Still, the company said it expects lower sales in 2013 as dealers
trim pre-season orders for the coming winter and the dollar appreciates
against other currencies.
Net sales reached $333.1 million for the same period of 2012. Changes in foreign currency exchange rates negatively affected first quarter consolidated net sales comparisons by less than one percent.
First quarter net income increased 159 percent to $10.1 million, or
$0.29 per diluted share, including restructuring charges of
approximately $2.0 million, or $0.06 per diluted share, net of tax,
compared with net income of $3.9 million, or $0.11 per diluted share,
for the same period of 2012, which also included restructuring charges
of approximately $2.8 million, or $0.08 per diluted share, net of tax.
The effective tax rate in the first quarter of 2013 was 17.4 percent,
compared to 30.4 percent in the comparable quarter of 2012.
“During the first quarter, cold weather in North America helped us liquidate additional Fall season inventory, primarily through our direct-to-consumer channels, putting our inventory levels in better shape than last year at this time,” said Tim Boyle, Columbia’s president and chief executive officer. "Cold weather also helped our wholesale customers liquidate more of their Fall 2012 inventory; however, it did not alter their cautious posture in placing advance orders for our Fall 2013 product offering. Accordingly, based on current advance wholesale order levels, our direct-to-consumer expansion plans, the anticipated effects of transitioning to a joint venture in China, and a number of other variables and assumptions, our full year 2013 outlook anticipates slightly lower net sales compared to 2012.”
First quarter 2013 results (All comparisons are between first quarter 2013 and first quarter 2012, unless otherwise noted.)
First quarter 2013 U.S. net sales increased 4 percent to $200.5 million. Latin America and Asia Pacific (LAAP) region net sales grew 8 percent to $83.1 million, including a 5 percentage point negative effect from changes in currency exchange rates. Europe, Middle East, and Africa (EMEA) region net sales increased 7 percent to $40.9 million, including a 1 percentage point benefit from changes in currency exchange rates. Canada net sales decreased 6 percent to $23.8 million, including a 1 percentage point benefit from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
First quarter apparel, accessories & equipment net sales
increased $10.0 million, or 4 percent, to $294.3 million. Footwear net
sales increased $5.2 million, or 11 percent, to $54.0 million. (See
“Categorical Net Sales” table below.)
First quarter Columbia brand net sales increased $8.0 million, or 3 percent, to $301.1 million. Sorel brand net sales increased $6.0 million, or 94 percent, to $12.4 million. Mountain Hardwear net sales increased $1.4 million, or 5 percent, to $32.1 million. (See “Brand Net Sales” table below.)
Balance sheet
The company ended the quarter with $374.6 million in cash and short-term investments, compared with $335.4 million at December 31, 2012 and $252.8 million at March 31, 2012.
Consolidated inventories declined 11 percent to $325.2 million at
March 31, 2013, compared with $366.6 million at March 31, 2012,
reflecting approximately 5 percent fewer units and a reduced mix of Fall
season product.
2013 financial outlook
The company currently expects a slight net sales decline in 2013 compared to 2012, with a low single-digit net sales increase in constant dollars more than offset by the negative effect of anticipated changes in foreign currency exchange rates.
Full year 2013 gross margin is expected to be comparable to 2012, including the effect of deferring approximately $3.0 million of gross profit into 2014 as a result of the previously announced plan to transition to a joint venture in China, effective January 1, 2014, from the current independent distributor arrangement.
Full year 2013 selling, general and administrative expenses are expected to increase approximately 3 percent, including approximately $3.7 million in pre-operating expenses related to the China joint venture and pre-tax restructuring charges of approximately $4.1 million, primarily related to employee termination and lease exit costs in our European operation, resulting in approximately 135 basis points of SG&A expense deleverage.
Full year 2013 licensing income is expected to be comparable to 2012, including the effect of deferring approximately $4.0 million of licensing income into 2014 in conjunction with the transition to the China joint venture.
As a result, full year 2013 operating margin is expected to be approximately 6.6 percent. Full year 2013 operating margin is expected to be approximately 7.5 percent if the following items are excluded: the anticipated $4.1 million in restructuring charges, and the deferral of approximately $3.0 million of gross profit and $4.0 million of licensing income into 2014 and pre-operating costs of approximately $3.7 million related to the China joint venture.
The company is modeling a full year effective tax rate of 26 percent; however, the actual rate could differ, perhaps significantly, based on the status of tax uncertainties, the geographic mix of pre-tax income, as well as other discrete events that may occur during the year.
The company’s annual net sales are weighted more heavily toward the fall/winter season, while operating expenses are more equally distributed throughout the year, resulting in a highly seasonal profitability pattern weighted toward the second half of the fiscal year.
Second quarter 2013 outlook
The second quarter is the company’s lowest volume quarter, which amplifies the effect on operating results of changes in the timing of shipments and the fixed costs of the company’s operations.
The company expects second quarter 2013 net sales to decline
approximately 4 to 6 percent compared with second quarter 2012,
primarily reflecting lower wholesale net sales, partially offset by
increased direct-to-consumer sales.
The company expects second quarter 2013 operating margin to decline approximately 370 to 540 basis points compared to second quarter 2012, consisting of approximately 430 to 560 basis points of SG&A expense deleverage, including restructuring charges of approximately $1.7 million, approximately $1.2 million in pre-operating costs of the China joint venture, and decreased licensing income, partially offset by approximately 90 to 140 basis points of gross margin expansion.
The company is modeling an effective income tax rate for the second quarter of 29 percent.
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.
| Geographical Net Sales: | ||||||||||
| United States | $ | 200.5 | $ | 193.0 | 4 | % | ||||
| Latin America & Asia Pacific | 83.1 | 76.8 | 8 | % | ||||||
| Europe, Middle East, & Africa | 40.9 | 38.1 | 7 | % | ||||||
| Canada | 23.8 | 25.2 |
(6)
|
%
| ||||||
| Total | $ | 348.3 | $ | 333.1 | 5 | % | ||||
| Categorical Net Sales: | ||||||||||
| Apparel, Accessories and Equipment | $ | 294.3 | $ | 284.3 | 4 | % | ||||
| Footwear | 54.0 | 48.8 | 11 | % | ||||||
| Total | $ | 348.3 | $ | 333.1 | 5 | % | ||||
| Brand Net Sales: | ||||||||||
| Columbia | $ | 301.1 | $ | 293.1 | 3 | % | ||||
| Mountain Hardwear | 32.1 | 30.7 | 5 | % | ||||||
| Sorel | 12.4 | 6.4 | 94 | % | ||||||
| Other | 2.7 | 2.9 |
(7)
|
%
| ||||||
| Total | $ | 348.3 | $ | 333.1 | 5 | % | ||||
Source Columbia Sportswear
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