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Core Priorities & DTC Business Aid Columbia Sportswear (COLM)
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Columbia Sportswear Company (COLM - Free Report) is benefiting from its strategic growth efforts like focus on brand enhancement techniques. The global active lifestyle apparel, footwear, accessories and equipment provider’s direct-to-consumer (DTC) business is yielding well. However, the company is not immune to the rising inflationary environment.
What’s Working in Columbia Sportswear’s Favor?
Columbia Sportswear remains focused on its strategic priorities. To this end, it intends to continue its demand creation investments to drive brand awareness and boost sales. Further, the company remains committed to enhancing consumers’ experience and digital capacity in all networks and regions. It will also continue exploring growth opportunities in the DTC business and improving support processes. The company is keen on investing in its people and optimizing its organization across its brand portfolio.
Columbia Sportswear undertakes brand-enhancing and unique marketing initiatives that further strengthen its presence in the apparel industry. Management continued with innovation with various new product technologies, like the ODX mesh fabric in outerwear and tech light plush cushioning in footwear during the first quarter of 2022. The company highlighted that its spring 2022 product pipeline includes launching many new differentiated technologies and products. Certainly, continued focus on innovation helps the company attract more consumers and drive sales.
Image Source: Zacks Investment Research
The Zacks Rank #3 (Hold) company is committed to expanding and enhancing its global DTC business through accelerated investments. During the first quarter, the company’s DTC and wholesale businesses rose 22% each. Under the DTC business, brick-and-mortar rose 22% and e-commerce increased 21%. In its last earnings call, management highlighted that it is impressed with the recent DTC sell-through. DTC e-commerce has been seeing robust momentum, with more consumers opting for online shopping. This channel will likely continue performing well in the forthcoming periods as stores reopen and many consumers prefer to shop online. Incidentally, management is on track to expand global DTC operations.
Hurdles on Way
During the first quarter of 2022, Columbia Sportswear’s gross margin contracted 170 basis points (bps) to 49.7%, mainly due to increased inbound freight costs, negative year-over-year changes in inventory provisions, unfavorable regional sales mix and reduced wholesale product margins. For 2022, management expects gross margin to contract about 130 bps and reach nearly 50.3%. The company expects an operating margin in the range of 13.2-13.6% compared with 14.4% reported in 2021.
Columbia Sportswear has been seeing higher SG&A costs for a while now. In the first quarter, SG&A expenses increased 18% to $299.1 million. The year-over-year rise in SG&A expenses is primarily caused by costs incurred to support business growth and investments to fuel brand-led consumer-focused strategies. The rise in the metric also reflects increased demand creation, global retail and personnel expenses.
We believe that the aforementioned upsides will likely help Columbia Sportswear stay afloat amid such hurdles.
Although COLM’s stock has declined 18.5% in the past three months, it has outpaced the industry’s 28.5% decline.
The Zacks Consensus Estimate for G-III Apparel 's current financial-year sales suggests growth of 12.9%, while the same for earnings per share (EPS) indicates a rise of 10.4% from the respective year-ago reported figures.
Gildan Activewear (GIL - Free Report) has a Zacks Rank #1 at present. GIL manufactures and sells various apparel products. Gildan Activewear has a trailing four-quarter earnings surprise of 38.7%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of almost 12% and 12.5%, respectively, from the corresponding year-ago reported figures.
Crocs, Inc. (CROX - Free Report) , casual lifestyle footwear and accessories provider, carries a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 26.5%, on average.
The Zacks Consensus Estimate for Crocs’ current-year sales and EPS suggests growth of 52.6% and 27.2%, respectively, from the year-ago reported figures.
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Core Priorities & DTC Business Aid Columbia Sportswear (COLM)
Columbia Sportswear Company (COLM - Free Report) is benefiting from its strategic growth efforts like focus on brand enhancement techniques. The global active lifestyle apparel, footwear, accessories and equipment provider’s direct-to-consumer (DTC) business is yielding well. However, the company is not immune to the rising inflationary environment.
What’s Working in Columbia Sportswear’s Favor?
Columbia Sportswear remains focused on its strategic priorities. To this end, it intends to continue its demand creation investments to drive brand awareness and boost sales. Further, the company remains committed to enhancing consumers’ experience and digital capacity in all networks and regions. It will also continue exploring growth opportunities in the DTC business and improving support processes. The company is keen on investing in its people and optimizing its organization across its brand portfolio.
Columbia Sportswear undertakes brand-enhancing and unique marketing initiatives that further strengthen its presence in the apparel industry. Management continued with innovation with various new product technologies, like the ODX mesh fabric in outerwear and tech light plush cushioning in footwear during the first quarter of 2022. The company highlighted that its spring 2022 product pipeline includes launching many new differentiated technologies and products. Certainly, continued focus on innovation helps the company attract more consumers and drive sales.
Image Source: Zacks Investment Research
The Zacks Rank #3 (Hold) company is committed to expanding and enhancing its global DTC business through accelerated investments. During the first quarter, the company’s DTC and wholesale businesses rose 22% each. Under the DTC business, brick-and-mortar rose 22% and e-commerce increased 21%. In its last earnings call, management highlighted that it is impressed with the recent DTC sell-through. DTC e-commerce has been seeing robust momentum, with more consumers opting for online shopping. This channel will likely continue performing well in the forthcoming periods as stores reopen and many consumers prefer to shop online. Incidentally, management is on track to expand global DTC operations.
Hurdles on Way
During the first quarter of 2022, Columbia Sportswear’s gross margin contracted 170 basis points (bps) to 49.7%, mainly due to increased inbound freight costs, negative year-over-year changes in inventory provisions, unfavorable regional sales mix and reduced wholesale product margins. For 2022, management expects gross margin to contract about 130 bps and reach nearly 50.3%. The company expects an operating margin in the range of 13.2-13.6% compared with 14.4% reported in 2021.
Columbia Sportswear has been seeing higher SG&A costs for a while now. In the first quarter, SG&A expenses increased 18% to $299.1 million. The year-over-year rise in SG&A expenses is primarily caused by costs incurred to support business growth and investments to fuel brand-led consumer-focused strategies. The rise in the metric also reflects increased demand creation, global retail and personnel expenses.
We believe that the aforementioned upsides will likely help Columbia Sportswear stay afloat amid such hurdles.
Although COLM’s stock has declined 18.5% in the past three months, it has outpaced the industry’s 28.5% decline.
Top 3 Picks
G-III Apparel Group, Ltd. (GIII - Free Report) , a women's and men's apparel company, currently sports a Zacks Rank of 1 (Strong Buy). GIII has a trailing four-quarter earnings surprise of 97.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel 's current financial-year sales suggests growth of 12.9%, while the same for earnings per share (EPS) indicates a rise of 10.4% from the respective year-ago reported figures.
Gildan Activewear (GIL - Free Report) has a Zacks Rank #1 at present. GIL manufactures and sells various apparel products. Gildan Activewear has a trailing four-quarter earnings surprise of 38.7%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of almost 12% and 12.5%, respectively, from the corresponding year-ago reported figures.
Crocs, Inc. (CROX - Free Report) , casual lifestyle footwear and accessories provider, carries a Zacks Rank #2 (Buy) at present. The company has a trailing four-quarter earnings surprise of 26.5%, on average.
The Zacks Consensus Estimate for Crocs’ current-year sales and EPS suggests growth of 52.6% and 27.2%, respectively, from the year-ago reported figures.