Columbia Sportswear Recalls Again

Media reports confirm that Columbia Sportswear Company (COLM - Snapshot Report) has issued yet another recall of battery packs used in its electrically heated jackets. Columbia Sportswear believes that the defective batteries were sold at nine U.S. retail stores affecting 33 jackets across several states.

The original recall was with respect to batteries sold with 220 jackets roughly a year ago. The defective batteries were overheating, which increased the chances of a fire breaking out. The battery fell into the Omni-Heat Electric Wader Widgeon, Omni-Heat Electric Big Game and Omni-Heat Gale Warning Interchange categories.

Last year, they were sold to the European countries of Austria, France, Germany, Spain and the U.K. between June and November 2011. No casualties were reported.

The problem this time was because of some of the defective batteries finding their way back into inventories due to clerical errors (both human and machine-generated). Columbia Sportswear has said that aggrieved customers would be able to recover free replacements upon providing the concerned part numbers.

The repeated recall of its products has a risk of affecting the reputation and sales of the company. However, since the number of batteries affected is very small, we feel that this will not be detrimental to the company’s fundamentals.

The company earnings fell 5.0% to $1.88 in its recently concluded third quarter of 2012. Net sales in the Apparel, Accessories and Equipment category fell 2% from the year ago level.

The batteries were manufactured in China, each costing $79 online. The complete jacket set is priced at between $900 and $1,200.

Currently, Columbia Sportswear, which competes with Hanesbrands Inc. (HBI - Analyst Report), PVH Corp (PVH - Snapshot Report), has a Zacks Rank #3 (Hold).