Columbia Sportswear Company’s (COLM - Free Report) strategic endeavors are boosting growth across most geographic regions, product categories and brands. Further, the company is on track with Project CONNECT, an initiative to boost revenues as well as profitability. However, rising SG&A costs are concerns. That said, let’s delve into the factors that have been impacting the company’s performance.
Efforts to Boost Sales Channels Bode Well
Columbia Sportswear is committed toward expanding and enhancing global direct-to-consumer (DTC) business, through accelerated investments. Within the DTC business, brick-and-mortar and e-commerce businesses have been performing well. Encouragingly, management expects DTC revenue growth to outpace growth in the wholesale channels in the forthcoming periods.
Further, we note that management is committed toward boosting sales across channels through brand awareness and expansion of digital capabilities. Further, the company’s brand-enhancing and marketing initiatives have been boosting revenues. Speaking of brands, the company’s prAna and SOREL brands are particularly doing well, backed by constant upgrade and effective management strategies.
Columbia Sportswear is progressing well with the Project CONNECT program The initiative focuses on connecting consumers, wholesale customers and international distributors with manufacturing partners and employees around the globe.
Markedly, the program is expected to deliver low-double-digit percentage growth in net income, enhance revenues, capture cost of sales efficiencies, improve gross margins and lower SG&A costs. Additionally, the company is optimistic about generating substantial financial value from the project in 2019 and beyond.
Rising Costs Pose Hurdles
Columbia Sportswear is grappling with rising SG&A costs. In fact, management expects SG&A costs to continue to rise due to constant investments for capability development as well as informational technology costs associated with the company’s strategic initiatives. Though the company is on track with Project CONNECT, these expenses are expected to weigh on Columbia Sportswear’s operating margin in the forthcoming periods.
Apart from this, the company is also exposed to the threats emerging from higher tariffs, thanks to volatilities in trading policies with China. Also, stiff competition and fluctuations in the prices of raw materials are a worry.
Such headwinds have dented investors’ optimism, evident from the stock’s 6.6% decline in the past six months compared with the industry’s fall of 18.7%.
Nevertheless, we expect that solid growth endeavors along with continued business momentum are likely to help the company brave the aforementioned challenges. Such effective policies are expected to lift investors’ optimism in the Zacks Rank #3 (Hold) stock.
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