global net sales increase.
The company expects fiscal year 2017 gross margins to improve by about 30 basis points, and for selling, general and administrative expenses to increase at a rate slightly higher than net sales, resulting in about 30 basis points of SG&A expense deleverage, including a planned increase in global demand creation spend.
Based on the above assumptions, the company expects 2017 operating income to increase approximately 3 percent to between $256 million and $265 million, resulting in anticipated 2017 operating margin of about 10.8%. Net income after non-controlling interest is expected to increase up to 4 percent to $192 million to $199 million, or $2.72 to $2.82 per diluted share. The company’s anticipated growth in full year 2017 operating income and net income is expected to occur in the second half.