Columbia Sportswear is poised for “a record year of growth and profitability,” CEO Tim Boyle said. And it’s advance orders and brand momentum that are driving that growth.
In a Nutshell: Buoyed by the strength of its Columbia brand, improvement in the Sorel unit and a turnaround at Mountain Hardwear, Columbia Sportswear Co. scored gains in sales and earnings in the second quarter.
The company said the Columbia brand generated double-digit constant-currency growth in the quarter and the first half of the year, led by U.S. wholesale and direct-to-consumer performance. Sorel’s progress toward becoming a year-round brand was evident in the success of Spring 2019 styles that contributed to greater than 30 percent constant-currency growth period, and a positive first half of the year. Mountain Hardwear, which had languished for several years, also generated double-digit constant-currency growth in the three months and is poised for continued growth in the second half, the company said.
Columbia Sportswear, based in Portland, Ore., updated its full year financial outlook, with net sales now expected to reach $3 billion to $3.04 billion compared to the prior forecast of $2.98 million to $3.04 billion, representing net sales growth of 7 percent to 8.5 percent compared to the previous outlook of 6.5 percent to 8.5 percent. The net sales outlook includes a foreign currency translation impact that is expected to reduce net sales growth by approximately 90 basis points.
The active outdoor apparel, footwear, accessories and equipment specialist noted that inventories increased 33 percent to $756.4 million in the quarter compared to $570.5 million on June 30, 2018. This was the result of earlier receipts of Fall 2019 inventory aimed at alleviating manufacturing capacity constraints and, to a lesser degree, increased volume to support business growth.
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Sales: Net sales for the second quarter ended June 30 increased 9 percent to a record $526.2 million compared to the year-ago period.
Earnings: Net income in the quarter increased 137 percent to $23 million from $9.7 million for the comparable period in 2018. The net income also includes the benefit of full ownership of our China business, which became a wholly owned subsidiary in January. In the second quarter of 2018, the non-controlling interest share of net income was $800,000.
Gross margin expanded 70 basis points to a record 48.2 percent of net sales compared to second quarter 2018 gross margin of 47.5 percent of net sales. Operating income increased 68 percent to a record $16.4 million and operating margin expanded 110 basis points to 3.1 percent of net sales compared to second quarter 2018 operating income of $9.7 million or 2 percent of net sales.
CEO’s Take: “Momentum across our diverse brand portfolio, distribution channels and regions, along with Project Connect financial benefits fueled record second quarter and first half financial performance,” Boyle said. “As we enter the second half of 2019, our brand, channel, geographic and supply chain diversification positions us for continued profitable growth despite global economic and trade uncertainty. Our first half results, Fall 2019 advance orders and current business momentum position us to deliver another record year of growth and profitability.”
“Our profitable growth trajectory and fortress balance sheet, with cash and short-term investments of over $500 million and no long-term debt, provide a foundation of strength and confidence from which we will continue investing in our strategic priorities to drive brand awareness and sales growth through increased, focused demand creation investments; enhance consumer experience and digital capabilities in all our channels and geographies; expand and improve global direct-to-consumer operations with supporting processes and systems, and invest in our people and optimize our organization across our portfolio of brands.”