New momentum for Columbia

Columbia Sportswear reported a sales increase of only one percent to $1,685 million in 2013, but the company enjoyed a higher-than-expected sales increase of 6 percent in the fourth quarter and the management sees the growth accelerating to a rate of between 15 and 17 percent in 2014. More than half of this year's growth should come from the consolidation of its new joint venture with Swire in China and about eight percentage points from higher retail and wholesale revenues from its existing operations.

The new Chinese joint venture, which replaces a former distribution agreement with Swire, is expected to generate sales of $155 million in 2014. The original plan called for a higher turnover, but Columbia said its growth in the country will be tempered by a major inventory overhang in the market that will be cleared in one season or two at the most.

The global order backlog indicates a recovery in the wholesale business during the second half of this year, thanks to stronger demand for innovative products being launched for next autumn at accessible prices. Direct-to-consumer sales are expected to continue to increase after a rise of 20 percent in 2013 that brought their share of the total turnover up to 34 percent from 29 percent in 2012. Its share should increase to around 36 percent after the opening of 18 new stores including 12 factory outlets.

Higher demand for Columbia and Sorel products has led to a double-digit increase in orders in North America, while Mountain Hardwear should see a recovery thanks to reduced prices, contributing to the overall increase in turnover. The gross margin should go up by about 0.5 percentage points this year, helping the company to reach an operating margin of 8.0 percent in spite of an increase in marketing expenses from 4.6 to 5.1 percent of sales.

For the 2013 financial year, Columbia reported a 6 percent drop in net profit to $94.3 million, but this was due exclusively to a $5.6 million asset impairment charge taken in the fourth quarter on its European distribution center in the French city of Cambrai. The same factor affected net earnings for the fourth quarter, which fell by 7 percent to $36.7 million in spite of an improvement of 3.3 percentage points in the gross margin thanks to a higher proportion of sales at full price and a big spurt in the direct-to-consumer business.

The 6 percent increase in the group's fourth-quarter revenues, which reached a level of $533.1 million, included sales increases of 12 percent in the U.S., 11 percent in Europe, the Middle East and Africa (EMEA), and 16 percent in Canada, partially offset by an 11 percent drop in the Latin America/Asia-Pacific (LAAP) region. In terms of local currencies, sales went up by 8 percent globally, by 8 percent in EMEA, by 10 percent in Canada. LAAP had a currency-neutral decline of 3 percent that was attributed to the transition to direct sales in China and political problems in Latin America.

For the full year, sales grew in local currencies by about two percent globally, by 3 percent in the U.S., by 2 percent in EMEA and by 7 percent in Canada. They were off by one percent in LAAP.

The stronger sales increase in the U.S. in the fourth quarter was mainly due to the weather, but Tim Boyle, president and chief executive of the group, attributed it also to increased consumer demand for the company's products that became evident already in the third quarter across its direct-consumer platform.

By product, footwear sales were up by 8 percent in the quarter, while apparel, accessories and equipment rose by 6 percent. By brand, the quarterly sales increased by 7 percent for Columbia and staged a major recovery for Sorel, up by 17 percent, but Mountain Hardwear went down by 13 percent.

Inventories were down by 9 percent at year-end, and they were off by about 15 percent excluding the incremental inventory acquired by the company's new joint venture in China (more in The Outdoor Industry Compass)