Columbia reports Q2 loss, but brand awareness rises in Europe

Columbia Sportswear Company reported a net loss of $11.74 million against a profit of $8.35 million last year, on 8 percent lower revenues to $570.2 million in the seasonally small quarter, down from $620.9 million. The operating loss was $23.8 million, compared to operating income of $6.2 million in the year-ago period. Apparel sales dipped 5 percent to $464.0 million, while footwear dropped 20 percent to $106.2 million, hurt by retailer cautiousness, a competitive marketplace and soft US demand. Wholesale accounted for the bulk of the drop, declining 15 percent to $278.4 million, while direct-to-consumer was down less than 1 percent to $291.8 million, as e-commerce declines offset brick-and-mortar growth. 

The group fared much better in key overseas markets than in North America. EMEA sales expanded by 3 percent to $103.9 million, as direct sales increased by low double digits on strength in both DTC and wholesale, while distributor sales declined in the low single digits. 

“I would say that the brand awareness level has moved north (in Europe), especially in the markets of France, Germany, and the UK where we’re seeing terrific results,” Chairman, President and CEO Tim Boyle told analysts. The company confirmed that it has seen a “slight shift” in market deliveries related to Red Sea delays. 

Boyle, while suggesting the company’s Europe-direct business is on track to be one of its fastest-growing segments this FY, called out the company’s teams in Europe “for doing an exceptional job” creating Columbia brand visibility and relevance that includes efforts around the hike category this summer. 

Elsewhere in Q2, Columbia Sportswear realized a 7 percent sales increase in LAAP to $99.5 million. Sales grew low double-digits in China but fell by mid-single digits in Japan and by mid-teens in Korea. LAAP distributor sales increased in the high 30 percent range on early shipments of fall orders. 

But overall weakness in North America weighed most on Columbia’s quarterly revenues, with US sales tumbling 15 percent to $340.2 million and Canada off 4 percent to $26.6 million. The home market suffered from weakness in spring orders that sent wholesale down to high 20s. Brick-and-mortar DTC was a bright spot, helped by 46 clearance pop-ups and six additional outlet stores used to move excess stock. 

The Columbia brand slipped 5 percent lower to $508.6 million, entirely due to soft US demand, as international sales improved. The US outdoor market has struggled coming out of the pandemic, with pressure felt particularly on rugged footwear demand, the company reported. Among its smaller brands, Sorel sales fell by 44 percent to $21.0 million and prAna revenues were down by 21 percent to $21.8 million. Mountain Hardwear has been doing better under new leadership, inching up by 2 percent to $18.8 million, helped by promotions. 

Gross margin contracted 260 basis points to 47.9 percent, reduced by additional inventory clearance efforts and changes in sales provisions that more than offset lower inbound freight costs and favorable channel mix. SG&A was reduced by 3 percent in US dollars, benefitting from the ongoing Profit Improvement Program and lower inventories, but still deleveraged 280 b.p. to 53.1 percent of sales. Inventory was down 29 percent from a year ago to $823.6 million, including “manageable” levels of older products and leaner-than-normal channel inventories. 

The group’s FY revenue guidance remains unchanged at $3.35 to $3.42 billion, down 2 to 4 percent from $3.49 billion in 2023. Fall orders are said to be encouraging, auguring sequential improvement in wholesale sales with a potential to return to overall growth in Q4. An early look at Spring 2025 orders suggests wholesale will begin growing by H1 2025. Gross margin will be a bit worse than expected at 50.0 to 50.2 percent, rather than 50.4 to 50.8 percent. Operating income is expected to come in between $256 to $288 million, down slightly from prior guidance of $259 to $291 million, with net income guidance for $215 to $239 million compared to $217 to $240 million previously.