Columbia Sportswear Co. reported third-quarter earnings were down but ahead of internal expectations, prompting the outdoor apparel giant to raise its full-year EPS guidance. Sales reached $545.0 million for the quarter ended Sept. 30, a 4 percent decline compared with net sales of $566.8 million for the same period in 2011. Changes in currency exchange rates reduced reported net sales by approximately 2 percentage points.
Third quarter net income totaled $64.4 million, or $1.88 per diluted
share, compared with net income of $67.5 million, or $1.98 per diluted
share, for the same period in 2011. A higher effective tax rate
contributed $0.11 to the reduction in third quarter 2012 earnings per
share compared with the third quarter of 2011.
Columbia’s president and chief executive officer, commented, “Our third
quarter benefited from improved gross margins and disciplined expense
management, resulting in higher operating margin and further
demonstrating our ability to navigate effectively through a slow-growth
environment. We are pleased to raise our 2012 operating margin outlook
based on better-than-expected results through the first nine months of
Boyle concluded, “Looking ahead to 2013, we anticipate
continued slow growth through at least the first half of the year,
based in part on advance Spring 2013 wholesale orders, the fragile U.S.
recovery, continued uncertainty in Europe, and signs of slowing in key
Asian markets. However, we believe that our continued focus on
innovation, performance and enhanced design is elevating our brand
portfolio, which holds substantial long-term growth potential.”
Third Quarter Results
(All comparisons are between third quarter 2012 and third quarter 2011, unless otherwise noted.)
$21.8 million net sales decline in the third quarter was concentrated
primarily in the company’s Europe/Middle East/Africa (EMEA) region,
where net sales declined $39.8 million, or 40 percent, to $60.5 million,
including an 8 percentage point negative effect from changes in
currency exchanges rates. The decline reflected lower net sales in the
company’s EMEA direct markets, against an increase of more than 70
percent in the comparable 2011 period. Last year’s warm winter and
persistent unfavorable macro-economic conditions weighed on both the
Sorel and Columbia brands, creating headwinds against our ongoing
efforts to revitalize the Columbia brand in key European markets. In
addition, approximately 45 percent of the decline in EMEA net sales was
attributable to previously-referenced timing differences in shipments of
fall orders to EMEA distributors, which were heavily concentrated in
the Columbia brand.
Year-to-date Fall 2012 shipments to EMEA
distributors are up 7 percent compared with Fall 2011 shipments in the
comparable period. Net sales in Canada decreased $8.1 million, or 13
percent, including a 3 percentage point negative effect from changes in
currency exchange rates.
These declines were partially offset by
net sales increases in the U.S. of $14.2 million, or 4 percent, to
$347.8 million, and in the Latin America/Asia Pacific (LAAP) region of
$11.9 million, or 16 percent, to $84.7 million, including a 3 percentage
point negative effect from changes in currency exchange rates.
Accessories & Equipment net sales declined $8.7 million, or 2
percent, to $429.5 million; and Footwear net sales declined $13.1
million, or 10 percent, to $115.5 million.
Columbia and Sorel
brand net sales declined $11.0 million, or 2 percent, and $10.8 million,
or 15 percent, respectively, accounting for the entire net sales
decline in the quarter.
Balance SheetThe company
ended the third quarter with $96.3 million in cash and short-term
investments, compared with $90.4 million at September 30, 2011.
inventories totaled $475.7 million at September 30, 2012, approximately
10 percent higher than at the same time last year. Higher average unit
costs accounted for all of the increase in inventory valuation, on a
mid-single-digit percentage decline in units.
Raised 2012 Earnings Outlook
company currently expects full year 2012 net sales of approximately
$1.7 billion, a 25 to 35 basis point decrease in gross margin, and 40 to
50 basis points of SG&A expense leverage (including first quarter
restructuring charges of approximately $4.0 million), resulting in
operating margin of approximately 8.3 percent compared with 8.1 percent
operating margins in fiscal 2011.
For the fourth quarter of 2012,
the company expects net sales to increase up to 1.5 percent from net
sales of $526.1 million in the fourth quarter of 2011, a 50 to 75 basis
point decrease in gross margin, and 150 to 200 basis points of SG&A
expense leverage, resulting in estimated operating margin expansion of
approximately 100 to 150 basis points.
All projections related to
anticipated future results are forward-looking in nature and are
subject to risks and uncertainties which may cause actual results to
differ, perhaps significantly.