It has been about a month since the last earnings report for Columbia Sportswear (COLM Quick QuoteCOLM - Free Report) . Shares were flat in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent trend continue leading up to its next earnings release, or is Columbia Sportswear due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Columbia Sportswear Raises View on Q2 Earnings Beat

Columbia Sportswear posted splendid second-quarter results. The company posted earnings of 61 cents per share against a net loss of 77 cents recorded in the year-ago period. Moreover, the bottom line crushed the Zacks Consensus Estimate, which was pegged at a loss of 12 cents.

Net sales soared 79% to $566.4 million, beating the consensus mark of $500 million. Sales were backed by a robust revival in the DTC brick & mortar and U.S. wholesale channels. Reduced pandemic-led headwinds and temporary store closures as compared with the second quarter of 2020 also fueled the top-line growth. Sales increased across all categories, regions, brands and channels.The DTC channel displayed sales growth of 69% and wholesale net sales rose 89%. DTC e-commerce sales rose 5% in the quarter and formed 16% of the company’s total sales mix.

Gross margin increased 540 basis points (bps) to 51.6% on reduced inventory reserve provisions, better wholesale product margins and a decline in DTC promotional levels. These were somewhat negated by the adverse channel sales mix. SG&A expenses escalated 20% to $261.8 million. As a percentage of sales, however, the same contracted from 68.7% to 46.2%. The year-over-year rise in SG&A can be accountable to the variable part of SG&A, which is related to the change in sales volume. Apart from this, higher global retail, demand creation, personnel and incentive compensation costs led to the upside, partly compensated by lower bad debt expenses and non-recurrence of pandemic-related costs. The company’s operating income came in at $35 million against an operating loss of $70.3 million a year ago.

In the United States, net sales surged a whopping 107% to $379.1 million. Further, net sales jumped 52% to $88.5 million in Europe/the Middle East/Africa (EMEA). In Canada, net sales climbed 7.7% to $20.8 million. Latin America/Asia Pacific (LAAP) net sales advanced 16% to $78 million. Net sales in the Apparel, Accessories and Equipment category ascended 86% to $453.1 million, while the same for Footwear surged 56% to $113.3 million. The Columbia, SOREL, prAna and Mountain Hardwear brands registered sales growth of 82%, 74%, 43% and 97%, respectively.

Other Updates & Guidance

Most of the company-owned stores were open throughout the quarter, apart from some isolated temporary closures. Management highlighted that overall brick-and-mortar traffic was better but below the pre-pandemic level. The company stated that it has been witnessing greater-than-expected ocean freight costs in recent months, which affected its full-year guidance. Apart from this, product availability and delivery could be hampered by increasing coronavirus cases in sourcing nations in southeast Asia. Also, port congestion and logistic hurdles are still negatively impacting inventory receipt and delivery timing.

For 2021, the company now expects net sales in the range of $3.13-$3.16 billion, indicating a 25-26.5% increase from the year-ago period’s reported figure. Earlier, the metric was envisioned to be $3.04-$3.08 billion, suggesting 21.5-23% growth. Management now expects gross margin to expand 95-115 bps to reach 49.9-50.1%. The metric was earlier expected to increase 110-130 bps to 50-50.2%. In 2020, the company reported gross margin of 48.9%. The lowered 2021 view reflects additional ocean freight costs of nearly $40 million. We note that ocean freight rates have elevated majorly in the past 60 days.

SG&A expenses are anticipated to rise at a softer rate than sales growth. As a percentage of sales, SG&A expenses are anticipated to be 38.4-38.7% now compared with 38.7-39.1% expected before. In 2020, the metric was 43.9%. The company expects demand creation (as a percentage of net sales) to be 6% in 2021, in comparison with 5.7% in 2020. For 2021, operating income is expected to be $365-386 million, implying an operating margin of 11.7-12.2%. Earlier, operating income was expected to be $347-369 million, indicating operating margin of 11.4-12%. In 2020, operating margin came in at 5.5%. Finally, management envisions earnings per share in the range of $4.30-$4.55 for the ongoing year compared with $4.05-$4.30 expected earlier.  The consensus mark is currently pegged at $4.35 per share.

For the second half of 2021, management projects net sales growth in the low-20 percent range. Management further commented that fall 2021 inventory receipts and wholesale shipments timing can largely impact quarterly financial results. As of the currently projected product delivery dates, net sales in both third and fourth quarters are likely to grow in the low-20 percent range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -25.07% due to these changes.

VGM Scores

Currently, Columbia Sportswear has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Columbia Sportswear has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.