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Columbia Sportswear Company’s (COLM - Snapshot Report) third-quarter 2013 earnings dropped 16.5% to $1.57 from $1.88 per share in the year-ago quarter, owing to higher effective tax rate that hurt the bottom-line by 6 cents. However, the quarterly earnings surpassed the Zacks Consensus Estimate of $1.43 per share by 9.8%.

Net sales of this leading apparel and footwear designer slipped 4% to $523.1million. However, it came ahead of the Zacks Consensus Estimate of $513 million.

The better-than-expected results are driven by Columbia Sportswear’s strong direct-to-consumer sales and its continuous efforts to effectively streamline its wholesale segment worldwide.

Gross profit declined 4.7% to $232.3 million due to lower sales. Gross margin contracted 30 basis points to 44.4% during the quarter. Operating income collapsed by 12.4% to $76.9 million, while operating margin shriveled 140 basis points to 14.7%.

Segmental Information

Compared to the year-ago quarter, net sales in U.S. fell 7% to $323.1 million in the reported quarter. In the Europe/Middle East/Africa (EMEA) region, net sales surged 29% to $78.1 million due to the positive effect from changes in foreign currency exchange rates.

Additionally, negative changes in foreign currency pushed net sales down by 15% to $72.0 million in the Latin America and Asia Pacific segment and by 4% to $49.9 million in Canada.

Apparel, Accessories & Equipment net sales were almost in line with the previous-year quarter sales, falling marginally. Footwear net sales were $94.5 million, down 18% from the comparable prior-year quarter.

Brand wise Segregation

Net sales of the Columbia brand fell by 1% to $431.5 million, Sorel brand declined by 23% to $47.4 million and Mountain Hardwear brand waned 9% to $40.6 million on a year-over-year basis.

Other Financial Updates

Columbia Sportswear gracefully ended the quarter with cash and short-term investments balance of $303.2 million, up from $96.3 million last year. Total shareholders’ equity stood at $1,212.0 million, excluding non-controlling interest of $7.8 million compared to $1,127.7 million last year.

Inventories fell 13.8% to $410.1 million on the back of lower purchases, better management and more promising advance deals.

Encouraging statements

The company expects to generate growth, banking on its new Chinese joint venture, its wholesale business augmentation in North America and Europe and its plans to expand operations in the main global markets. Columbia Sportswear is also making significant efforts to enhance its direct-to-consumer sales.

Dividend Information

Taking cue from the encouraging statements, the directors of the company announced a 14% hike in dividend to 25 cents from 22 cents a share to be paid on Dec 2, 2013 to stakeholders of record as of Nov 14, 2013.

Outlook

Columbia Sportswear’s net sales for the fourth quarter and 2013 are expected to fall up to 2% and 1.5%, respectively.

Compared to the prior year, management envisions its full-year gross margin to increase about 50 basis points.

Adjusted operating margin for fiscal 2013 is estimated at 8.1% and that for the final quarter it is expected to contract by 120 basis points. Including one-time items, operating margin for the full year will come in at approximately 7.3%, while that of the fourth quarter would decline 220 basis points.

Other Stocks to Consider

Columbia Sportswear carries a Zacks Rank #4 (Sell). However, some other companies in the textile apparel sector that warrant a look include Hanesbrands Inc. (HBI - Analyst Report) with a Zacks Rank #1 (Strong Buy) and Ralph Lauren Corporation (RL - Analyst Report) and Guess Inc. (GES - Analyst Report), both carrying a Zacks Rank #2 (Buy).

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