Columbia Sportswear is upgrading its financial outlook for this year in reporting a 120 percent increase in net income to $22.3 million on 22 percent higher revenues of $424.1 million for the first quarter of 2014.
All the geographies delivered double-digit sales growth except for Europe, the Middle East and Africa, where the turnover went down in terms of dollars by 4 percent to $39.2 million, although Columbia's hiking shoes fared well in the region. In terms of local currencies, the EMEA sales decline amounted to 6 percent.
The management stressed, however, that sales in the European markets where the group sells directly to retailers were up in dollars and flat in local currencies. Shipments to European distributors were down due to a shift in advance orders to the fourth quarter of 2013. Furthermore, direct-to-consumer revenues went up slightly in Europe.
A manager of the group told us that the spring/summer 2014 products delivered to Sportmaster, the exclusive distributor of Columbia in the Russian market, are apparently selling through nicely.
Sales in the U.S. rose by 20 percent to $241.2 million, aided by an exceptionally long cold spell that made it unnecessary to mark down any excess inventories, helping the group to raise its gross margin by 2.5 percentage points to a record level of 46.5 percent for the quarter.
The Columbia brand drove the overall sales increase, rising by 25 percent to $376.0 million. Mountain Hardwear inched up by 1 percent to $32.4 million. Sorel's sales increased by 4 percent to $12.9 million, and the brand ran out of merchandise to serve the demand. The group ended up the quarter with 11 percent lower overall inventories.
The Canadian market was up by 13 percent to $26.9 million for the company in terms of U.S. dollars, but the growth was 11 percentage points higher in terms of Canadian dollars. The Latin America and Asia Pacific region saw group sales expanding by 41 percent to $116.8 million, or by 46 percent currency-neutral, thanks to the new joint venture in China and to a recovery in Argentina and Venezuela. Sales were down slightly in Korea due to a more promotional market, but they should improve for the balance of the year. Japanese sales were up in yen but down in dollars.
The company's Chinese operations have nearly completed a planned move from Hong Kong to Shanghai. Tim Boyle, president and chief executive of the group, said that it wants to be “closer to the customer” in China, developing more specific products for the market and constantly refreshing its stores in the country.
In terms of product categories, the group scored increases in the quarter of 30 percent in footwear to $70.4 million and of 20 percent to $353.7 million in apparel, accessories and equipment. Higher sales of winter boots and trail boots led the increase in footwear.
n Europe, the management of Sorel seems to be doing the right thing in simplifying the business and selecting clients. Group officials point out that the group is focusing first on the biggest customers in the biggest markets in Europe to revitalize the Columbia and Sorel brands.
A new ERP system, which is operational since three weeks ago, is expected to lead to higher inventory turns and gross margins. The management is expecting a 0.5 percent improvement in the group's gross margin for the full year. Excluding the acquisition of prAna, sales should go up by between 16 and 18 percent from last year's level of $1.68 billion, with more than half of the growth stemming from the joint venture in China.
