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Columbia Sportswear (COLM) Tumbles on Q4 Earnings & Sales Miss
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Columbia Sportswear Company (COLM - Free Report) posted soft fourth-quarter 2023 results, wherein both the top and bottom lines declined year over year and came below the respective Zacks Consensus Estimate. The company navigated a tough operating landscape in the United States, which, along with the warm winter, affected results. Shares of this Zacks Rank #4 (Sell) company were down 8.6% in the after-market trading session on Feb 1.
Management expects 2024 to be a difficult year, with retailers placing orders cautiously and elevated economic and geopolitical uncertainty. The company is working toward maximizing sales amid a tough landscape while improving its products, marketing and marketplace strategies to fuel growth in 2025 and thereafter. To enhance operational efficiency and protect profits, Columbia Sportswear is implementing a multi-year profit improvement program, which targets annual savings of $125-$150 million by 2026.
Quarter in Detail
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted quarterly earnings of $1.55 per share, which declined 23% year over year. Excluding an impairment charge of 31 cents related to prAna, COLM’s adjusted earnings per share (EPS) came in at $1.86 per share compared with the adjusted EPS of $2.45 in the year-ago period. The bottom line came below the Zacks Consensus Estimate of $2.00.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Net sales declined 9% to approximately $1,060 million and missed the consensus mark of $1,081 million. Net sales declined 10% at constant currency or cc. The sales decline resulted from earlier shipments of Fall 2023 wholesale orders (in the third quarter of 2023), along with reduced U.S. direct-to-consumer (DTC) net sales.
The gross margin increased 20 basis points (bps) to 50.6%, mainly caused by reduced inbound freight costs and a better channel mix, somewhat offset by the company’s inventory curtailment efforts in the wholesale and DTC businesses.
SG&A expenses dipped slightly to $404.8 million. As a percentage of sales, the same expanded 360 bps to 38.2%. Elevated DTC expenses were partly countered by reduced variable demand creation and incentive compensation expenses. We had expected SG&A expenses as a percentage of sales to expand 300 bps to 37.6% in the fourth quarter.
Columbia Sportswear’s operating income came in at $113.1 million, down 27% year over year. The operating margin contracted 260 basis points to 10.7%. Excluding prAna-related impairment charges from both periods, adjusted operating income came in at $138.1 million in the fourth quarter of 2023, down from $191 million in the year-ago quarter.
Channels & Regional Segments
In the United States, net sales tumbled 12% to $689.4 million. Net sales fell 2% to $130.7 million in the EMEA. LAAP net sales grew 7% to $174.7 million. In Canada, net sales slumped 29% to $65.2 million.
During the quarter, DTC sales dropped 4% to $631.1 million. Wholesale channel sales went down by 17% to $428.9 million. We had expected a Wholesale channel sales decrease of 18.1% for the quarter under review.
Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category dropped 9% to $823.4 million, while the same for Footwear fell 12% to $236.6 million.
Columbia, SOREL, prAna and Mountain Hardwear brands registered a sales decline of 7%, 18%, 29% and 11%, respectively.
Other Financial Updates
Columbia Sportswear ended the quarter with cash, cash equivalents and short-term investments of $764.5 million and shareholders’ equity of $1,938.6 million. The company had no borrowings on its balance sheet as of Dec 31, 2023.
During 2023, Columbia Sportswear’s cash provided by operating activities was $636.3 million, while capital expenditures were $54.6 million.
For 2024, COLM expects operating cash flow of at least $300 million. Capital expenditures are envisioned in the band of $60-$80 million.
During the 12 months of 2023, the company repurchased 2,377,962 shares for $184 million. On Dec 31, 2023, Columbia Sportswear had $345.3 million available under its share buyback authorization. Management announced a quarterly cash dividend of 30 cents per share, which is payable on Mar 22, 2024, to shareholders of record as of Mar 8.
Guidance
For 2024, Columbia Sportswear expects net sales to decline 4-2% to the $3.35-$3.42 billion band. The company expects foreign currency translation to boost net sales growth by roughly 60 bps in 2024.
Management expects the gross margin to expand 100-150 bps to roughly 50.6-51.1%. As a percentage of net sales, SG&A expenses are anticipated in the range of 43.2-43.5%, up from the 40.6% reported in 2023. For the full-year 2024, the operating income is expected in the band of $256-$288 million. The operating margin is still expected in the range of 7.6-8.4%. In 2022, COLM reported an operating margin of 8.9%.
Management envisions EPS in the range of $3.45-$3.85 in 2024. Columbia Sportswear expects foreign currency translation to increase the EPS by nearly 3 cents.
For the first half of 2024, management expects net sales to decline 9-6% to the $1,310-$1,352 million band. The operating income is likely to come in the range of a loss of $12 million to an operating income of $8 million. The EPS is envisioned in the band of 1-26 cents for the first half of 2024 compared with 88 cents reported in the same year-ago period.
For the first quarter of 2024, COLM anticipates a net sales decline of 11-8% to the $730-$753 range. Operating income for the quarter is likely to be $16-$28 million, with the operating margin expected to be 2.2-3.8%, down from the 6.9% reported in the first quarter of 2023. Finally, management envisions first-quarter EPS of 30-45 cents compared with 74 cents reported in the year-ago period.
Shares of COLM have declined 12.2% in the past year against the industry’s growth of 4.5%.
The Zacks Consensus Estimate for GIII’s current financial-year revenues suggests a decline of 2.4% from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 541.8%, on average.
Ralph Lauren, which designs, markets and distributes lifestyle products, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for RL’s current financial-year revenues and EPS suggests growth of 1.6% and 13.7%, respectively, from the year-ago reported figure. Ralph Lauren has a trailing four-quarter earnings surprise of nearly 18%, on average.
lululemon, which offers athletic apparel, footwear and accessories, carries a Zacks Rank #2.
The Zacks Consensus Estimate for lululemon’s current financial-year sales suggests growth of 18.4% from the year-ago period. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.
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Columbia Sportswear (COLM) Tumbles on Q4 Earnings & Sales Miss
Columbia Sportswear Company (COLM - Free Report) posted soft fourth-quarter 2023 results, wherein both the top and bottom lines declined year over year and came below the respective Zacks Consensus Estimate. The company navigated a tough operating landscape in the United States, which, along with the warm winter, affected results. Shares of this Zacks Rank #4 (Sell) company were down 8.6% in the after-market trading session on Feb 1.
Management expects 2024 to be a difficult year, with retailers placing orders cautiously and elevated economic and geopolitical uncertainty. The company is working toward maximizing sales amid a tough landscape while improving its products, marketing and marketplace strategies to fuel growth in 2025 and thereafter. To enhance operational efficiency and protect profits, Columbia Sportswear is implementing a multi-year profit improvement program, which targets annual savings of $125-$150 million by 2026.
Quarter in Detail
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted quarterly earnings of $1.55 per share, which declined 23% year over year. Excluding an impairment charge of 31 cents related to prAna, COLM’s adjusted earnings per share (EPS) came in at $1.86 per share compared with the adjusted EPS of $2.45 in the year-ago period. The bottom line came below the Zacks Consensus Estimate of $2.00.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
Net sales declined 9% to approximately $1,060 million and missed the consensus mark of $1,081 million. Net sales declined 10% at constant currency or cc. The sales decline resulted from earlier shipments of Fall 2023 wholesale orders (in the third quarter of 2023), along with reduced U.S. direct-to-consumer (DTC) net sales.
The gross margin increased 20 basis points (bps) to 50.6%, mainly caused by reduced inbound freight costs and a better channel mix, somewhat offset by the company’s inventory curtailment efforts in the wholesale and DTC businesses.
SG&A expenses dipped slightly to $404.8 million. As a percentage of sales, the same expanded 360 bps to 38.2%. Elevated DTC expenses were partly countered by reduced variable demand creation and incentive compensation expenses. We had expected SG&A expenses as a percentage of sales to expand 300 bps to 37.6% in the fourth quarter.
Columbia Sportswear’s operating income came in at $113.1 million, down 27% year over year. The operating margin contracted 260 basis points to 10.7%. Excluding prAna-related impairment charges from both periods, adjusted operating income came in at $138.1 million in the fourth quarter of 2023, down from $191 million in the year-ago quarter.
Channels & Regional Segments
In the United States, net sales tumbled 12% to $689.4 million. Net sales fell 2% to $130.7 million in the EMEA. LAAP net sales grew 7% to $174.7 million. In Canada, net sales slumped 29% to $65.2 million.
During the quarter, DTC sales dropped 4% to $631.1 million. Wholesale channel sales went down by 17% to $428.9 million. We had expected a Wholesale channel sales decrease of 18.1% for the quarter under review.
Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category dropped 9% to $823.4 million, while the same for Footwear fell 12% to $236.6 million.
Columbia, SOREL, prAna and Mountain Hardwear brands registered a sales decline of 7%, 18%, 29% and 11%, respectively.
Other Financial Updates
Columbia Sportswear ended the quarter with cash, cash equivalents and short-term investments of $764.5 million and shareholders’ equity of $1,938.6 million. The company had no borrowings on its balance sheet as of Dec 31, 2023.
During 2023, Columbia Sportswear’s cash provided by operating activities was $636.3 million, while capital expenditures were $54.6 million.
For 2024, COLM expects operating cash flow of at least $300 million. Capital expenditures are envisioned in the band of $60-$80 million.
During the 12 months of 2023, the company repurchased 2,377,962 shares for $184 million. On Dec 31, 2023, Columbia Sportswear had $345.3 million available under its share buyback authorization. Management announced a quarterly cash dividend of 30 cents per share, which is payable on Mar 22, 2024, to shareholders of record as of Mar 8.
Guidance
For 2024, Columbia Sportswear expects net sales to decline 4-2% to the $3.35-$3.42 billion band. The company expects foreign currency translation to boost net sales growth by roughly 60 bps in 2024.
Management expects the gross margin to expand 100-150 bps to roughly 50.6-51.1%. As a percentage of net sales, SG&A expenses are anticipated in the range of 43.2-43.5%, up from the 40.6% reported in 2023. For the full-year 2024, the operating income is expected in the band of $256-$288 million. The operating margin is still expected in the range of 7.6-8.4%. In 2022, COLM reported an operating margin of 8.9%.
Management envisions EPS in the range of $3.45-$3.85 in 2024. Columbia Sportswear expects foreign currency translation to increase the EPS by nearly 3 cents.
For the first half of 2024, management expects net sales to decline 9-6% to the $1,310-$1,352 million band. The operating income is likely to come in the range of a loss of $12 million to an operating income of $8 million. The EPS is envisioned in the band of 1-26 cents for the first half of 2024 compared with 88 cents reported in the same year-ago period.
For the first quarter of 2024, COLM anticipates a net sales decline of 11-8% to the $730-$753 range. Operating income for the quarter is likely to be $16-$28 million, with the operating margin expected to be 2.2-3.8%, down from the 6.9% reported in the first quarter of 2023. Finally, management envisions first-quarter EPS of 30-45 cents compared with 74 cents reported in the year-ago period.
Shares of COLM have declined 12.2% in the past year against the industry’s growth of 4.5%.
Take a Look at These Solid Picks
Three better-ranked stocks include G-III Apparel Group, Ltd. (GIII - Free Report) , Ralph Lauren (RL - Free Report) and lululemon athletica (LULU - Free Report) .
G-III Apparel, which designs, sources and markets women's and men's apparel, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII’s current financial-year revenues suggests a decline of 2.4% from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 541.8%, on average.
Ralph Lauren, which designs, markets and distributes lifestyle products, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for RL’s current financial-year revenues and EPS suggests growth of 1.6% and 13.7%, respectively, from the year-ago reported figure. Ralph Lauren has a trailing four-quarter earnings surprise of nearly 18%, on average.
lululemon, which offers athletic apparel, footwear and accessories, carries a Zacks Rank #2.
The Zacks Consensus Estimate for lululemon’s current financial-year sales suggests growth of 18.4% from the year-ago period. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.