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Can High Costs Hurt Columbia Sportswear's (COLM) Q2 Earnings?

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Columbia Sportswear Company (COLM - Free Report) is scheduled to report second-quarter 2019 results on Jul 25, after market close. This lifestyle apparel, footwear, accessories and equipment company delivered an average positive earnings surprise of 82.7% in the trailing four quarters and beat estimates all through. Let’s see how things are placed ahead of the upcoming quarterly announcement.

What Do Estimates Reveal?

The Zacks Consensus Estimate for second-quarter earnings is currently pegged at break-even, suggesting a considerable decline from 16 cents in the year-ago quarter.

For revenues, the consensus mark is pegged at $507.4 million. The figure indicates 5.4% rise from the year-ago quarter’s figure.

Columbia Sportswear Company Price, Consensus and EPS Surprise

 

 

Factors Likely to Impact Q2

A strong direct-to-consumer (DTC) business has been driving growth for Columbia Sportswear. The DTC channel is supported by the expansion of e-commerce and brick-and mortar businesses. Benefits from this channel are likely to be reflected on the upcoming quarterly results.

Additionally, we are optimistic about Columbia Sportswear’s solid international presence. Progress witnessed in Europe, Japan and Korea is likely to make a positive impact in the upcoming announcement. In fact, many other textile-apparel players like lululemon (LULU - Free Report) , Ralph Lauren (RL - Free Report) and Guess? (GES - Free Report) are benefiting from strong overseas operations.

Moreover, Columbia Sportswear’s strong brand positions, especially for the SOREL and Global Columbia banners, are expected to drive the top line in the second quarter. Further, the company is engaging in marketing initiatives to broaden brand reach. We also expect the company to consistently benefit from the Project CONNECT program, an initiative to boost overall operational effectiveness.

In spite of these factors, there are significant headwinds that are likely to dent the quarterly outcome. Notably, rising SG&A costs are a concern for Columbia Sportswear. High investments and costs related to incentive are leading to increase in SG&A costs. Management expects such expenses to continue growing in 2019, which is likely to exert pressure on operating profit in the second quarter. Moreover, volatility surrounding raw material costs along with tariff risks are other persistent concerns.

What Does the Zacks Model Say?

Our proven model doesn’t show that Columbia Sportswear is likely to beat bottom-line estimates in the to-be-reported quarter.  For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Though Columbia Sportswear carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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