Columbia Sportswear swung to a second-quarter profit and raised its full-year 2021 forecasts but warned that “escalating” ocean-freight prices and ongoing port congestions were dragging on the annual outlook. The outdoor gear producer reported net income of $40.6 million for the three months to June 30, compared with a loss of $51 million a year earlier amid the Covid-19 pandemic.
Revenues grew by 79 percent to $566.3 million, against analysts’ expectations of $503 million, driven by better-than-expected performances in the U.S. wholesale segment and the brick-and-mortar business. The top and bottom lines were higher than in the same quarter of 2019 by 8 percent and 77 percent, respectively.
The gross margin expanded by 5.4 percentage points to 51.6 percent, helped by reduced inventory reserve provisions, lower promotion levels and better product margins, offset by an unfavorable channel sales mix.
Mentioning an “exceptional” spring sell-through of its products, the owner of the Columbia, Sorel, Prana and Mountain Hardwear brands guided for full-year revenues of $3.13 billion to $3.16 billion, representing 25.0 to 26.5 percent sales growth compared with 2020 and up from the $3.04 billion to $3.08 billion forecast previously. Net income is now expected to reach a level of between $287 million to $304 million, up from prior guidance, with the gross margin up by 9.5 to 11.5 percentage points to 49.9 to 50.1 percent, despite an estimated $40 million of incremental ocean freight costs. Demand creation spending is budgeted to grow to around 6.0 percent of revenues for the year from 5.7 percent in 2020.
The company pointed out that it is facing various headwinds, including store traffic that is still below pre-pandemic levels and ocean-freight prices that have “significantly exceeded” expectations, with the group’s CEO, Tim Boyle, calling for U.S. and European government intervention to break up what he called “monopolistic practices.” “I mean, it’s one (thing) to deal with delays, which we all understand that that’s possible due to the container dislocation, but the freight rates are clearly monopolistic in my opinion,” he said. “The rates have skyrocketed in the last 60 days. We saw a fourfold increase in ocean freight from June 1 through (to) the middle part of July.” Demand for ocean-going ships and containers “is far outstripping available capacity,” he said, while port congestions and logistics problems continue to hit inventories. Rising Covid-19 cases in sourcing countries in Southeast Asia could also further disrupt product availability and deliveries, he added.
On the other hand, Boyle feels that the group has an advantage over smaller brands in coping with the shipping chaos. He also sees an opportunity to gain market share from competitors who are choosing to cut off wholesale accounts.
For the second quarter, the group’s wholesale channel posted an 89 percent rise to $302.3 million, while direct-to-consumer (DTC) revenues grew by 69 percent to $264.1 million, with stores up 149 percent and e-commerce rising by 5 percent. Store traffic improved during the quarter but still remained below pre-pandemic levels.
In terms of regional reported net sales, the U.S. more than doubled to $379.1 million, while Canada was up 170 percent to $20.8 million, also affected by the delivery delays. Europe, the Middle East and Africa (EMEA) improved by 52 percent to $88.5 million. The Latin America and Asia Pacific (LAAP) region gained 16 percent to $78 million, led by improvements in Japan. China, which the company sees as a major growth target, saw net sales go up by a mid-single digit, hurt by second-quarter wholesale deliveries that shifted into the first quarter.
In local currencies, sales were up by 140 percent in Canada, 46 percent in EMEA, and 11 percent in LAAP. In Europe, sales to distributors and DTC showed increases in the mid-50s and the high 40s, respectively.
The core Columbia brand’s sales increased by 82 percent to $484.3 million. Prana was up 43 percent to $39.7 million, driven by wholesale and full-price sales. Sorel jumped by 74 percent to $23.1 million, with sneakers and sandals both selling well at wholesale as well as on its DTC website. Mountain Hardwear nearly doubled, growing by 97 percent to $19.3 million, helped by a spring assortment that included more sportswear and equipment. Overall, apparel, accessories and equipment sales grew by 86 percent to $453.1 million, while footwear was up 56 percent to $113.3 million.
Based on current forecasted product delivery dates, the company anticipates sales growth in the low teens for the third and fourth quarters of the year, warning that the timing of autumn 2021 inventory receipts and wholesale shipments “can have a significant impact on quarterly financial performance.”
