Columbia Sportswear (COLM) Fourth-quarter earnings and sales beat estimates

Columbia sportswear company COLM reported strong results in the fourth quarter of 2021, as the top and bottom results increased year-over-year and topped Zacks’ respective consensus estimate. The strong performance reflects the strength of the company’s brands. The company benefited from the strength of the direct-to-consumer or DTC business and a full-price retail landscape. Management remains encouraged by the successful global launch of Omni-Heat Infinity.

For 2022, management remains focused on exploiting growth opportunities while battling supply chain and inflation challenges. Its robust brand portfolio keeps it well placed.

Quarter in detail

This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories reported earnings of $2.39 per share, compared with $1.44 in the year-ago quarter. Net income beat Zacks’ consensus estimate, which was pegged at $1.78 per share.

Columbia Sportswear Company Price, Consensus and Surprise EPS

Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote

Net sales increased 23% year-over-year to $1,129.7 million, driven by growth in DTC (which was supported by strong demand) and increased shipments in wholesale in the fall of 2021, as the business suffered disruption caused by the pandemic a year ago. Net sales exceeded Zacks’ consensus estimate of $1,059 million.

In the quarter under review, the DTC channel posted sales growth of 33% and wholesale net sales increased by 13%. DTC’s physical net sales jumped 39% and DTC’s e-commerce net sales increased 25% in the quarter.

Gross margin increased by 160 basis points (bps) to 52.2% driven by lower DTC promotional levels, higher wholesale product margins and improved channel mix. These were somewhat offset by increased inbound freight spending and year-over-year changes in inventory provisioning activity.

SG&A expenses increased 12% to $280.1 million. As a percentage of sales, the same contracted from 37.5% to 34%. The year-over-year increase in SG&A expenses can be attributed to costs related to supporting business growth, which include increased global retail, incentive compensation, creation of the application and personnel costs. These were somewhat offset by lower retail write-downs and store closing costs.

The company’s operating profit was $211.6 million, up 71% from $123.7 million in the year-ago quarter. The operating margin increased from 13.5% to 18.7%.

Regional sectors

In the United States, net sales jumped 27% year-over-year to $762.1 million. Net sales increased 33% to $113.6 million in EMEA. In Canada, net sales increased 14% to $81.2 million. LAAP net sales increased 8% to $172.8 million.

Sales by product category and brand

Net sales in the Apparel, Accessories & Equipment category increased 28% to $846.1 million, while footwear sales increased 12% to $283.6 million. The Columbia, SOREL and Mountain Hardwear brands recorded sales growth of 28%, 9% and 30% respectively. Net sales of the prAna brand decreased by 7%.

Zacks Investment ResearchImage source: Zacks Investment Research

Other Financial Updates

Columbia Sportswear ended the quarter with cash and cash equivalents and short-term investments of $894.5 million and shareholders’ equity of $1,989.3 million. The company had no borrowings on its balance sheet as of December 31, 2021. For the year ended 2021, net cash provided by operating activities was $354.4 million. Capital expenditures amounted to $34.7 million during this period. For 2022, COLM expects operating cash flow of at least $170 million, while capital expenditures are expected in the $80-100 million range.

During the twelve months ended Dec. 31, the company repurchased 1,655,407 shares for $165.9 million. As of December 31, 2021, the company had $316.3 million available under its current stock repurchase authorization. On January 28, 2022, management announced a 15% increase in quarterly cash dividend, bringing it to 30 cents per share. This amount is payable on March 21, 2022 to shareholders of record as of March 11.

COVID-19 Update

Most directly owned stores were open throughout the quarter, except for a few isolated temporary closures. Management stressed that overall bricks-and-mortar traffic remained below pre-pandemic levels.

Supply chain challenges continued to negatively impact operations, resulting in delays in receipt and delivery of fall and spring products. Additionally, management pointed out that the demand for ocean vessels and containers remains high relative to its available capacity, leading to a massive spike in ocean freight costs.

Advice

Management offered its guidance for 2022, which reflects the expected impacts of the pandemic as well as economic conditions, such as supply chain barriers, inflation, labor shortages, changes in consumer behavior and geopolitical headwinds.

For 2022, Columbia Sportswear expects net sales to grow 16-18% to $3.63-3.69 billion. Management expects gross margin to contract by around 160 basis points and close to 50%.

SG&A expenses are expected to grow at a slower rate than net sales growth. As a percentage of net sales, SG&A expenses are expected to be between 37.2 and 37.5% versus 37.8% in 2021. The company expects demand generation (as a percentage of net sales) to be 6% in 2022 compared to 5.9% in 2021. 2021.

For 2022, operating income is expected in the range of $472-498 million, implying an operating margin of 13-13.5%. In 2021, the operating margin stands at 14.4%. Management expects earnings per share (EPS) of between $5.5 and $5.80 for 2022.

For the first half of 2022, management expects net sales growth in the high teen to low range of 20% compared to the first half of 2021. Gross margin is expected to contract by more than 300 basis points. EPS for the quarter is expected to be between 90 cents and $1.10.

Shares of this company Zacks Rank No. 4 (sell) are down 11.1% in the last six months compared to the industrydown 14.2%.

Actions to Consider

Some higher ranked stocks are Crocs, Inc. CROX, Guess?, Inc. EMS and Gildan Activewear Inc. GILL.

Crocs, the designer, developer, manufacturer, marketer and marketer of casual lifestyle footwear and accessories, currently sports a Zacks #1 (Strong Buy) rating. Shares of Crocs are down 29.6% over the past six months. You can see the full list of today’s Zacks #1 Rank stocks here.

Zacks’ consensus estimate for Crocs sales and EPS in 2022 suggests growth of 48.7% and 23.2%, respectively, from the figure published a year ago. CROX has a four-quarter earnings surprise of 41.6% on average.

Guess?, which designs, markets, distributes and licenses collections of lifestyle apparel and accessories, is currently ranked Zacks Rank #2 (Buy). Guess Stock? increased by 3.5% over the last six months.

Zacks consensus estimate for Guess sales and EPS? for the 2022 financial year suggests growth of 6% and 11.7%, respectively, compared to the figure reported a year ago. GES has a four-quarter earnings surprise of 97%, on average.

Gildan Activewear, which manufactures and sells a variety of apparel products, currently carries a No. 2 Zacks rank. It has a four-quarter earnings surprise of 9.7% on average. Shares of Gildan Activewear are up 14.8% over the past six months.

Zacks consensus estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.2% and 9.4%, respectively, from the figure reported a year ago. GIL has a four-quarter earnings surprise of around 85%, on average.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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