Columbia Sportswear Co. (COLM, Financial) recently reported fourth quarter results with increases in net sales and net income. The fourth quarter witnessed record gross margins and expanded operating margin. The company is doing well in the Europe-direct markets. Sales increased in most of the geographic regions.
The company has its presence felt in around 100 countries. Boasting of a diversified brand portfolio, the company is taking initiatives to grow sales. The company predicts 4% growth in global sales for the full year 2017. It expects its U.S. business to perform well.
Fourth-quarter results
Net sales during the quarter were $717.4 million (which marked a 3% increase from net sales of $699.4 million in the prior-year quarter).
Operating income during the quarter increased by 22% and was a record $100.4 million or 14% of net sales, which was $82.3 million or 11.8% of net sales in the prior-year quarter.
Net income during the quarter increased by 34% and was a record $84.7 million, or $1.20 per diluted share, which was $63.4 million, or 90 cents per diluted share, in the prior-year quarter.
Global Apparel, Accessories & Equipment net sales increased by 4% during the quarter and were $535.8 million.
Global Columbia brand net sales increased 4% and were $552.3 million.
Global prAna brand net sales increased by 2% and were $28.2 million.
Fourth-quarter SG&A expense increased by $4.1 million, or 2%, and was $241.2 million, or 33.6% of net sales, which was 33.9% of net sales in the prior-year quarter.
The effective tax rate for the fourth quarter was 15.1%, which was 21.7% in the prior-year quarter.
Full-year performance
Net sales during the full year increased by 2% and were a record $2.38 billion.
Operating income increased by 3% and was a record $256.5 million.
Operating margin during the year was 10.8% (which was 10.7% in the prior-year period).
Full-year 2016 net income increased by 10% and was a record $191.9 million, or $2.72 per diluted share, which was $174.3 million, or $2.45 per diluted share, in the prior-year period.
The company had $275.2 million in operating cash flow as at Dec. 31, 2016.
Capex as of Dec. 31, 2016 was $50.0 million.
Consolidated inventories increased by 3% and were $488.0 million as at Dec. 31, 2016 (which was $473.6 million in the prior-year period).
Global Columbia brand net sales increased by 2% and were $1.91 billion.
Global Apparel, Accessories & Equipment net sales increased by 2% and were $1.87 billion.
Global Footwear net sales increased by 1% and were $511.6 million.
SG&A expenses increased by $32.1 million or 4% and were $864.1 million, representing 36.4% of net sales, which $832.0 million or 35.8% was of net sales in the prior-year period.
The full-year 2016 income tax rate was 22.8% (which was 27.3% in the prior-year period).
Share repurchases
Around $173.5 million remained available under the current repurchase authorization.
Dividends
The company declared a regular quarterly dividend of 18 cents per share, payable on March 22 to shareholders of record on March 9.
Expectations for 2017
| Â | Range |
| Operating income | To range between $260 million and $270 million |
| Operating margin | To be around 10.9% |
| Net income | To range between $192 million and $200 million, or approximately $2.72 to $2.82 per diluted share. |
| Net sales | To grow by 4% |
Focus
- Innovation.
- Gain market share.
- Deliver earnings growth.
- Powerful marketing platform.
- To invest strategically in the brands.
- Product launches.
Global athletic apparel market
The global sports apparel market is growing profusely. North America generates a lump sum of the revenues. In this region the company has significant room for continued expansion. Increased participation of women in fitness is going to propel further growth for this company. The company already has entered the Indian market, which is becoming a fashion hub and a place for foreign investors. Per the National Bureau of Statistics of China, India's overall annual disposable income increased from $1.366 trillion in 2010 to $1.587 trillion in 2013.
Not just athletes but also regular working people prefer wearing trendy athletic apparel for their fitness activities, swimming, yoga and so on. This trend has caught people of all age groups.
Conclusion
Headquartered in Portland, Oregon, Columbia Sportswear is a leader in the global apparel, footwear, accessories and equipment markets. Founded in 1938, the company has carved a niche for itself in the global platform for innovation, quality and performance. Its flagship brands include Mountain Hardwear, SOREL, prAna and OutDry.
It is true that there are many athletic apparel brands out here, but this brand has already marked a place of its own. It has reserved this place by constant innovation. With a clear position in the market, it appeals to both the genders.
The company expects its U.S. direct-to-consumer channel to account for a majority of the projected full-year 2017 global net sales increase. It is concentrating on existing brands and organic growth. The athletic apparel industry is booming, and this company has a lot of opportunities in this space.
Global sports apparel industry is expected to generate revenue of $184.6 billion by 2020, growing at a CAGR of 4.3% during the forecast period, 2015-2020, according to new research published by Allied Market Research. The women segment is also growing and contributing to these increased figures. The market is expected to be at its peak between 2015 and 2020. The company is trying to validate the long-term strategic framework by continuing to invest to drive growth and improve profitability. It boasts of a diverse brand portfolio and strong balance sheet. Adding this company may reap shareholder returns.
Disclosure: I do not hold any position in the company.
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