Columbia Sports is Poised to Pop

Columbia Sportswear Company (COLM, Financial) is a leading innovator in the global apparel, footwear, accessories and equipment markets. Founded in 1938, Columbia brand apparel, footwear, accessories and equipment have earned a global reputation for innovation, quality and performance, keeping outdoor enthusiasts in more than 100 countries, warm, dry, cool and protected year-round.

It is an active lifestyle brand with a clear position in the market appealing to socially-conscious consumers of both genders.

In addition to the flagship Columbia Sportswear brand, it also designs, develops, markets and distributes active outdoor and lifestyle apparel, footwear and related accessories and equipment under the Mountain Hardware, Sorel, prana, Montrail and Pacific Trail brands.

It was the first large U.S. outdoor brand to enter the Chinese market more than a decade ago. In 2014, it added the prana brand to its portfolio by shedding $189 million since then, it has become a growing, profitable business. Prana added $54 million of its net sales subsequent to its addition.

The company is currently focusing on existing brands and organic growth. The shares rose 17% and are performing well. It is constantly incorporating changes to its operating structure.

Strong second quarter results

Net sales increased by $56.0 million (an increase of 17%) and were $380.2 million during the second quarter (which was f $324.2 million during the prior year period).

Net loss totalled at $6.5 million, or $(0.09) per share, (which was $6.3 million, or $(0.09) per share, in the prior year period).

There were $417.5 million in cash and short-term investments as at the end of the quarter.

Consolidated inventories of $581.0 million at June 30, 2015 were 27% higher compared with the $456.4 million balance at June 30, 2014.

U.S. net sales increased by 45%.

Net sales in Canada increased 27%.

Latin America/Asia Pacific (LAAP) region net sales increased by 1%.

Europe/Middle East/Africa (EMEA) region net sales decreased 18%.

Sorel brand net sales increased 43% and were $4.3 million.

Mountain Hardwear net sales decreased by 3% and were $21.2 million.

Apparel, Accessories & Equipment net sales increased 18%.

Footwear net sales increased by 14% and were $70.0 million.

Dividends

The company declared a regular quarterly dividend of $0.15 per share, payable on September 3, 2015 to shareholders of record on August 20, 2015.

Share repurchases

COLM repurchased approximately 259,000 shares of common stock for an aggregate purchase price of approximately $14.5 million in the second quarter of 2015. Approximately $229.0 million remains available under the current repurchase authorization, which does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.

Strong attributes of second quarter

  1. Increased earnings power of expanded brand portfolio.
  2. Seasonally diverse product offerings.
  3. Enhanced operational platforms.
  4. Strong sell-through of Spring 2015 products in North America and Europe drove demand in the second quarter and is fuelling encouraging Spring 2016 wholesale advance orders.
  5. Robust momentum in North America.
  6. The company is very well positioned to deliver against strong Fall advance order book.

Expectations for 2015

The company expects the following:

  • Gross margins to improve by approximately 50 basis points.
  • Selling, general and administrative expenses to increase at a rate slightly lower than anticipated sales growth, generating approximately 30 basis points of operating expense leverage.
  • Effective tax rate of approximately 28.0%.
  • Net income after non-controlling interest of approximately $160 million to $168 million, or approximately $2.25 to $2.35 per diluted share.

Being in the news

COLM has opened its newest Performance Fishing Gear concept store in Miami's The Falls. The Columbia PFG concept store is modeled after the adventurous atmosphere and lifestyle that Columbia PFG customers embrace on a daily basis. The new 5,654-square-foot Miami location will feature the latest and greatest from the popular collection, an interactive knot-tying station and digital design elements.

Mountain Hardwear Inc., a leading mountaineering, outdoor equipment and clothing company, and a wholly owned subsidiary of Columbia Sportswear Company recently named Scott Kerslake to serve as interim brand president while the company conducts a global search for a permanent brand leader to replace Topher Gaylord, who has resigned.

Expansion in India

This U.S.-based apparel giant has recently opened around 25 stores in India. It partnered with Chogori India Retail Limited to enter the Indian market. Within a period of three years, it plans to roll out 120 point of sales, exclusive stores and shop-in-shop stores in India. Around 90% of the products are imported and 10% are manufactured there as of now. India is a growing economy and has plenty of room for these companies to grow. The company is in plans to introduce high performance outdoor gears in the country.

India ranks as the fifth-largest shopping festival in the world. With a growing middle class population, India is surely becoming a fashion hub and a place for the foreign investors to consider.

(Source: The Economic Times)

On a concluding note

This American Outdoor Retailer has reported a strong second quarter and is poised for more stellar performances in the near future. It has more room to grow and is backed by strong sales. Mountain Hardware and Sorel were the chief performers in the recent quarter.

2014 war also a remarkable year for COLM. Consolidated net sales surpassed $2.1 billion, or an increase of 25%, marking its fastest growth rate in the last decade and the largest single-year volume growth in the company’s history.

There is more upside to this company as the athletic apparel industry is booming as of now. The company offers great product quality, innovation, style and value to its customers. It is focused on tapping the market opportunities, new technologies and capabilities to gain further market share and deliver earnings growth.

It has significant room for continued expansion in North American markets and virtually untapped international opportunities to pursue together. In 2014, sales through ecommerce sites grew 40% and surpassed $100 million. The company’s stores and ecommerce sites have powerful marketing platforms through which each of its brands build strong emotional connections with consumers to drive additional growth through its wholesale channels.

Nowadays, activewear is becoming a hot fashion statement. The wearables market is expected to be at $6 billion by the end of 2016. Under Armour is capitalizing on this growing trend by offering highly technical activewear products for men, women and youth. It is emerging as a big player in the sports apparel industry.

The athletic apparel industry has always been amongst the hot picks. COLM has plenty of room to grow and is in a better position to offer increased shareholder returns. There is a lot of potential in this company.