Columbia Sportswear said last week that it is cutting back planned investments in marketing and retailing after a poor fourth quarter in which group revenues fell by 6 percent to $354.9 million, with three percentage points attributable to foreign exchange rates. In terms of dollars, sales in Europe fell by 21 percent to $59.9 million, partly because of weak assortments.
However, Antti Kärävä, Columbia’s European marketing director, stressed that no major cutbacks should be expected in Europe. Spending on media advertising may be reduced thanks to significantly lower advertising fees expected to be charged by the relevant media in the months to come. On the other hand, Columbia will continue to strengthen the brand’s in-store presentation at stores that commit themselves to the brand with significant pre-orders.
The group performed slightly better outside Europe during the latest quarter. Sales declined by 3 percent to $205.0 million in the U.S. and by 12 percent to $27.0 million in Canada, thanks to a cold spell in North America. They rose by 6 percent to $63.0 million in Latin America and Asia. By category, sportswear sales were off by 4 percent to $540.9 million, outerwear sales decreased by 1 percent to $491.7 million, and footwear sales went to down by 4 percent to $217.4 million. Sales of accessories increased by 4 percent to $68.0 million.
Operating profit fell to $12.4 million from $56.8 million in the same period a year earlier. The net result for the quarter was a drop of 59 percent in net income to $18,557,000, mainly due to a $24.7 million write-down of goodwill and intangible assets related to the 2006 acquisition of Pacific Trail and Montrail, neither of which have met expectations. These charges were partially offset by a $5.0 million tax benefit that helped Columbia exceed the profit guidance it gave last November, excluding the charges.
The poor economy was evidently a factor in the disappointing results. Inventories have fallen by about 4 percent but are still high because of order cancellations. On the other hand, the cold weather helped Columbia clear much of its outerwear inventories at relatively good margins. The company has since shed some of the remaining excess inventory through its dealer network, outlet stores and some discount channels (more in the last issue of The Outdoor Industry Compass).
