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Why You Should Avoid Columbia Sportswear (COLM) for Now

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Apparel retailer Columbia Sportswear Company (COLM - Free Report) has been under immense pressure of late. Currency headwinds, soft sales in the U.S. and Canada along with a lackluster performance of the Columbia brand are plaguing the company.

Though shares of the company have declined nearly 4% year to date, it has lagged the Zacks categorized Consumer Discretionary sector’s gain of 14%.

What’s Wrong with the Stock?

While the company delivered an earnings beat, it reported lower-than-expected sales in fourth-quarter 2016 primarily due to lower sales in the U.S. and Canada. Moreover, the company’s Global Apparel, Accessories & Equipment segment underperformed owing to the ongoing headwinds of the apparel sector.

The players in the industry are suffering from lower comps due to declining traffic at stores. With more and more consumers resorting to online shopping, the brick-and-mortar stores are witnessing a decline in footfall. This has dealt a major blow to apparel retailers like Columbia Sportswear who are dependent on mall traffic to drive growth.

Additionally, cold weather in metropolitan areas and snow sports regions are prerequisite for a good start to the outerwear season but an unseasonably warm winter prevented the company from gaining the benefit of early orders. This has also resulted in lower-than-expected sales for the category.

Moreover, keeping in sync with the protective measures of the U.S government, higher excise duties are expected to be imposed on the shoe and apparel retail industry. The apparel and footwear industry has faced double-digit import tariffs in the U.S. and elsewhere since the 1930s, some as high as 67.5%. If a higher excise duty is placed on the company’s import operations it is likely to hamper sales as prices are anticipated to rise.

Further, this Zacks Rank #4 (Sell) company is facing macroeconomic challenges in Russia. Additionally, slow growth in the China business is hampering the overall sales growth of the company. Columbia and prAna brands are also suffering setbacks in Korea as there is a general shift of consumer preference away from outdoor apparel space in the region. The company anticipates the industry wide glut to persist and makes a recovery very unlikely, at least in 2017.

Stocks to Consider

Better-ranked stocks in the broader consumer discretionary sector include:

Hasbro Inc. (HAS - Free Report) has an earnings growth rate of 13.6% in the trailing four quarters.

While DeVry Education Group Inc. has an expected earnings growth of 9.2%, GoPro Inc. (GPRO - Free Report) has an expected earnings growth of 15%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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