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Columbia Sportswear (COLM) Up 25% in 3 Months: Will Momentum Stay?
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Columbia Sportswear Company (COLM - Free Report) appears to be well placed, thanks to strength in its direct-to-consumer (DTC) e-commerce business and focus on the Experience First or XI initiative. Certainly, the company’s commitment to enhancing e-commerce operations has been working well, especially amid the pandemic-induced surge in online shopping. Shares of the company have rallied almost 25% in the past three months compared with the industry’s growth of 1.2%.
In fourth-quarter 2020, the company’s top and bottom lines beat the Zacks Consensus Estimate despite encountering COVID-related challenges. Though results were down year over year, trends improved on a sequential basis and the company anticipates continued revival in 2021. Management remains encouraged about the better-than-expected fourth-quarter show as well as broad-based growth in the company’s solid brands as it entered 2021. Management stated that results were all the more impressive, reflecting the company’s ability to counter hurdles related to the pandemic, such as supply-chain hiccups, regional lockdowns and obstacles stemming from safety protocols.
Incidentally, this provider of outdoor, lifestyle and active apparel, footwear and other accessories has been witnessing traffic declines in brick-and-mortar stores, along with industry-wide supply-chain and capacity restrictions, which in turn are leading to delayed receipts and customer deliveries. Apart from these, higher SG&A costs (as a percentage of sales) have been a concern. Nonetheless, the company’s 2021 guidance is based on anticipations of sequential revival in retail store traffic as well as sales all through the year.
The company expects net sales of $2.95-3 billion in 2021, indicating an 18-20% increase from the year-ago period. This is expected to be backed by spring and fall 2021 orders, continued growth in DTC e-commerce as well as growth revival in DTC brick-and-mortar sales. The company projects net sales growth in the high teens percentage to low 20% range in the first half of the year. For 2021, operating income is expected to be $320-$346 million, suggesting an operating margin of 10.8-11.5%. In full-year 2020, the company’s operating income and margin came in at $137 million and 5.5%, respectively. Finally, management envisions earnings per share in the range of $3.75-$4.05 for the ongoing year compared with $1.62 reported in 2020. Incidentally, the Zacks Consensus Estimate for 2021 has increased from $4-$4.03 per share over the past 30 days.
Columbia Sportswear Company Price, Consensus and EPS Surprise
In the fourth quarter of 2020, the company’s DTC e-commerce sales surged 41% in the quarter and formed about one-fourth of the company’s total sales mix on the back of better-than-anticipated consumer demand. In full-year 2020, DTC e-commerce sales increased 39% and formed 19% of the total sales mix, with growth across all brands. Certainly, DTC e-commerce is seeing robust momentum with more consumers opting to shop online. This channel is likely to continue performing well in the forthcoming periods. On its fourth-quarter earnings call, management said that will continue strengthening the DTC business and improving support processes.
Columbia Sportswear remains on track with its X1 initiative, which is aimed at enhancing e-commerce operations to keep pace with the evolving consumer environment. Notably, the company’s e-commerce platform has been largely operational during the pandemic, except for some distribution center closures. The company on its fourth-quarter 2020 earnings call noted that its mobile-first e-commerce platform, X1, performed brilliantly in the peak season and led to better site performance as well as conversion. X1 went live in North America for the Columbia, SOREL and Mountain Hardwear brands in the third quarter of 2020. Prior to this, the company had successfully deployed X1 across Europe and prAana in 2019.
COVID-19 Hurdles & High Costs
Fourth-quarter results were affected by concerns related to COVID-19. Net sales dropped 4% to $915.7 million, including declines across all categories and channels, and in most regions. Sales were marred by the continued impacts of the ongoing pandemic. DTC channel sales were hurt by reduced brick-and-mortar sales, though it was somewhat made up by the solid e-commerce improvement. Most of the company-owned stores were open throughout the fourth quarter, apart from some isolated temporary closures due to local regulations or safety factors. However, brick-and-mortar traffic was significantly below the year-ago period’s level. Traffic has been most affected in stores and destination locations, as well as stores operating in markets dependent on tourists. The company expects traffic in these regions to remain soft till the resumption of international tourism activities.
Moreover, SG&A expenses, as a percentage of sales, went up from 36.1% to 37.5% in the fourth quarter of 2020. Also, the gross margin continued to be somewhat affected by elevated freight costs. The company’s operating income of $123.7 million declined 11% year over year, with the operating margin contracting from 14.5% to 13.5%. The company intends to continue its investments to create demand, drive brand awareness and enhance digital capabilities. Though these investments are likely to fuel growth, they may weigh on margins.
That being said, we believe that the abovementioned drivers are likely to keep this Zacks Rank #3 (Hold) company’s growth story going.
Delta Apparel (CSV - Free Report) , with a Zacks Rank #1, has delivered earnings surprises in the trailing three quarters, consecutively.
PVH Corp. (PVH - Free Report) has a Zacks Rank #2 (Buy) and a long-term earnings growth rate of 18%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Columbia Sportswear (COLM) Up 25% in 3 Months: Will Momentum Stay?
Columbia Sportswear Company (COLM - Free Report) appears to be well placed, thanks to strength in its direct-to-consumer (DTC) e-commerce business and focus on the Experience First or XI initiative. Certainly, the company’s commitment to enhancing e-commerce operations has been working well, especially amid the pandemic-induced surge in online shopping. Shares of the company have rallied almost 25% in the past three months compared with the industry’s growth of 1.2%.
In fourth-quarter 2020, the company’s top and bottom lines beat the Zacks Consensus Estimate despite encountering COVID-related challenges. Though results were down year over year, trends improved on a sequential basis and the company anticipates continued revival in 2021. Management remains encouraged about the better-than-expected fourth-quarter show as well as broad-based growth in the company’s solid brands as it entered 2021. Management stated that results were all the more impressive, reflecting the company’s ability to counter hurdles related to the pandemic, such as supply-chain hiccups, regional lockdowns and obstacles stemming from safety protocols.
Incidentally, this provider of outdoor, lifestyle and active apparel, footwear and other accessories has been witnessing traffic declines in brick-and-mortar stores, along with industry-wide supply-chain and capacity restrictions, which in turn are leading to delayed receipts and customer deliveries. Apart from these, higher SG&A costs (as a percentage of sales) have been a concern. Nonetheless, the company’s 2021 guidance is based on anticipations of sequential revival in retail store traffic as well as sales all through the year.
The company expects net sales of $2.95-3 billion in 2021, indicating an 18-20% increase from the year-ago period. This is expected to be backed by spring and fall 2021 orders, continued growth in DTC e-commerce as well as growth revival in DTC brick-and-mortar sales. The company projects net sales growth in the high teens percentage to low 20% range in the first half of the year. For 2021, operating income is expected to be $320-$346 million, suggesting an operating margin of 10.8-11.5%. In full-year 2020, the company’s operating income and margin came in at $137 million and 5.5%, respectively. Finally, management envisions earnings per share in the range of $3.75-$4.05 for the ongoing year compared with $1.62 reported in 2020. Incidentally, the Zacks Consensus Estimate for 2021 has increased from $4-$4.03 per share over the past 30 days.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
Factors Driving Columbia Sportswear
In the fourth quarter of 2020, the company’s DTC e-commerce sales surged 41% in the quarter and formed about one-fourth of the company’s total sales mix on the back of better-than-anticipated consumer demand. In full-year 2020, DTC e-commerce sales increased 39% and formed 19% of the total sales mix, with growth across all brands. Certainly, DTC e-commerce is seeing robust momentum with more consumers opting to shop online. This channel is likely to continue performing well in the forthcoming periods. On its fourth-quarter earnings call, management said that will continue strengthening the DTC business and improving support processes.
Columbia Sportswear remains on track with its X1 initiative, which is aimed at enhancing e-commerce operations to keep pace with the evolving consumer environment. Notably, the company’s e-commerce platform has been largely operational during the pandemic, except for some distribution center closures. The company on its fourth-quarter 2020 earnings call noted that its mobile-first e-commerce platform, X1, performed brilliantly in the peak season and led to better site performance as well as conversion. X1 went live in North America for the Columbia, SOREL and Mountain Hardwear brands in the third quarter of 2020. Prior to this, the company had successfully deployed X1 across Europe and prAana in 2019.
COVID-19 Hurdles & High Costs
Fourth-quarter results were affected by concerns related to COVID-19. Net sales dropped 4% to $915.7 million, including declines across all categories and channels, and in most regions. Sales were marred by the continued impacts of the ongoing pandemic. DTC channel sales were hurt by reduced brick-and-mortar sales, though it was somewhat made up by the solid e-commerce improvement. Most of the company-owned stores were open throughout the fourth quarter, apart from some isolated temporary closures due to local regulations or safety factors. However, brick-and-mortar traffic was significantly below the year-ago period’s level. Traffic has been most affected in stores and destination locations, as well as stores operating in markets dependent on tourists. The company expects traffic in these regions to remain soft till the resumption of international tourism activities.
Moreover, SG&A expenses, as a percentage of sales, went up from 36.1% to 37.5% in the fourth quarter of 2020. Also, the gross margin continued to be somewhat affected by elevated freight costs. The company’s operating income of $123.7 million declined 11% year over year, with the operating margin contracting from 14.5% to 13.5%. The company intends to continue its investments to create demand, drive brand awareness and enhance digital capabilities. Though these investments are likely to fuel growth, they may weigh on margins.
That being said, we believe that the abovementioned drivers are likely to keep this Zacks Rank #3 (Hold) company’s growth story going.
Don’t Miss These Bets
Gildan Activewear (GIL - Free Report) , which carries a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Delta Apparel (CSV - Free Report) , with a Zacks Rank #1, has delivered earnings surprises in the trailing three quarters, consecutively.
PVH Corp. (PVH - Free Report) has a Zacks Rank #2 (Buy) and a long-term earnings growth rate of 18%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>