As part of a robust quarterly performance that triggered an upgraded forecast for the full year, Columbia Sportswear hailed its return to growth in Europe, the Middle East and Africa (EMEA) during the first quarter ended March 31.
Although its European sales continued to fall in the quarter, Columbia reached the end of March with a positive wholesale backlog for fall shipments in the region, putting an end to four years of steady declines in European orders. The European backlog jumped in the mid-teens compared with the same time last year, including a low-single-digit percentage benefit from exchange rates.
When it comes to European markets handled directly by Columbia, France, Germany and the U.K. showed the strongest order backlogs. The company said it had received more orders from sporting goods and specialist outdoor retailers, driven by Columbia’s new Omni-Heat warmth technology and by the Sorel brand, which made up by far the largest share of the order increase. On the other hand, the group still suffered a decline in European apparel orders.
While Sorel had already been selling strongly in a few European countries, such as Norway, interest in the increasingly fashion-oriented brand of boots has been widening swiftly. The company’s managers are particularly bullish about Sorel, which will also introduce a spring range next year to become an all-year brand.
In EMEA countries where Columbia’s brands are sold by distributors, its order backlog increased at a mid-teen range as well. This was explained by the improvement in the Russian and East European economies, and returning growth in consumer demand.
More broadly, the company added that its European orders had been boosted by a better adjustment of Columbia’s offering to the European demand, with a higher level of technical features and improved styling. Even more broadly, the company’s managers pointed out that they had striven to internalize their European sales force in the last years, resulting in more focused sales teams.
Beyond Europe, the increase in orders was felt across all regions and for all of the group’s categories and brands. Robust orders of Omni-Heat products and growing fashion interest in the Sorel brand boosted global autumn orders by 19 percent to $725.3 million, including 3 percentage points from positive currency effects.
In fact, interest in Omni-Heat was apparently stronger than anticipated, forcing the company to scramble to get the products supplied. Omni-Heat will hit the stores later this year, accompanied by Columbia’s largest integrated campaign ever.
Outside of the EMEA region, orders for the U.S. market were up at a mid-teen rate, Canada was up in the mid-30s, and Latin America/Asia-Pacific was up in the mid-20s.
The increase was driven by footwear, where orders went up at a mid-40s rate, while apparel orders grew in the mid-teens. Orders for the Columbia brand and Mountain Hardwear rose by the mid-teens but Sorel outshone all of them with an order backlog increase in the low 60s.
For the first quarter ended March 31, Columbia Sportswear’s revenues grew by 10 percent to $300.4 million, with 3 percentage points stemming from advantageous currency effects. The gross profit margin rose by 1.8 percentage points to 42.4 percent and net income surged by 34 percent to $9.2 million.
EMEA sales were still down by 6 percent to $46.9 million, even with a benefit of 4 percentage points related to foreign exchange. In markets handled directly by the company, sales were down at a mid single-digit rate, in spite of a benefit of 6 percent from exchange rates.
In European markets covered by distributors, the company’s sales contracted at a low single-digit rate, which was attributed to poor sell-through last year and cautious buying for the start of this year, but the situation has since become much healthier.
U.S. sales rose by 11 percent to $173.2 million on the expansion of direct-to-consumer sales. Sales in Latin America/Asia-Pacific and Canada each rose by 22 percent to $56.1 million and $24.2 million, respectively. Latin America/Asia-Pacific included 8 percentage points attributed to currency, while Canada’s results included a whopping 18-percentage-point benefit from the exchange rates.
All product categories showed positive sales results in the quarter on a global basis: Sportswear grew by 6 percent to $146.4 million, outerwear rose by 14 percent to $87.6 million, footwear increased by 15 percent to $46.1 million, and accessories climbed by 19 percent to $20.3 million. Columbia brand sales rose by 11 percent to $267.7 million; Mountain Hardwear grew by 10 percent to $25.6 million; and Sorel increased by 33 percent to $4.0 million.
Based on order levels, improved first-quarter results and currency impacts, Columbia upped its guidance for the full year to a sales increase of 12 to14 percent. It expects its gross margin to increase by about 1 percentage point for the full year, but anticipates a similar rise for its expenses, and is therefore targeting a stable operating margin of about 7 percent.
The marketing spend for the full year should reach 5.5 percent of anticipated sales, against a ratio of 5.2 percent for last year (more in The Outdoor Industry Compass).
