Zacks Investment Research upgraded
Columbia Sportswear Company
) to a Zacks Rank #1 (Strong Buy) on Jul 4. Columbia Sportswear's
acquisition of PrAna lifestyle apparel brand in June and
better-than-expected earnings in the first quarter of 2014 led to
Why the Upgrade?
Last month, Columbia Sportswear - a leading apparel and footwear
designer - completed the acquisition of California based PrAna
lifestyle apparel brand for $190 million. PrAna is now a
wholly-owned subsidiary of Columbia Sportswear and is headquartered
in Carlsbad, CA. The acquisition is expected to be accretive in
full fiscal 2015.
The acquisition is a strategic fit for Columbia's strategic
priority to expand into complementary consumer segments. PrAna will
also complement Columbia's portfolio of authentic, active outdoor
brands, which include Columbia, Mountain Hardwear, Sorel and
In April, Columbia Sportswear reported strong first quarter 2014
results wherein both earnings and sales beat expectations. The
company also raised its outlook for fiscal 2014. First quarter
earnings of 63 cents increased a significant 80% from the year-ago
adjusted earnings backed by strong sales.
Net sales of this retailer increased 22% to $424.1 million and
came ahead of the Zacks Consensus Estimate of $398 million, driven
by strong demand for Columbia and Sorel brands, especially across
U.S. wholesale and direct-to-consumer channels and the new China
joint venture. The company also witnessed solid demand for its fall
2014 products in many key markets globally. However, results were
partly offset due to unfavorable currency fluctuations.
Following better-than-expected first quarter results, the
company raised its fiscal 2014 outlook. Columbia Sportswear's net
sales for 2014 are now expected to grow 16% to 18% compared with
2013 levels, as against the previous expectation of 15% to 17%
growth. Net sales growth expectation for 2014 excludes the impact
of the pending prAna acquisition. The company also continues to
expect North American direct-to-consumer sales to grow at a
double-digit rate in 2014.
Compared to the prior year, management envisions its full-year
operating income to grow 25%, leading to operating margin of
approximately 8.25%, higher than the prior forecast of 8%.
This apparel retailer witnessed sharp upward estimate revisions
after announcing its first quarter 2014 results. Most of the
estimates for 2014 and 2015 increased over the past 60 days.
Columbia Sportswear is likely to post a positive earnings
surprise in the second quarter of 2014, since it has both a Zacks
Rank #1 and a positive
of +11.96%. The second quarter results are expected on Jul 24.
Other Stocks to Consider
Some other stocks in the textile apparel sector that warrant a
Vince Holding Corp.
Michael Kors Holdings Ltd.
). While Hanesbrands and Vince Holding carry a Zacks Rank #1,
Michael Kors holds a Zacks Rank #2 (Buy).
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