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4 Factors That Make Columbia Sportswear a Promising Bet

Zacks Equity Research

Columbia Sportswear Company COLM is surely a worthwhile bet, given its robust past record, which in turn was buoyed by the company’s efficient endeavors. Driven by such upsides and an impressive outlook for fiscal 2019, this Zacks Rank #1 (Strong Buy) stock has rallied almost 26% in the past three months, outpacing the industry’s growth of 22.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moreover, the Zacks Consensus Estimate for fiscal 2019 has moved considerably from $4.07 to $4.34 over the past 60 days. On that note, let’s take a look at the company’s growth drivers that are set to keep its momentum alive.

Columbia Sportswear Company Price, Consensus and EPS Surprise

Columbia Sportswear Company Price, Consensus and EPS Surprise | Columbia Sportswear Company Quote

Solid DTC Business, Brand Strength

Columbia Sportswear is committed toward expanding and enhancing its global direct-to-consumer (DTC) business through accelerated investments. We note that during the fourth quarter, DTC channels sales grew nearly 23%, while it improved 22% in 2018. Notably, the DTC channel contributed 42% to the company’s revenues in 2018, up from 40% in 2017. Management expects this channel to continue performing well in the forthcoming periods. Further, Columbia Sportswear undertakes brand-enhancing and unique marketing initiatives that strengthen its presence in the apparel space. We note that the company’s Global Columbia and prAna brands are gaining market share. The company is on track with demand boosting efforts for the prAna brand, while it also expects continued growth from its SOREL brand through constant upgrades and effective management strategies.

Significant International Presence

Columbia Sportswear has a prominent international presence, which provides the company a solid business foundation and enables it to seek new opportunities to enhance profitability. In fact, many other apparel companies like Ralph Lauren RL, lululemon athletica LULU and Guess? GES are gaining from their international strength. Columbia Sportswear’s sales from international markets improved 12% in the fourth quarter, while it was up 8% in 2018. Results were backed by strength in Europe-direct, Japan, China, Canada and Korea businesses. Despite Korea being a difficult market, the company is encouraged by steady growth in the region. Moreover, management is impressed with growth witnessed in China lately.

Project CONNECT — a Key Driver

Columbia Sportswear is progressing well with its Project CONNECT program, which is likely to drive sales and earnings growth alongside strengthening its financial position. Project CONNECT focuses on connecting consumers, wholesale customers and international distributors with its manufacturing partners and employees around the globe. Markedly, the program is expected to boost net income, drive revenues, capture cost of sales efficiencies, improve gross margins, enhance marketing efforts and lower SG&A costs. Per management, gains from this program are likely to increase adjusted gross margin by 70 basis points (bps) in 2019.

Strong Record & Outlook

The aforementioned upsides helped Columbia Sportswear retain its spectacular past record in the fourth quarter of 2018. During the quarter, both top and bottom lines improved year over year and came ahead of the Zacks Consensus Estimate. While the top line marked its eighth straight quarter of beat, the bottom line delivered positive surprise for 24 quarters in a row. Management is impressed with its better-than-expected quarterly performance, wherein direct-to-consumer and wholesale businesses depicted steady growth.

Consequently, the company provided a view for 2019, wherein it expects consistent growth on the back of strong brands and sales channels. That said, net sales are expected to be $2.97-$3.03 billion, up nearly 6-8% year on year. Notably, the company expects higher sales during spring and fall. Further, earnings per share for 2019 are anticipated to be $4.30-$4.45, marking an improvement from $4.01 delivered in 2018.

Undoubtedly, Columbia Sportswear is set to add new leaves to its growth story.

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