Active and outdoor maven Columbia Sportswear Company saw net income for the fourth quarter rise 64 percent on a 23 percent sales hike.
In a Nutshell: Columbia Sportswear forecast net sales for 2022 to increase 16 percent to 18 percent to $3.63 billion to $3.69 billion from $3.13 billion in 2021.
Net income is projected to be $359 million to $379 million, resulting in diluted earnings per share of $5.50 to $5.80. Gross margin is forecast to contract approximately 160 basis points to around 50 percent of net sales from 51.6 percent of net sales in 2021.
Sales, general and administrative (SG&A) expense as a percent of net sales is expected to be 37.2 percent to 37.5 percent, compared to SG&A expenses as a percent of net sales of 37.8 percent in 2021. Operating income is projected to be $472 million to $498 million, resulting in operating margin of 13 percent to 13.5 percent, compared to operating margin of 14.4 percent in 2021.
The company said while the majority of its owned stores remained open throughout fourth quarter, overall brick and mortar store traffic trends remain below pre-pandemic levels.
Supply chain constraints continued to impact operations in the quarter, resulting in delayed receipt and delivery of products for Columbia’s Fall 2021 and Spring 2022 seasons. Demand for ocean vessels and containers continues to far outstrip available capacity, resulting in significant year-over-year increases in ocean freight costs, the company noted.
At year’s end, cash, cash equivalents and short-term investments totaled $894.5 million, compared to $791.9 million as of Dec. 31, 2020. Inventories increased 16 percent to $645.4 million, compared to $556.5 million as of Dec. 31, 2020. Inventory at quarter-end primarily consisted of current and future season product.
On the marketing side, this week Columbia Sportswear announced the launch of a special-edition product collection created in collaboration with NASCAR Cup Series driver and brand ambassador Bubba Wallace. The Bubba Wallace Collection is outdoor activewear and Columbia’s first signature collection developed with a sponsored athlete.
Wallace worked directly with Columbia’s product team to design the distinct collection, visiting Columbia headquarters in Portland to select styles and fabrics, as well as advise on colorways and design details. Columbia’s latest technologies are featured in the Bubba Wallace Lightweight Puffer Jacket, such as its most advanced thermal-reflective lining, and Omni-Heat Infinity, which uses an expanded pattern of gold dots to reflect body heat without sacrificing breathability. The collection features seven styles ranging from outerwear to sportswear to footwear.
Sales: Net sales for the fourth quarter ended Dec. 31 increased 23 percent to $1.13 billion from $915.6 million for the comparable period in 2020. The increase in net sales primarily reflects strong consumer demand, which fueled direct-to-consumer (DTC) growth and higher Fall 2021 wholesale shipments.
For the year, net sales were up 25 percent to $3.13 billion from $2.5 billion for 2020 quarter.
Earnings: Net income for the quarter rose 64 percent to $157 million, or $2.39 per diluted share, compared to net income of $95.8 million, or $1.44 per diluted share, for the comparable period in 2020.
Gross margin expanded 160 basis points to 52.2 percent of net sales from 50.6 percent of net sales for 2020 comparable period. Gross margin expansion was primarily driven by lower DTC promotional levels, strong retail sell-through performance resulting in higher wholesale product margins, and favorable channel sales mix, partially offset by higher inbound freight costs and year-over-year changes in inventory provision activity.
SG&A expenses increased 12 percent to $384 million, or 34 percent of net sales, from $343.3 million, or 37.5 percent of net sales, for year-earlier period. The increase in SG&A expenses primarily reflected costs to support the growth of the business, including higher global retail, demand creation, incentive compensation and personnel expenses, partially offset by lower retail impairments and store closure charges compared to fourth quarter 2020.
Operating income increased 71 percent to $211.6 million, or 18.7 percent of net sales, compared to operating income of $123.7 million, or 13.5 percent of net sales, for the comparable period in 2020.
For the year, net income increased 228 percent to $354.1 million, or $5.33 per diluted share, compared to net income of $108 million, or $1.62 per diluted share, for the year-earlier period.
Gross margin expanded 270 basis points to 51.6 percent of net sales from 48.9 percent of net sales for the comparable period in 2020. SG&A expenses increased 7 percent to $1.18 billion, or 37.8 percent of net sales, compared to $1.1 billion, or 43.9 percent of net sales, for the same 2020 period.
Operating income increased 229 percent to $450.5 million, or 14.4 percent of net sales, compared to operating income of $137.0 million, or 5.5 percent of net sales, for the comparable period in 2020.
CEO’s Take: Tim Boyle, chairman, president and CEO, said: “Fourth quarter and full year financial results were exceptional. Record financial performance reflects the strength of our brands and the tremendous efforts and resilience of our employees globally. In the quarter, robust consumer demand led to results that far exceeded our financial outlook driven by DTC outperformance and a highly favorable full price selling environment, which benefited gross margin. Throughout the season, our Fall 2021 sell-through rates have been outstanding, including the successful global launch of Omni-Heat Infinity.”
“As we begin 2022, we are acutely focused on unlocking the growth opportunities we see across the business while mitigating supply chain and inflationary pressures,” Boyle added. “Our powerful brand portfolio is well positioned to connect active people with their passions and capitalize on the popularity of outdoor activities…I am confident we have the right strategies in place to drive profitable growth, and we are committed to 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.”