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Active outdoor apparel and footwear retailer Columbia Sportswear Company’s (COLM - Snapshot Report) fourth quarter preliminary results came in lower than prior expectations. Weak holiday sales in North America led to the disappointing results.

The company believes that its net sales in the fourth quarter will range between $499.0 million and $503.0 million. The revised net sales outlook is 5% lower than the year-ago sales of $526.1 million, contrary to prior estimates of a 1.5% increase from the year ago level. The company attributed the downward revision to mild winter weather, customer caution and lower traffic that impacted direct-to-consumer sales, as well as weakness at wholesale customers in the U.S.

The operating margin is expected to be 9.4% to 10.3% compared with the previously-announced outlook of 10.6% to 11.1%. The gross margin is anticipated to contract 120 to 130 basis points from 42.5% reported last year. The company had previously expected the gross margin to contract by only 50 to 75 basis points year on year. The reduced margin outlook is because of higher-than-expected promotional spending during the holiday season.

Selling, general and administrative (SG&A) expenses as a percentage of net sales is expected to range from 31.5% to 32.3%, lower than the previously announced outlook of 32.0% to 32.5% of sales, as cost discipline continued.

The company also suffered some losses recently due to 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.

In the third quarter, the company’s earnings had dropped 5.0% y/y to $1.88 a share. Net sales in the Apparel, Accessories and Equipment category fell 2% from the year-ago level.

Currently, Columbia Sportswear carries a Zacks Rank #3 (Hold). It competes with Hanesbrands Inc. (HBI - Analyst Report) and PVH Corp (PVH - Snapshot Report), which carry a Zacks Rank #2 (Buy).

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