Columbia Sportswear returned to timid sales growth at the end of last year after several quarters of decline, but its European business continued to suffer badly, with a sales drop of 22.9 percent to $46.2 million for the quarter. The fall was even steeper in constant currencies, reaching about 28 percent.
The company’s managers indicated that the issue was chiefly caused by a 60 percent decline in shipments to European distributors, mostly situated in Eastern Europe. This business has particularly high exposure to the troubled Russian economy.
This problem was aggravated by some shifts in shipments to the first quarter of this year. Sales by the company itself in Europe, the Middle East and Africa (EMEA) increased at a mid-single-digit rate, pushed up by robust reorders. Currency exchange rates improved this performance by 9 percentage points.
Aided by cold weather, Columbia Sportswear enjoyed higher sales in nearly all other regions for the last three months of the year. Its turnover for the quarter crawled up by 1 percent to $358.3 million, although it would have declined by about 2 percent in constant currencies. Tim Boyle, the company’s chief executive, attributed the tiny growth to strong reorders and a return to less erratic cancellation rates in Columbia’s wholesale business, along with the expansion of its own retail business.
By brand, Columbia’s sales were off by 2.3 percent to $298.6 million for the quarter. Mountain Hardwear lifted its sales by 19.4 percent to $28.9 million and Sorel’s sales jumped by 27.2 percent to $29 million. Other sales, generated by the Montrail and Pacific Trail units, declined by 21.7 percent to $1.8 million.
The company’s gross margin was roughly flat at 42.1 percent for the quarter. Operating income amounted to 7.7 percent of sales, compared with 3.5 percent for the same quarter in 2008, but this included a pre-tax impairment charge of $24.7 million. Columbia Sportswear ended the three months with net income up by 24 percent to nearly $23.1 million.
For the full year, Columbia Sportswear’s sales tallied $1,244 million, down by 5.6 percent. Europe was badly hit, with sales falling by 26.1 percent to $197.4 million, including a negative impact of 3 percentage points from exchange rates. Canada was another shrinking market for Columbia, with sales down by 14.6 percent for the year. On the other hand, the company’s sales inched up by 1.3 percent to $736.9 million in the U.S. market and they rose by 2.5 percent to $203.2 million in the Latin America/Asia-Pacific region.
The Columbia brand’s sales slumped by 7.7 percent for the full year to $1,072.5 million. The Mountain Hardwear brand grew its sales by 5.8 percent to $100.5 million and will launch online sales this year. Sorel, with more upscale product and a new focus on women, lifted its turnover by 26.0 percent to $60.6 million. Meanwhile, Montrail and Pacific Trail suffered a sales drop of 18.1 percent to $10.4 million.
Columbia Sportswear’s retail business continued to expand last year. There are now 10 European stores, including three branded stores, and two outlets in Canada. There are 45 U.S. stores, including six branded stores. This year it plans to add three outlets in the U.S. and two more branded stores in Europe.
The company’s gross margin lost 1 full percentage point for the year, down to 42.1 percent. This was blamed on close-out sales in the first quarter, as retailers cleaned up their inventories, and the negative impact of foreign currency hedging. Operating income amounted to 7.1 percent of sales for the year, down from 9 percent the year before, even though that included impairment charges. Net income fell by 29.5 percent to $67 million for the year.
As usual, Columbia declined to give a full year outlook until fall bookings are complete, but it said that consumer spending remained cautious and that retailers were still not expanding open-to-buys. The company predicted that it would achieve further sales growth for the present quarter, up by 4 to 5 percent – albeit with a contribution estimated at 4 percentage points from currency exchange rates (more in The Outdoor Industry Compass sent to subscribers).
