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Columbia Sportswear (COLM) Down More Than 10% in 3 Months

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Columbia Sportswear Company (COLM - Free Report) has been troubled by escalated cost headwinds. The company has been seeing higher SG&A costs for a while now. Also, increased inbound freight costs have been a concern. Apart from this, volatile currency movements are a threat for the company. On its second-quarter earnings call, management lowered its guidance for 2022.

The Zacks Consensus Estimate for 2022 earnings per share (EPS) has gone down from $5.88 to $5.18 over the past 60 days. The consensus mark suggests a decline of 2.8% from the figure reported in the year-ago period. Shares of this Zacks Rank #4 (Sell) company have tumbled 12.2% in the past three months compared with the industry’s decline of 7.5%.


In the second quarter of 2022, Columbia Sportswear’s SG&A expenses escalated by 7% to $281.3 million. As a percentage of sales, the same expanded from 46.2% to 48.7%. The year-over-year rise in SG&A expenses can be attributed to higher personnel expenses stemming from the increased headcount and escalated wages.

SG&A expenses are anticipated to rise nearly in line with sales growth. As a percentage of net sales, SG&A expenses are anticipated in the range of 37.6-38% compared with the 37.3-37.7% range projected earlier and 37.8% in 2021. The company still expects demand creation (as a percentage of net sales) to be 6% in 2022 compared with 5.9% in 2021.

Columbia Sportswear Company Price, Consensus and EPS Surprise

Columbia Sportswear Company Price, Consensus and EPS Surprise

Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote

In the second quarter, COLM’s gross margin contracted 240 basis points (bps) to 49.2%, mainly due to increased inbound freight costs and reduced wholesale product margins. For 2022, management expects the gross margin to contract 210-180 bps and reach 49.5-49.8% now. Earlier, the metric was expected to contract about 130 bps to nearly 50.3%. For the second half of 2022, the gross margin is likely to contract 220-170 bps.

For 2022, the operating income is now expected in the band of $415-$449 million, with the operating margin expected at 12.1-12.8%. Earlier, the operating income was expected in the band of $477-502 million, implying an operating margin of 13.2-13.6%. In 2021, the operating margin came in at 14.4%.

Apart from this, Columbia Sportswear expects foreign currency translation to hurt net sales growth by roughly 300 bps in 2022, up from the 120 bps projected before. Management expects foreign currency translation to hurt earnings by 15-20 cents in 2022.

Zacks Investment Research
Image Source: Zacks Investment Research

A Look at Q2 & Ahead

Columbia Sportswear posted second-quarter 2022 results, wherein earnings of 11 cents per share declined sharply from the 61 cents recorded in the year-ago quarter. Management stated that increased interest rates, inflation and recession jitters are hurting consumers’ and retailers’ sentiments in the United States. The company lowered its 2022 guidance, which considers the increased risk of order cancelation and more conservative direct-to-consumer expectations.

Apart from this, the guidance assumes increased promotional activity to rationalize the inventory. Additionally, supply-chain hurdles remain high and are likely to persist throughout the rest of the year. That said, management is working toward lowering supply-chain woes by taking early orders from its retail partners and placing them early with its factory associates.

Management now envisions EPS in the range of $5.00-$5.40 for 2022 compared with the $5.70-$6.00 band expected earlier. The EPS in the second half is envisioned in the band of $3.85-$4.25 compared with the $3.91 reported in the same period last year. Management also lowered its sales guidance for 2022, though it still suggests growth on a year-over-year basis. For 2022, Columbia Sportswear now expects net sales to grow 10-12% to the $3.44-$3.50 billion band. Earlier, the metric was anticipated to rise 16-18% to the $3.63-$3.69 billion range.

Consumer Discretionary Stocks Worth a Look

Some better-ranked stocks are BJ's Wholesale Club (BJ - Free Report) , Hyatt Hotels (H - Free Report) and Marriott International (MAR - Free Report) .

BJ's Wholesale, which operates warehouse clubs, currently sports a Zacks Rank #1 (Strong Buy). BJ has a trailing four-quarter earnings surprise of 16.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BJ's Wholesale current financial-year sales suggests growth of around 15% from the year-ago reported number.

Hyatt, which operates as a hospitality company, currently carries a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 798.8%, on average.

The Zacks Consensus Estimate for Hyatt’s current financial-year sales suggests growth of 89.1% from the corresponding year-ago reported figure.

Marriott International, which operates, franchises and licenses hotel, residential and timeshare properties, carries a Zacks Rank #2 at present. Marriott International delivered an earnings surprise of 18.6% in the last reported quarter.
The Zacks Consensus Estimate for MAR’s current financial-year sales suggests growth of 46.1% from the year-ago period’s reported figure.

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