Columbia Sportswear Company (
) recently reported its second quarter 2014 results wherein the
adjusted loss came below the Zacks Consensus Estimate and sales
exceeded expectations. The company also raised its outlook for
This leading apparel and footwear designer posted adjusted loss
of 26 cents, wider than a loss of 21 cents reported in the year-ago
quarter, due to higher operating losses incurred in the quarter.
However, the loss was narrower than the Zacks Consensus Loss
Estimate of 38 cents per share owing to better-than-expected
Columbia Sportswear Company - Earnings Surprise
Quarter in Detail
Net sales of this retailer increased 16% to $324.2 million and
came ahead of the Zacks Consensus Estimate of $317 million, driven
by improved sales growth from all the four geographic regions. The
company's Columbia brand, the newly-acquired praAna brand
(acquisition completed on May 30) and the China joint venture also
contributed to sales. In January, the company formed a joint
venture in China with Swire Resources Ltd., which has acted as
Columbia's exclusive distributor in China since 2004.
Columbia brand net sales increased $38.5 million from the
prior-year quarter, while the prAna brand and China JV contributed
$5.5 million and $23.1 million, respectively, of incremental net
sales. The company was also benefited by favorable currency
Gross profit increased 19.7% to $144 million, while gross margin
expanded 150 basis points to 44.4% in the quarter owing to higher
sales. However, the company incurred an operating loss of $16.9
million in the quarter, almost twice the loss incurred in the
year-ago quarter, due to higher operating costs related to the
prAna acquisition and the China JV. Selling, general &
administrative (SG&A) expenses increased 23% in the quarter,
while the SG&A ratio increased to 50%, compared with 47% of
sales in the year-ago quarter.
Segment Detail on Regional Basis
Second quarter U.S. net sales increased 5% mainly driven by
increased direct-to-consumer (DTC) sales, largely offset by lower
wholesale sales. U.S. net sales included $5.5 million of
incremental prAna net sales.
Net sales in Canada increased 39%, driven by increased wholesale
and DTC sales. However, sales were impacted by an unfavorable
currency impact of 10 percentage points.
Latin America/Asia Pacific (LAAP):
The company witnessed net sales growth of 18% in the region, coming
from sales at the company's new China joint venture. Currency
impact was neutral in the region in the quarter.
Europe/Middle East/Africa (EMEA):
Sales in this region improved 37%, which includes a 2 percentage
points benefit owing to the changes in foreign currency exchange
Other Financial Update
During the quarter, the company's board authorized a quarterly
dividend of 28 cents a share to be paid on Aug 28, 2014 to
shareholders of record as of Aug 14, 2014.
Columbia Sportswear's board also authorized a two-for-one stock
split in the form of a 100% stock dividend, which will be payable
on Sep 26, 2014 to shareholders of record on Sep 8, 2014.
During the second quarter, the company completed its acquisition
of the prAna Lifestyle Apparel Brand for $188.5 million. PrAna is a
lifestyle brand and will complement Columbia's existing portfolio
of authentic, active outdoor brands, which include Columbia,
Mountain Hardwear, Sorel and Montrail. The company expects to
recognize incremental net sales of approximately $55 million from
the prAna acquisition during fiscal year 2014. It is also expected
to contribute low double-digit operating margin in 2014.
2014 Outlook Raised
The company raised its 2014 outlook to account for the PrNA
acquisition. Columbia Sportswear's net sales for 2014 are now
expected to grow 19% to 21% from 2013 levels to $2.01 - $2.04
billion against the previous expectation of 16% to 18% growth. The
anticipated growth of approximately $320 million to $355 million is
expected to come from the new China JV and from the prAna brand.
The company also expects high single-digit percentage organic
growth to contribute to sales.
The company expects gross margin to increase up to 75 basis
points, compared with 2013 levels.
Compared to the prior year, management envisions full-year
adjusted operating margin of approximately 8.8%, higher than the
prior forecast of 8.25% and the 2013 adjusted operating margin of
Excluding the impact of the prAna acquisition and the China JV,
Columbia Sportswear expects adjusted earnings in the range of $3.27
- $3.43 per share, much higher than $2.72 reported in 2013. The
Zacks Consensus Estimate for earnings is pegged at $3.45 for 2014,
higher than the guided range.
Columbia Sportswear carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Investors interested in the textile apparel sector can also
consider stocks like Hanesbrands Inc. (
), Vince Holding Corp. (
) and Perry Ellis International Inc. (
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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COLUMBIA SPORTS (COLM): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
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