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Columbia Sportswear (COLM) Q3 Earnings Top Estimates, Sales Up
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Columbia Sportswear Company (COLM - Free Report) posted third-quarter results, wherein the top and bottom lines increased year over year, and the latter came ahead of the Zacks Consensus Estimate. Earnings and sales reflect solid business momentum and the strength of the company’s brand portfolio.
Columbia Sportswear reaffirmed its top and bottom-line view for 2022 while curtailing the gross margin and operating income guidance.
Management remains encouraged about its innovative products for the Fall season, including the expanded Omni-Heat Infinity collection as well as the new poly fleece innovation – Omni-Heat Helix. The company has been focused on accelerating brand awareness, enhancing consumer experience and digital capabilities and expanding global direct-to-consumer (DTC) operations.
Quarter in Detail
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted earnings of $1.80 per share compared with the $1.52 per share recorded in the year-ago period. The bottom line comfortably outpaced the Zacks Consensus Estimate of $1.67.
Columbia Sportswear Company Price, Consensus and EPS Surpris
Net sales advanced 19% (up 22% at constant currency or cc) to $955 million but missed the consensus mark of $966 million. Sales were backed by DTC growth and the earlier shipment of increased Fall 2022 wholesale orders. Sales increased across all categories, brands and channels. Most regions saw a rise in sales.
The gross margin declined 270 basis points (bps) to 48% due to elevated inbound freight costs, an adverse channel and regional sales mix, higher inventory provisions and reduced DTC product margins. These were somewhat negated by increased wholesale product margins.
SG&A expenses escalated by 14% to $319 million. However, as a percentage of sales, the same contracted from 34.8% to 33.4%. The year-over-year rise in SG&A expenses can be attributed to expenses related to business growth and investments to aid the company’s brand-led consumer-focused strategies.
Moreover, higher SG&A expenses reflect a rise in personnel, demand creation and global retail costs, somewhat offset by the reduced accrued incentive compensation.
The company’s operating income came in at $145.3 million, up 9% year over year. The operating margin contracted from 16.6% to 15.2%.
Channels & Regional Segments
In the reported quarter, the DTC channel displayed sales growth of 8%, and wholesale net sales rose 24%.
In the United States, net sales surged 19% to $607 million. Further, net sales jumped 41% to $153.5 million in the EMEA. Latin America/Asia Pacific net sales advanced 12% to $115.4 million. In Canada, net sales dipped 4% to $79.1 million.
Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category ascended by 17% to $726.3 million, while the same for Footwear surged 25% to $228.7 million.
The Columbia, SOREL, prAna and Mountain Hardwear brands registered sales growth of 19%, 28%, 3% and 11%, respectively.
Other Financial Updates
Columbia Sportswear ended the quarter with cash, cash equivalents and short-term investments of $160.2 million and shareholders’ equity of $1,814.8 million. The company had borrowings of $4.4 million on its balance sheet as of Sep 30, 2022.
During the nine months ended Sep 30, the company used cash from operating activities of $117.2 million, while capital expenditures were $42.5 million.
For 2022, COLM expects operating cash flow to be breakeven compared with the earlier view of about $150 million. Capital expenditures are envisioned in the band of $80-$90 million (compared with the earlier view in the range of $80-$100 million).
During the nine months ended Sep 30, the company repurchased 3,235,327 shares for $286.9 million. On Sep 30, 2022, the company had $529.4 million available under its share buyback authorization. Additionally, management announced a quarterly cash dividend of 30 cents per share, which is payable on Dec 1, 2022, to shareholders of record as of Nov 17.
Outlook
Management’s guidance for 2022 considers estimates as of Oct 27, 2022 for the impact of the pandemic on the company’s operations.
The guidance also considers the impact of economic conditions, like inflation, supply-chain headwinds, labor shortages, limitations and expenses, geopolitical tensions, changing consumer behavior and increased marketplace inventories.
For 2022, Columbia Sportswear expects net sales to grow 10-12% to the $3.44-$3.50 billion band. The company expects foreign currency translation to hurt net sales growth by roughly 350 bps in 2022, up from the 300 bps projected before.
Management expects the gross margin to contract 250-220 bps to 49.1-49.4%. Earlier, this was anticipated to decline by 210-180 bps and reach 49.5-49.8%.
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 37.4-37.8% compared with the earlier range of 37.6-38% and the 37.8% recorded 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.
For 2022, the operating income is now expected in the band of $410-$443 million, with the operating margin expected at 11.9-12.7%. Earlier, the operating income was expected in the band of $415-449 million, implying an operating margin of 12.1-12.8%. In 2021, the operating margin came in at 14.4%.
Management envisions earnings per share (EPS) in the range of $5.00-$5.40 for 2022. The company expects foreign currency translation to hurt earnings by 25 cents compared with the 15-20 cent range expected earlier.
For the fourth quarter of 2022, the company expects net sales to grow 1-7% to the $1.14-$1.21 billion band. The EPS in the quarter is envisioned in the band of $2.07-$2.47 compared with the $2.39 reported in the same period last year.
Shares of this Zacks Rank #3 (Hold) company have dropped 0.6% in the past three months compared with the industry’s decline of 8.7%.
3 Consumer Discretionary Stocks Worth Noting
Oxford Industries (OXM - Free Report) , which designs, sources, markets and distributes products of lifestyle and other brands, sports a Zacks Rank #1 (Strong Buy). Oxford Industries has a trailing four-quarter earnings surprise of 91.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OXM’s current financial-year EPS suggests 31.2% growth from the year-ago reported number.
lululemon athletica (LULU - Free Report) , which designs, distributes and retails athletic apparel and accessories, carries a Zacks Rank #2 (Buy). lululemon has a trailing four-quarter earnings surprise of 10.4%, on average.
The Zacks Consensus Estimate for LULU’s current financial-year earnings suggests growth of nearly 27% from the year-ago reported number.
Crocs (CROX - Free Report) , which designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories, currently carries a Zacks Rank #2. Crocs has a trailing four-quarter negative earnings surprise of 21.9%, on average.
The Zacks Consensus Estimate for CROX’s current financial-year earnings suggests 20.7% growth from the year-ago reported figure.
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Columbia Sportswear (COLM) Q3 Earnings Top Estimates, Sales Up
Columbia Sportswear Company (COLM - Free Report) posted third-quarter results, wherein the top and bottom lines increased year over year, and the latter came ahead of the Zacks Consensus Estimate. Earnings and sales reflect solid business momentum and the strength of the company’s brand portfolio.
Columbia Sportswear reaffirmed its top and bottom-line view for 2022 while curtailing the gross margin and operating income guidance.
Management remains encouraged about its innovative products for the Fall season, including the expanded Omni-Heat Infinity collection as well as the new poly fleece innovation – Omni-Heat Helix. The company has been focused on accelerating brand awareness, enhancing consumer experience and digital capabilities and expanding global direct-to-consumer (DTC) operations.
Quarter in Detail
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted earnings of $1.80 per share compared with the $1.52 per share recorded in the year-ago period. The bottom line comfortably outpaced the Zacks Consensus Estimate of $1.67.
Columbia Sportswear Company Price, Consensus and EPS Surpris
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
Net sales advanced 19% (up 22% at constant currency or cc) to $955 million but missed the consensus mark of $966 million. Sales were backed by DTC growth and the earlier shipment of increased Fall 2022 wholesale orders. Sales increased across all categories, brands and channels. Most regions saw a rise in sales.
The gross margin declined 270 basis points (bps) to 48% due to elevated inbound freight costs, an adverse channel and regional sales mix, higher inventory provisions and reduced DTC product margins. These were somewhat negated by increased wholesale product margins.
SG&A expenses escalated by 14% to $319 million. However, as a percentage of sales, the same contracted from 34.8% to 33.4%. The year-over-year rise in SG&A expenses can be attributed to expenses related to business growth and investments to aid the company’s brand-led consumer-focused strategies.
Moreover, higher SG&A expenses reflect a rise in personnel, demand creation and global retail costs, somewhat offset by the reduced accrued incentive compensation.
The company’s operating income came in at $145.3 million, up 9% year over year. The operating margin contracted from 16.6% to 15.2%.
Channels & Regional Segments
In the reported quarter, the DTC channel displayed sales growth of 8%, and wholesale net sales rose 24%.
In the United States, net sales surged 19% to $607 million. Further, net sales jumped 41% to $153.5 million in the EMEA. Latin America/Asia Pacific net sales advanced 12% to $115.4 million. In Canada, net sales dipped 4% to $79.1 million.
Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category ascended by 17% to $726.3 million, while the same for Footwear surged 25% to $228.7 million.
The Columbia, SOREL, prAna and Mountain Hardwear brands registered sales growth of 19%, 28%, 3% and 11%, respectively.
Other Financial Updates
Columbia Sportswear ended the quarter with cash, cash equivalents and short-term investments of $160.2 million and shareholders’ equity of $1,814.8 million. The company had borrowings of $4.4 million on its balance sheet as of Sep 30, 2022.
During the nine months ended Sep 30, the company used cash from operating activities of $117.2 million, while capital expenditures were $42.5 million.
For 2022, COLM expects operating cash flow to be breakeven compared with the earlier view of about $150 million. Capital expenditures are envisioned in the band of $80-$90 million (compared with the earlier view in the range of $80-$100 million).
During the nine months ended Sep 30, the company repurchased 3,235,327 shares for $286.9 million. On Sep 30, 2022, the company had $529.4 million available under its share buyback authorization. Additionally, management announced a quarterly cash dividend of 30 cents per share, which is payable on Dec 1, 2022, to shareholders of record as of Nov 17.
Outlook
Management’s guidance for 2022 considers estimates as of Oct 27, 2022 for the impact of the pandemic on the company’s operations.
The guidance also considers the impact of economic conditions, like inflation, supply-chain headwinds, labor shortages, limitations and expenses, geopolitical tensions, changing consumer behavior and increased marketplace inventories.
For 2022, Columbia Sportswear expects net sales to grow 10-12% to the $3.44-$3.50 billion band. The company expects foreign currency translation to hurt net sales growth by roughly 350 bps in 2022, up from the 300 bps projected before.
Management expects the gross margin to contract 250-220 bps to 49.1-49.4%. Earlier, this was anticipated to decline by 210-180 bps and reach 49.5-49.8%.
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 37.4-37.8% compared with the earlier range of 37.6-38% and the 37.8% recorded 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.
For 2022, the operating income is now expected in the band of $410-$443 million, with the operating margin expected at 11.9-12.7%. Earlier, the operating income was expected in the band of $415-449 million, implying an operating margin of 12.1-12.8%. In 2021, the operating margin came in at 14.4%.
Management envisions earnings per share (EPS) in the range of $5.00-$5.40 for 2022. The company expects foreign currency translation to hurt earnings by 25 cents compared with the 15-20 cent range expected earlier.
For the fourth quarter of 2022, the company expects net sales to grow 1-7% to the $1.14-$1.21 billion band. The EPS in the quarter is envisioned in the band of $2.07-$2.47 compared with the $2.39 reported in the same period last year.
Shares of this Zacks Rank #3 (Hold) company have dropped 0.6% in the past three months compared with the industry’s decline of 8.7%.
3 Consumer Discretionary Stocks Worth Noting
Oxford Industries (OXM - Free Report) , which designs, sources, markets and distributes products of lifestyle and other brands, sports a Zacks Rank #1 (Strong Buy). Oxford Industries has a trailing four-quarter earnings surprise of 91.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OXM’s current financial-year EPS suggests 31.2% growth from the year-ago reported number.
lululemon athletica (LULU - Free Report) , which designs, distributes and retails athletic apparel and accessories, carries a Zacks Rank #2 (Buy). lululemon has a trailing four-quarter earnings surprise of 10.4%, on average.
The Zacks Consensus Estimate for LULU’s current financial-year earnings suggests growth of nearly 27% from the year-ago reported number.
Crocs (CROX - Free Report) , which designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories, currently carries a Zacks Rank #2. Crocs has a trailing four-quarter negative earnings surprise of 21.9%, on average.
The Zacks Consensus Estimate for CROX’s current financial-year earnings suggests 20.7% growth from the year-ago reported figure.