The pandemic drove down income and earnings for the year, but Columbia Sportswear showed improvement in the fourth quarter improvement and sees a better 2021 ahead.
In a Nutshell: Columbia Sportswear Company, known for its active outdoor lifestyle apparel, footwear, accessories and equipment, said it delivered fourth-quarter 2020 results ahead of its financial outlook, despite port congestion, logistics and parcel shipping capacity constraints, and enhanced distribution center health and safety protocols that strained fulfillment service levels.
While there were isolated temporary store closures resulting from local regulations or safety concerns, the majority of the company’s owned stores remained open throughout the fourth quarter. Overall brick-and-mortar store traffic trends remain well below prior year levels, Columbia reported.
During the fourth quarter, the company realized approximately $30 million in sales, general and administrative (SG&A) savings from cost containment actions and lower variable expenses. SG&A expenses were essentially flat at $343.3 million, or 37.5 percent of net sales, from $344.4 million, or 36.1 percent of net sales, for the comparable period in 2019.
Columbia Sportswear said its 2021 financial outlook reflects estimates regarding the impact on operations of the Covid-19 pandemic, economic conditions, supply chain and logistics capacity constraints, and changes in consumer behavior and confidence, as well as geopolitical tensions. The outlook assumes a sequential recovery in brick-and-mortar retail traffic and sales throughout 2021.
The outlook for fiscal 2021 calls for net sales of $2.95 billion to $3 billion, representing a net sales growth of 18 percent to 20 percent. Operating income is forecast to improve significantly to $320 million to $346 million, representing an operating margin of 10.8 percent to 11.5 percent. Diluted earnings per share are projected to be $3.75 to $4.05.
The company exited the quarter with $791.9 million in cash and short-term investments, and no borrowings. It also refinanced its domestic credit agreement with a new agreement providing a $500 million, five-year unsecured revolving credit facility.
Inventories decreased 8 percent for the year to $556.5 million, compared to $606 million on Dec. 31, 2019.
Sales: Net sales for the fourth quarter ended Dec. 31 decreased 4 percent to $915.7 million from $954.9 million in the fourth quarter 2019. Net sales benefited from later shipment of Fall wholesale orders.
In the direct-to-consumer channel, e-commerce net sales increased 41 percent year-over-year, while brick-and-mortar store traffic and sales trends improved sequentially but remained well below prior-year levels.
For the full year, net sales declined 18 percent to $2.5 billion from $3.04 billion in 2019.
Earnings: Net income in the quarter fell 16 percent to $95.8 million, or $1.44 per diluted share, from net income of $114 million, or $1.67 per diluted share, for the comparable period in 2019.
Operating income decreased 11 percent to $123.7 million, or 13.5 percent of net sales, from operating income of $138.6 million, or 14.5 percent of net sales, for the comparable period in 2019. Fourth-quarter 2020 operating income includes $18.1 million in retail impairments and store closure charges and a $17.5 million prAna trademark impairment.
Gross margin expanded 50 basis points to 50.6 percent of net sales from 50.1 percent of net sales for the comparable period in 2019. Diluted earnings per share decreased 14 percent to $1.44 compared to fourth quarter 2019 diluted earnings per share of $1.67.
For the year, net income decreased 67 percent to $108 million, or $1.62 per diluted share, compared to net income of $330.5 million, or $4.83 per diluted share, in 2019. Operating income fell 65 percent to $137 million, or 5.5 percent of net sales, from operating income of $395 million, or 13 percent of net sales, in 2019. Gross margin contracted 90 basis points to 48.9 percent of net sales from 49.8 percent of net sales in 2019.
CEO’s Take: Tom Boyle, chairman, president and CEO, said: “I’m encouraged to see better than expected fourth quarter results and broad-based momentum across our powerful brand portfolio as we begin 2021. These results are particularly impressive with the backdrop of a global pandemic and demonstrate the dedication and commitment of our global workforce of employees who overcame the impact of COVID-19 safety protocols, supply chain constraints and regional lockdowns. E-commerce net sales grew an impressive 41 percent year-over-year in the quarter, representing nearly a quarter of our total sales mix. With strong Fall 2020 sell-through rates, our wholesale partners are well positioned to exit the season with clean inventory positions.”