Columbia Sportswear reported a sales increase of 17 percent to $380.2 million in the second quarter. On an organic basis, excluding the acquisition of Prana and foreign currency impacts, the turnover went up by 11 percent in the quarter, which is the company's smallest one in terms of revenues, historically accounting for around 15 percent of annual sales.
Demand was driven by strong sell-through of spring 2015 products in North America and Europe, which created higher-than-expected at-once orders for the season and advance orders for spring/summer 2016. On the downside, the group was affected by the strength of the U.S. dollar and the tough market situation in Russia and South Korea. The company's business in China is O.K., the management indicated.
The group's gross margin expanded by 0.7 percentage points to a second-quarter record of 45.1 percent. The operating quarterly loss declined to $9.0 million from $17.0 million in the year-ago period, but the company had to report a net loss of $6,545,000 for the quarter. In the same period a year ago, the company had booked a lower net loss of $6,329,000, after a net tax benefit of $5.6 million from the favorable resolution of uncertain tax positions and net costs of around $2.1 million for the acquisition of Prana.
The quarterly sales increased by 45 percent in the U.S. to $212.1 million, driven by increased wholesale and direct-to-consumer revenues, including a contribution of $19.0 million from Prana. Sales rose by 27 percent in Canada, or by 43 percent on a constant-dollar basis, including $1.0 million of incremental revenues from Prana.
Prana contributed sales of about $300,000 in both the Latin America/Asia-Pacific (LAAP) and EMEA regions. Including Prana, sales went up by one percent in LAAP, with a 7 percent increase in local currencies. In contrast, they fell by 18 percent to $59.8 million in EMEA. Sales to EMEA distributors decreased by more than 20 percent, primarily reflecting lower advance autumn 2015 shipments to the company's distributor in Russia, where challenging economic conditions persist.
By brand, sales increased for the Columbia brand by 12 percent to $325.1 million, primarily driven by growth in the U.S. and partially offset by lower sales to EMEA, mainly due to the difficult economic conditions in Russia. Sorel registered a strong 43 percent sales increase to $4.3 million, with a 15 percent improvement in local currencies, thanks especially to its growing assortment of fashion-forward styles. Prana's sales totaled $26.1 million, as compared to $5.5 million in the second quarter of 2014.
In contrast, Mountain Hardwear continued to struggle, with quarterly sales down 3 percent to $21.2 million. For the first six months of the year, the California-based subsidiary's sales were off by 15 percent to $46.3 million. Columbia purchased Mountain Hardwear in 2003 for $36 million.
By product category, the group's total sales of apparel, accessories and equipment rose in the quarter by 18 percent in dollars to $310.2 million, primarily driven by increased sales for the Columbia brand in the U.S., and $20.6 million from Prana. Global footwear sales increased by 14 percent to $70.0 million, consisting mainly of higher sales for Columbia and Sorel in the U.S.
Through the first six months of 2015, sales grew by 15 percent, or 19 percent on a constant-dollar basis, to $859.2 million, including around $57.7 million of incremental sales from the Prana brand, whose sales went up by 30 percent. Operating income rose by 90 percent to $35.2 million. First-half net income increased by 25 percent to $19.9 million. In commenting on the first-half results, the company defined them as “exceptional” and attributed them to the increasing earnings power of its expanded brand portfolio, seasonally diverse product offerings, and enhanced operational platforms.
The company revised upward its outlook for the full year. The management is predicting a low double-digit percentage increase in global sales, and an operating margin of around 10.3 percent, up from 9.5 percent in 2014, despite an increase in the marketing spend from 5.2 to 5.4 percent sales. Net earnings should grow by between 17 and 22 percent for the year to an indicated level of between $160 million and $180 million.
In the U.S. alone, group sales are expected to increase by around 25 percent in the second half. In terms of constant dollars, the second half should bring a low double-digit sales increase for the Columbia brand, with gains in the high teens in North America, in the mid-teens in the European markets where it trades directly, and of more than 30 percent with distributors in the rest of the world. Sorel is expected to grow by more than 90 percent in the second half.
