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Columbia Sportswear Up 23% in a Year: Can Momentum Sustain?

The year 2017 turned out to be a favorable one for Columbia Sportswear CompanyCOLM with its share price surging close to 23% compared with the industry 's gain of 8.4%. Despite persistent challenges in the U.S. region, the company's international presence widened significantly in 2017, courtesy of brand popularity. Moreover, Columbia Sportswear's continued efforts to enhance efficiency and improve brand presence are also expected to boost performance in the forthcoming periods.

Let's now analyze how the stock is placed for 2018.

Strong Strides in International Markets

Columbia Sportswear has been gaining from solid sales growth in international regions, supported by significant footprint in close to 100 nations worldwide. In this respect, the company's European wholesale and direct-to-consumer businesses have been performing well. The company's Columbia and SOREL brands have been depicting strong growth in the European and Canada regions. In third-quarter 2017, the company's sales from Canada, the EMEA and Latin America/Asia Pacific regions increased 8%, 20% and 9%, respectively.

Although the company has significant potential in a variety of markets, we believe that the largest opportunity is in China, considering the region's strength in digital wholesale and e-commerce channels. Further, we expect the company to witness substantial growth in the emerging markets.

Brand Strengthening Efforts

Columbia Sportswear's brand-enhancing efforts have played an essential role in augmenting the company's business. In the past year, the company developed more than 150 shop-in-shops and increased the number of brand presentations in key partner store locations.

Additionally, consumers are inclining toward a healthier lifestyle with enhanced participation in outdoor activities. This has been driving the active apparel and accessories industry. Sportswear is increasingly becoming a style statement and is being worn casually owing to advanced designs and greater comfort. Such trends are particularly benefiting the company's prAna brand. The prAna brand is also attracting an expanding base of female consumers. Further, constant upgrades and effective management have boosted the consumer base for prAna and SOREL brands.

Project CONNECT

In June 2017, Columbia Sportswear started a new operating model assessment project - Project CONNECT. The initiative focuses on connecting consumers, wholesale customers and international distributors with manufacturing partners and employees across the globe. The project is expected to have a wide-spread impact on the company's operations in 2018 and includes a number of initiatives to enhance revenues, capture efficiencies, improve the marketing process and lower SG&A costs. These endeavors are anticipated to boost the company's direct-to-consumer and wholesale channel performance.

Final Thoughts

Columbia Sportswear has been facing challenges in the U.S. region, especially on the wholesale front. Several clients have either announced store closures or declared bankruptcy. Additionally, the company has been struggling against increased SG&A expenses, stemming from enhanced marketing spend and initiatives for improving performance.

Nevertheless, we expect Columbia Sportswear to effortlessly tide over the aforementioned challenges backed by strong international presence, efficiency and brand building efforts. With such solid fundamentals rolled-up in its sleeves, this Zacks Rank #2 (Buy) company seems well positioned to sustain growth momentum in 2018.

Do Consumer Discretionary Stocks Interest You? Check These

Investors interested in the same sector may consider other stocks such as Michael Kors Holdings Limited KORS , Deckers Outdoor Corporation DECK and Wolverine World Wide, Inc. WWW . While Michael Kors sports a Zacks Rank #1 (Strong Buy), Deckers Outdoor and Wolverine World Wide carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Michael Kors delivered an average positive earnings surprise of 23.7% in the trailing four quarters. It has a long-term earnings growth rate of 7.5%.

Deckers Outdoor Corporation pulled off an average positive earnings surprise of 88.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.7%.

Wolverine World Wide came up with an average positive earnings surprise of 21.8% in the trailing four quarters. It has a long-term earnings growth rate of 12.5%.

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Michael Kors Holdings Limited (KORS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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