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Bear of the Day: Columbia Sportswear Company (COLM)

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Columbia Sportswear (COLM - Free Report) is an outdoor apparel firm that’s seen its sales fall over the last three quarters, including a 23% decline in Q3. The company’s near-term outlook also remains subdued and its earnings revisions continue to slide in the wrong direction.

COLM's Pitch

Columbia was founded in the late 1930s and has remained at the forefront of outdoor clothing, apparel, and footwear. Today, the Portland, Oregon-headquarter firm owns four total brands: Mountain Hardwear, Sorel, prAna, and, its namesake brand. Columbia is still by far the largest brand, having pulled in roughly 80% of total sales during the first three quarters of the year.

The outdoor gear company has been hit hard by temporary coronavirus-based store closures and a pullback on some consumer spending related to travel. For example, COLM’s Q1 sales fell 13%, with Q2 down 40%, and Q3 down 23%. Meanwhile, its adjusted earnings fell by 46% in the third quarter to fall short of our estimate by over 20%.

Columbia has also been forced to close some stores for good due to weak brick-and-mortar traffic. “We continue to evaluate our own store fleet and have made the decision to permanently close a small number of locations,” CEO Tim Boyle said on the company’s Q3 earnings call at the end of October.

“Year to date, we've permanently closed eight stores in the U.S. and one in Europe. We continue to evaluate portfolio and anticipate closing additional underperforming stores.”













Better Days Ahead?

Columbia shares fell roughly 12% in 2020 and have lagged its industry over the past several years. The 2020 performance includes a substantial post Q3-release downturn. Luckily, things appear to be heading in the right direction, with Zacks estimates projecting COLM’s adjusted Q4 earnings to fall 27% on 9% lower sales, which would mark a solid improvement from last quarter.

Overall, its fiscal 2020 revenue is projected to sink 19% to $2.45 billion, with its adjusted earnings projected to fall 71%. The outdoor apparel firm’s sales and earnings are then expected to bounce back in a big way in 2021, although both figures are still projected to come in below 2019’s totals. And the company’s overall earnings picture is heading downhill.  

All that said, things haven’t been all bad for Columbia, especially considering the conditions. As some might expect, its e-commerce business has been a highlight, with its third-quarter e-commerce sales up 55%. And it continues to roll out new offerings that help it compete in a market that features The North Face (VFC - Free Report) , Patagonia, Canada Goose (GOOS - Free Report) , Lululemon (LULU - Free Report) , and many others.











Bottom Line

Columbia’s earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. COLM also holds “F” grades for Growth and Momentum and a “D” for Value in our Style Scores system. Therefore, it might be best to stay away from COLM stock for now.

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