Columbia Sportswear Company (COLM - Free Report) has been gaining from a sturdy top-line performance, backed by robust performance across most market regions and product categories. In this connection, the company’s direct-to-consumer and wholesale businesses have been performing well. Further, the company expects Project CONNECT to strengthen financial position. These upsides have aided this renowned apparel and accessories company’s shares to surge 56.2% in the past year compared with the industry’s 39.3% rally.
That said, let’s take a closer look at the factors aiding this Zacks Rank #1 (Strong Buy) company’s bull run.
Strength in DTC Business
Columbia Sportswear’s second-quarter 2018 results marked its sixth straight quarter of top-line beat. The bottom line delivered positive surprise for 22 quarters in a row. Management was impressed with better-than-expected quarterly performance, wherein direct-to-consumer (DTC) and wholesale businesses depicted steady growth. In this respect, the company is focused on driving brand awareness and boosting sales growth in the wholesale and direct-to-consumer channels, mainly though the creation of demand.
Notably, the company’s DTC business constituted 40% of the company’s total revenues in 2017, wherein sales from this channel increased at a high single-digit rate year over year. Encouragingly, management expects DTC revenue growth to outpace the wholesale channel in 2018. Courtesy of strength in the DTC business and enhanced wholesale business, the U.S. business witnessed growth of 13% in the first half of 2018. Within the DTC business, the brick-and-mortar and e-commerce businesses were strong and surpassed the company’s expectations in the first half.
Project CONNECT & More Factors Aiding Growth
Apart from bolstering wholesale and DTC channels, the company also focuses on enriching customers’ experience through improved digital operations and solidifying global direct-to-consumer networks. Moreover, the company undertakes brand-enhancing and unique-marketing initiatives that further strengthen presence in the apparel industry. In the past year, Columbia Sportswear’s brand team installed and renovated more than 300 shop-in-shops in key partner store locations. In fact, well-planned strategies have been boosting growth in the Global Columbia, Global prAna and Global SOREL brands.
To top these, Columbia Sportswear is progressing well with the Project CONNECT program, which is likely to drive sales and earnings growth, along with strengthening the company’s financial position. Markedly, the program is expected to enhance revenues, capture cost of sales efficiencies, improve marketing efforts and lower SG&A costs. The company is well on track with the program and expects to reap benefits from this program in 2018, with anticipated gains in 2019 and beyond.
Columbia Sportswear’s strategies for maintaining top-line growth combined with cost minimization efforts are likely to offset cost hurdles. In fact, solid growth endeavors and expectation of a strong second half encouraged management to raise outlook for 2018. All said we continue to expect that the stock will remain a lucrative pick for investors.
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Ralph Lauren Corporation (RL - Free Report) flaunting a Zacks Rank #1, has a solid earnings surprise history. The company has a long-term earnings growth rate of 9.6%.
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