Columbia Sportswear scored strong gains in net sales and income in the first quarter, led by e-commerce and other DTC.
In a Nutshell: Columbia Sportswear said Thursday that based on first quarter results, advance wholesale orders for the Spring season and plans for growth in its global direct-to-consumer (DTC) businesses as it anniversaries prior-year temporary store closures, it believes mid- to high-20 percent first half year-over-year net sales growth is achievable.
In the second quarter, year-over-year net sales growth by channel will be impacted by the anniversary of prior year temporary brick and mortar store closures, as well as elevated DTC e-commerce net sales penetration levels as demand shifted online when consumers were unable shop in store, the company said.
For the year, the company’s financial outlook has been upgraded for net sales to increase 21.5 percent to 23 percent to $3.04 billion to $3.08 billion compared the prior 18 percent to 20 percent forecast to $2.95 billion to $3 billion from $2.5 billion in 2020.
Gross margin is expected to improve 110 to 130 basis points to 50 to 50.2 percent of net sales from 48.9 percent of net sales in 2020. Sales, general and administrative (SG&A) expenses are expected to increase at a slower rate than net sales growth. SG&A expenses as a percent of net sales is expected to be 38.7 percent to 39.1 percent compared to SG&A expenses as a percent of net sales of 43.9 percent in 2020. Demand creation as a percent of net sales is anticipated to be 6 percent in 2021 compared to 5.7 percent in 2020.
Operating income is expected to be $347 million to $369 million, urgraded from the prior outlook of $320 million to $346 million, resulting in operating margin of 11.4 percent to 12 percent compared to operating margin of 5.5 percent in 2020.
Net income is expected to be $271 million to $288 million, up from the previous forecast of $250 million to $270 million, resulting in diluted earnings per share of $4.05 to $4.30, up from $3.75 to $4.05.
At the end of the quarter on March 31, cash, cash equivalents and short-term investments totaled $874.6 million compared to $706.9 million on March 31, 2020. Inventories decreased 9 percent to $525.7 million, primarily driven by lower Spring inventory purchases and a reduction of excess inventory.
Sales: Net sales for the first quarter increased 10 percent to $625.6 million from $568.2 million for the comparable period in 2020. Business momentum was led by e-commerce net sales growth, as well as better-than-planned sequential improvement in DTC brick and mortar trends.
Earnings: Net income in the period was $55.9 million, or 84 cents per diluted share, compared to net income of $200,000, or break-even diluted earnings per share, for the comparable period in 2020.
Operating income was $70.5 million, or 11.3 percent of net sales, compared to an operating loss of $2 million, or negative 0.3 percent of net sales, for the comparable period in 2020.
Gross margin expanded 360 basis points to 51.4 percent of net sales from 47.8 percent of net sales for the comparable period in 2020. Gross margin expansion was primarily driven by decreased reserve provisions related to less excess inventory, lower DTC promotional levels and favorable channel and region sales mix.
CEO’s Take: Tim Boyle, chairman, president and CEO, said: “I’m pleased to report the pace of fundamental recovery exceeded our expectations in the first quarter, resulting in a return to net sales growth and financial results that were stronger than we anticipated. Business momentum was led by our direct-to-consumer e-commerce business, which grew 35 percent year-over-year, reaching 20 percent of our total net sales mix. In our wholesale business, we experienced a strong finish to the Fall 2020 sales season, as well as excellent early season sell-through of our Spring 2021 assortment. Consumer demand is high and retail inventories are lean, resulting in a favorable full price selling environment.”
“I’m encouraged by the strong start to the year, but mindful that we must continue to carefully navigate operational challenges and quickly adapt to changing business conditions and ongoing pandemic-related disruptions,” Boyle added. “Our fortress balance sheet remains strong, with cash and short-term investments totaling $875 million with no bank borrowings at quarter end. We are committed to driving sustainable and profitable long-term growth and 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.”