Business news :Columbia Sportswear Earns Q4 Profit Despite Lower Sales

Columbia Sportswear Company reported  an 8 percent increase in net income and a 5 percent decline in net sales for fourth quarter 2012 compared to fourth quarter 2011. Full year 2012 net income declined 3 percent on a 1 percent decline in net sales compared to 2011.

“Diligent expense management throughout the year enabled us to deliver solid results during what proved to be another year of unseasonably warm weather in North America,” said Tim Boyle, Columbia’s president and chief executive officer. “As a result, despite a slight decline in 2012 full year sales, we were able to achieve 8 percent operating margin, similar to 2011 operating margin of 8.1 percent.”

Fourth quarter results

(All comparisons are between fourth quarter 2012 and fourth quarter 2011, unless otherwise noted.)

Consolidated net sales totaled $501.1 million for the quarter ended Dec. 31, 2012, a 5 percent decrease compared with net sales of $526.1 million for the same period in 2011. Changes in currency exchange rates had a neutral effect on the net sales comparison.

The company’s fourth quarter results rely heavily on the rate of sell-through in the company’s direct-to-consumer and wholesale channels, which are both heavily affected by global fall and winter weather patterns and consumers’ holiday shopping behavior.

Mild winter weather in North America during most of the holiday shopping period and general consumer caution resulted in reduced retail traffic and a more promotional environment in key markets, which caused higher order cancellations and fewer reorders from wholesale customers, as well as lower than expected direct-to-consumer sales, primarily in the U.S. In addition, approximately $9 million of factory-direct shipments of international distributors’ Spring 2013 advance orders shifted into the first quarter of 2013.

Fourth quarter net income increased 8 percent to $39.5 million, or $1.15 per diluted share, compared with net income of $36.7 million, or $1.08 per diluted share, for the same period in 2011.

Fourth quarter U.S. net sales declined $19.1 million, or 7 percent. Europe/Middle East/Africa (EMEA) region net sales declined $15.1 million, or 20 percent, including a 3 percentage point negative effect from changes in foreign currency exchange rates. Those declines were partially offset by a $7.7 million, or 6 percent, increase in Latin America/Asia Pacific (LAAP) region net sales, with a neutral effect of changes in currency exchange rates. Net sales in Canada increased $1.5 million, or 5 percent, primarily attributable to the positive impact of changes in currency exchange rates. (See “Geographical Net Sales” table below.)

Apparel, Accessories & Equipment net sales decreased $7.7 million, or 2 percent, to $392.3 million, and Footwear net sales declined $17.3 million, or 14 percent, to $108.8 million. (See “Categorical Net Sales” table below.)

Columbia brand net sales declined $16.0 million, or 4 percent, to $400.5 million, primarily due to lower sales of cold weather products. Sorel brand net sales declined $7.8 million, or 12 percent, to $56.5 million, also primarily due to lower sales of cold weather footwear. Mountain Hardwear and Montrail net sales each declined less than $1.0 million. (See “Brand Net Sales” table below.)

Fiscal year 2012 results (All comparisons are between fiscal 2012 and fiscal 2011, unless otherwise noted.)

Consolidated 2012 net sales totaled $1.67 billion, a decrease of $24.4 million, or 1 percent, compared with 2011 net sales of $1.69 billion, including a 1 percentage point negative effect from changes in currency exchange rates.

2012 net income totaled $99.9 million, or $2.93 per diluted share, a decrease of $3.6 million, or 3 percent, compared with 2011 net income of $103.5 million, or $3.03 per diluted share.

EMEA region net sales declined $44.8 million, or 16 percent, including a 4 percentage point negative effect from changes in currency exchange rates; Canada net sales declined $14.9 million, or 11 percent, with a neutral effect from changes in currency exchange rates; and U.S. net sales declined $1.3 million, or less than 1 percent. Those declines were partially offset by an LAAP region net sales increase of $36.6 million, or 11 percent, including a neutral effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)

Apparel, Accessories & Equipment net sales totaled $1.35 billion, an increase of $12.1 million, or 1 percent. Footwear net sales totaled $322.6 million, a decrease of $36.5 million, or 10 percent. (See “Categorical Net Sales” table below.)

Columbia brand net sales totaled $1.39 billion, essentially equal to 2011 Columbia brand net sales of $1.39 billion; Sorel brand net sales totaled $127.0 million, a decrease of $23.3 million, or 16 percent; and Mountain Hardwear brand net sales totaled $141.5 million, compared to 2011 net sales of $142.3 million. (See “Brand Net Sales” table below.)

Balance sheet The company ended the year with $335.4 million in cash and short-term investments, compared with $243.9 million at Dec. 31, 2011.
Consolidated inventories of $363.3 million at Dec. 31, 2012 were less than 1 percent lower than the $365.2 million balance at Dec. 31, 2011. A high single-digit unit decline was largely offset by higher average unit costs and changes in product mix.

Dividend The board of directors approved a first quarter dividend of 22 cents per share, payable on March 6, 2013 to shareholders of record on Feb. 21, 2013.

Preliminary 2013 financial outlook The company currently expects 2013 net sales comparable to 2012 net sales of $1.67 billion, and full year operating margin of between approximately 7.5 percent and 8.0 percent of sales. This preliminary outlook does not include the anticipated deferral of operating income from 2013 into future periods as we transition our China distribution from an independent distributor model to a joint venture operation effective Jan. 1, 2014.

For the first quarter of 2013, the company expects net sales

comparable to net sales of $333.1 million in the first quarter of 2012. Gross margin is expected to decrease between 120 and 170 basis points, more than offset by anticipated SG&A leverage of between 100 and 150 basis points and increased licensing income, resulting in first quarter operating margin expansion of up to 50 basis points from first quarter 2012 operating margin of 1.6 percent.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
	Three Months Ended December 31,								Twelve Months Ended December 31,
		2012				2011				2012				2011
Net sales	$	501,060			$	526,078			$	1,669,563			$	1,693,985
Cost of sales		294,155				302,304				953,169				958,677
Gross profit		206,905				223,774				716,394				735,308
		41.3	%			42.5	%			42.9	%			43.4	%
Selling, general, and administrative expenses		158,754				178,624				596,635				614,658
Net licensing income		2,952				5,360				13,769				15,756
Income from operations		51,103				50,510				133,528				136,406
Interest income (expense), net		(42	)			28				379				1,274
Income before income tax		51,061				50,538				133,907				137,680
Income tax expense		(11,574	)			(13,810	)			(34,048	)			(34,201	)
Net Income	$	39,487			$	36,728			$	99,859			$	103,479
Earnings per share:
Basic	$	1.16			$	1.09			$	2.95			$	3.06
Diluted		1.15				1.08				2.93				3.03
Weighted average shares outstanding:
Basic		33,999				33,629				33,840				33,808
Diluted		34,307				33,890				34,132				34,204

COLUMBIA SPORTSWEAR COMPANY
(In millions, except percentage changes)
(Unaudited)
			Three Months Ended December 31,									Twelve Months Ended December 31,
				2012			2011		% Change				2012			2011		% Change
Geographical Net Sales:
	United States		$	273.8		$	292.9		(7)%			$	946.7		$	948.0		-
	Latin America & Asia Pacific			132.0			124.3		6%				377.6			341.0		11%
	Europe, Middle East, & Africa			62.0			77.1		(20)%				230.6			275.4		(16)%
	Canada			33.3			31.8		5%				114.7			129.6		(11)%
	Total		$	501.1		$	526.1		(5)%			$	1,669.6		$	1,694.0		(1)%
Categorical Net Sales:
	Apparel, Accessories & Equipment		$	392.3		$	400.0		(2)%			$	1,347.0		$	1,334.9		1%
	Footwear			108.8			126.1		(14)%				322.6			359.1		(10)%
	Total		$	501.1		$	526.1		(5)%			$	1,669.6		$	1,694.0		(1)%
Brand Net Sales:
	Columbia		$	400.5		$	416.5		(4)%			$	1,391.1		$	1,391.5		-
	Mountain Hardwear			42.7			43.2		(1)%				141.5			142.3		(1)%
	Sorel			56.5			64.3		(12)%				127.0			150.3		(16)%
	Other			1.4			2.1		(33)%				10.0			9.9		1%
	Total		$	501.1		$	526.1		(5)%			$	1,669.6		$	1,694.0		(1)%

( SportsOneSource Media )

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