Columbia grows the most in Europe

Out of all the regions where Columbia Sportswear operates, Europe recorded the largest revenue growth in the first quarter of 2018, helping the U.S. outdoor group to post record profits and margins. Continuing the strong performance registered during the fourth quarter of last year, sales soared in the first three months of 2018 by 30 percent in the Europe, Middle East and Africa (EMEA) region to $71.8 million in reported terms and by 15 percent in constant currencies.

The total turnover advanced by 12 percent from the year-ago quarter to $607.3 million. The wholesale business gained 5 percent to $343.9 million, while direct to consumer (DTC) sales jumped by 23 percent to $263.4 million. Sales of apparel increased by 11 percent to $490.0 million, while footwear improved by 13 percent to $117.3 million.

Columbia Sportswear's sales were on the rise in the U.S. as well, up by 9 percent to $362.8 million, as accelerated investments in the direct-to-consumer business drove high teens growth. In Canada, the group's sales increased by 11 percent to $45.6 million, or by 6 percent in the local currency.

Overall, the group's revenues outside the U.S. increased by 8 percent in constant currencies. In Europe, the growth was achieved through increased demand in the DTC channel as well as sales to distributors. The management boasted that there are plenty of opportunities to drive continued growth and expand profitability in that market in the years ahead.

Latin America and Asia-Pacific (LAAP) generated a sales rise of 11 percent to $154.3 million, up by 5 percent on a currency-neutral basis. Reported sales are expected to achieve low double-digit growth in China for all of 2018.

The Columbia brand alone raised its sales by 13 percent to $508.8 million for the quarter. The management said it has invested abundantly in marketing and product initiatives.

The Sorel brand's sales jumped by 13 percent to $30.8 percent and the group's chief executive, Tim Boyle, said it was set for further growth this year. The management said that efforts to diversify the product line to include more spring/summer products are being met with a favorable response in the marketplace, with double-digit growth for the brand's spring styles. Sorel also saw strong demand for winter products, propelled by the cold weather spell that swept across the globe. In 2018, Columbia will raise its investment in the Sorel men's business, which it said is a sizable under-penetrated opportunity for the brand.

Prana raised its sales by 9 percent to $42.3 million, driven by growth in the U.S. at the wholesale level and a rebound in e-commerce.

On the other hand, Mountain Hardwear remained in the doldrums. The brand suffered a sales dip of 12 percent to $24.4 million, yet the management remained upbeat about the brand, noting that it experienced a favorable response to new products, recapturing floor space at several key accounts.

Overall, the group's gross margin increased by 1.8 percentage points for the group to a record level of 49.3 percent. The operating income increased by 24 percent to $59.3 million, representing one percentage point of operating margin expansion to 9.8 percent. Net income increased by 25 percent to $45.1 million in the seasonally small quarter, marking another record.

Looking at the entire 2018 financial year, the group expects sales to grow by about 8.0 to 10.0 percent and the gross margin to improve by up to 1.4 percentage points as compared to 2017. It had previously forecast a sales increase of between 5.5 and 7.5 percent for the year. Sorel and Prana should increase at a double-digit rate. Columbia should grow at a high single-digit rate, but Mountain Hardwear will likely post a decline.

The management is budgeting an operating profit of $275-285 million and net income of $213-220 million for 2018, up from previously budgeted ranges of $283-273 million and $203-211 million. On an underlying basis, the group had reported net income of $210.1 million for the past year.

The relatively strong results obtained in the first quarter have encouraged the management to allocate $10 million more than planned to its spending budget for the second half of this year, mostly for marketing. Columbia will also accelerate the development of its DTC operations, which already represent 40 percent of revenues.

As part of this program, the company plans to implement a new initiative in the first half of 2019 designed to upgrade its e-commerce systems in order to take advantage of changes in consumers' browsing and purchasing behavior with mobile devices. It wants its e-commerce platforms to offer enhanced search, browsing, checkout, loyalty and customer care experiences to mobile shoppers.