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Why Is Columbia Sportswear (COLM) Up 4.2% Since Its Last Earnings Report?
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A month has gone by since the last earnings report for Columbia Sportswear Company (COLM - Free Report) . Shares have added about 4.2% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is COLM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Columbia Sportswear Q4 Earnings & Sales Top, Rise Y/Y
Columbia Sportswear posted fourth-quarter 2017 results, wherein earnings came in at $1.31 per share, which easily surpassed the Zacks Consensus Estimate of $1.11 and rose 9.2% year over year. Including one-time items like expenses relating to Project CONNECT and costs associated with the recent tax reforms among others, the company reported a loss of 10 cents per share, against earnings of $1.20 recorded in the year-ago period.
Net sales advanced 8% year over year to $776 million, surpassing the Zacks Consensus Estimate of $761 million. This was backed by growth across all regions.
Gross profit jumped 10% to $371.4 million, and the company posted record gross margin of 47.9% that expanded 80 basis points (bps) year over year. Gross margin expansion was buoyed by gains from DTC business, along with a larger proportion of higher margin full-price sales.
Further, the adjusted operating income came in at $115.6 million, 15.1% higher than the year-ago reported figure. Also, adjusted operating margin shot up by 90 bps to 14.9%.
Regional Segments
United States: Net sales ascended 8% to $492.6 million, owing to higher direct-to-consumer (“DTC”) sales and favorable shipment timing of advance wholesale orders.
Europe/Middle East/Africa (EMEA): Net sales jumped 19% (up 14% on a constant currency basis) to $83.5 million, backed by solid performance at its Europe-direct business and greater sales to EMEA distributors.
Canada: Net sales grew 14% (up 9% on a constant currency basis) to $45.6 million.
Latin America/Asia Pacific (LAAP): Net sales climbed 2% (up 3% on a constant currency basis) to $154.3 million, mainly due to increased sales in China, Japan and to the LAAP distributors. Sales in Korea remained flat year over year.
Category and Brand Segments
The increase in net sales was also driven by the strong performance of its Global Columbia, Global prAna and Global SOREL brands, which registered growth of 9% to $602.4 million, 8% to $30.4 million and 10% to $113.9 million, respectively. However, net sales of Global Mountain Hardwear brand declined 9% to reach $28.4 million.
Further, net sales in the Global Apparel, Accessories and Equipment category edged up 8% to $578.3 million, and Footwear sales rose 9% to $197.7 million.
Other Financial Updates
Columbia Sportswear ended the quarter with cash and cash equivalents of $673.2 million and total equity of 1,652.3 million. Consolidated inventories fell 6% to $457.9 million as of Dec 31, 2017.
During the year, cash flow from operating activities amounted to $341.1 million, while the company incurred capital expenditures of $53.4 million. Further, Columbia Sportswear paid dividends worth $50.9 million and repurchased 665,095 shares for nearly $35.5 million during the year. At the end of 2017, the company had shares worth approximately $137.9 million available for repurchase.
Notably, management aims to return nearly 40-60% of free cash flow to shareholders via dividend hikes and share repurchases. Concurrently, management announced a 16% hike in quarterly cash dividend, taking it from 19 cents to 22 cents per share. This is payable on Mar 22 to shareholders of record as on Mar 9.
Guidance
Management remains impressed with its better-than-expected quarterly performance, which was driven by continued growth in Europe and North America and strong distributor business across the globe. Further, the company remains particularly impressed with its 2017 Europe-direct show, which delivered double-digit currency-neutral sales growth for the third consecutive year, alongside witnessing continued operating margin growth.
Moreover, the company’s U.S. results delivered growth as strong DTC business compensated for the softness in wholesale business stemming from liquidations, store closures and bankruptcies. Together, these factors helped Columbia Sportswear to deliver record net sales, operating income and gross margin in 2017, keeping it encouraged about another year of top and bottom-line growth.
Given these factors and focus on strategic initiatives, Columbia Sportswear issued its outlook for 2018. Net sales are expected to 5.5-7.5% year over year, while adjusted net sales are estimated to increase 4-6% (excluding impacts of changes in revenue accounting standards).
The company envisions 2018 adjusted gross margins to rise nearly 60 bps. Adjusted SG&A expenses are likely to deleverage by 40-50 bps, excluding costs related to Project CONNECT and change in revenue accounting standards. Consequently, adjusted operating income is estimated to lie between $290 million to $300 million, with adjusted operating margin expected in a range of 11.3-11.5%.
Full-year effective tax rate is now expected to be lower, at nearly 22%, thanks to benefits from tax reforms. All said, adjusted earnings per share for 2018 are projected in the band of $3.17 to $3.27. The company envisions reported earnings to be in the range of $2.88-$2.98 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.
At this time, COLM has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise COLM has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Columbia Sportswear (COLM) Up 4.2% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Columbia Sportswear Company (COLM - Free Report) . Shares have added about 4.2% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is COLM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Columbia Sportswear Q4 Earnings & Sales Top, Rise Y/Y
Columbia Sportswear posted fourth-quarter 2017 results, wherein earnings came in at $1.31 per share, which easily surpassed the Zacks Consensus Estimate of $1.11 and rose 9.2% year over year. Including one-time items like expenses relating to Project CONNECT and costs associated with the recent tax reforms among others, the company reported a loss of 10 cents per share, against earnings of $1.20 recorded in the year-ago period.
Net sales advanced 8% year over year to $776 million, surpassing the Zacks Consensus Estimate of $761 million. This was backed by growth across all regions.
Gross profit jumped 10% to $371.4 million, and the company posted record gross margin of 47.9% that expanded 80 basis points (bps) year over year. Gross margin expansion was buoyed by gains from DTC business, along with a larger proportion of higher margin full-price sales.
Further, the adjusted operating income came in at $115.6 million, 15.1% higher than the year-ago reported figure. Also, adjusted operating margin shot up by 90 bps to 14.9%.
Regional Segments
United States: Net sales ascended 8% to $492.6 million, owing to higher direct-to-consumer (“DTC”) sales and favorable shipment timing of advance wholesale orders.
Europe/Middle East/Africa (EMEA): Net sales jumped 19% (up 14% on a constant currency basis) to $83.5 million, backed by solid performance at its Europe-direct business and greater sales to EMEA distributors.
Canada: Net sales grew 14% (up 9% on a constant currency basis) to $45.6 million.
Latin America/Asia Pacific (LAAP): Net sales climbed 2% (up 3% on a constant currency basis) to $154.3 million, mainly due to increased sales in China, Japan and to the LAAP distributors. Sales in Korea remained flat year over year.
Category and Brand Segments
The increase in net sales was also driven by the strong performance of its Global Columbia, Global prAna and Global SOREL brands, which registered growth of 9% to $602.4 million, 8% to $30.4 million and 10% to $113.9 million, respectively. However, net sales of Global Mountain Hardwear brand declined 9% to reach $28.4 million.
Further, net sales in the Global Apparel, Accessories and Equipment category edged up 8% to $578.3 million, and Footwear sales rose 9% to $197.7 million.
Other Financial Updates
Columbia Sportswear ended the quarter with cash and cash equivalents of $673.2 million and total equity of 1,652.3 million. Consolidated inventories fell 6% to $457.9 million as of Dec 31, 2017.
During the year, cash flow from operating activities amounted to $341.1 million, while the company incurred capital expenditures of $53.4 million. Further, Columbia Sportswear paid dividends worth $50.9 million and repurchased 665,095 shares for nearly $35.5 million during the year. At the end of 2017, the company had shares worth approximately $137.9 million available for repurchase.
Notably, management aims to return nearly 40-60% of free cash flow to shareholders via dividend hikes and share repurchases. Concurrently, management announced a 16% hike in quarterly cash dividend, taking it from 19 cents to 22 cents per share. This is payable on Mar 22 to shareholders of record as on Mar 9.
Guidance
Management remains impressed with its better-than-expected quarterly performance, which was driven by continued growth in Europe and North America and strong distributor business across the globe. Further, the company remains particularly impressed with its 2017 Europe-direct show, which delivered double-digit currency-neutral sales growth for the third consecutive year, alongside witnessing continued operating margin growth.
Moreover, the company’s U.S. results delivered growth as strong DTC business compensated for the softness in wholesale business stemming from liquidations, store closures and bankruptcies. Together, these factors helped Columbia Sportswear to deliver record net sales, operating income and gross margin in 2017, keeping it encouraged about another year of top and bottom-line growth.
Given these factors and focus on strategic initiatives, Columbia Sportswear issued its outlook for 2018. Net sales are expected to 5.5-7.5% year over year, while adjusted net sales are estimated to increase 4-6% (excluding impacts of changes in revenue accounting standards).
The company envisions 2018 adjusted gross margins to rise nearly 60 bps. Adjusted SG&A expenses are likely to deleverage by 40-50 bps, excluding costs related to Project CONNECT and change in revenue accounting standards. Consequently, adjusted operating income is estimated to lie between $290 million to $300 million, with adjusted operating margin expected in a range of 11.3-11.5%.
Full-year effective tax rate is now expected to be lower, at nearly 22%, thanks to benefits from tax reforms. All said, adjusted earnings per share for 2018 are projected in the band of $3.17 to $3.27. The company envisions reported earnings to be in the range of $2.88-$2.98 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.
Columbia Sportswear Company Price and Consensus
Columbia Sportswear Company Price and Consensus | Columbia Sportswear Company Quote
VGM Scores
At this time, COLM has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise COLM has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.