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Bull of the Day: Columbia Sportswear (COLM)

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The historic outdoor clothing company got crushed by the coronavirus, from early store closures and less people traveling to an overall cutback on some non-essential retail spending. Columbia’s (COLM) turnaround now appears underway after a strong first quarter that had analysts racing to raise their earnings guidance.

Quick COLM Overview

Founded back in the late 1930s, Columbia has remained at the forefront of outdoor clothing, apparel, and footwear ever since through innovation, brand building, as well as a few acquisitions. The Portland, Oregon-headquarter firm bought higher-end outdoor boot maker Sorel in 2000. The brand has since grown into a far more diverse footwear company over the years.

COLM went on to buy higher-end rival Mountain Hardwear in 2003. Most recently, it acquired prAna, which makes everything from rock climbing clothes to yoga gear in 2014. The diversification and portfolio expansion has helped, but its namesake brand is still by far the largest contributor, bringing in around 80% to 85% of total sales most quarters.

Columbia competes against The North Face (VFC), Patagonia, Canada Goose (GOOS), Lululemon (LULU), and others. Its offerings can be found at its own stand-alone stores, as well as at places such as Dick’s Sporting Goods (DKS) and other clothing and outdoor-focused retailers.

Other Fundamentals

As we touched on at the outset, the outdoor apparel firm took a hit during the coronavirus on the back of store closures and a temporary change in shopping habits as consumers flocked to the likes of Target (TGT) and cut back on some spending.

Columbia’s fiscal 2020 revenue fell roughly 18% to $2.5 billion, which ended a nice run of YoY top-line growth. Luckily, things started to turn around in the second half of last year.

COLM topped our Q1 FY21 estimates on April 29, with sales up 10% and its adjusted earnings up from break-even a year ago to reach $0.84 a share and crush our projection by 155%. Plus, its direct-to-consumer e-commerce business grew by 35% to account for 20% of total sales.

More importantly in the forward-looking world of Wall Street, Columbia raised its 2021 guidance. Analysts have since lifted their bottom-line projections.

Zacks estimates currently call for Columbia’s fiscal 2021 sales to jump 22% to reach $3.05 billion, with FY22 projected to climb another 9% higher to come in at $3.33 billion. Crucially, both of these figures come in above FY19’s pre-pandemic total of $3.04 billion.

At the bottom-end, the company’s adjusted earnings are projected to jump by 165% and 18%, respectively over this stretch. And COLM has a solid history of quarterly earnings beats, including huge beats in the trailing two periods.

Along with its growth outlook, the company’s dividend yield sits at around 1% to top Nike’s (NKE) 0.81% and other apparel firms. Investors should know COLM repurchased over $11 million worth of stock last quarter. The company is also part of the Textile-Apparel space that rests in the top 22% of our over 250 Zacks industries.

Columbia’s shares have outpaced its industry in the past five years, up 105% vs. 55%. In 2021, the stock is up 18%, extending its outperformance trend against its peers, with it also well above the benchmark index. COLM has pulled back after it hit new records following its first quarter release.

At around $103 a share, the stock is trading around 9% below its highs. The recent pullback has also sent it well below neutral RSI levels (50) at 39. Therefore, Columbia appears to have room to run.

On the valuation front, Columbia trades in line with its industry at 22.8X forward 12-month earnings, which also represents a 25% discount to its own year-long highs. The company also boasts an impressive balance sheet.

Bottom Line

Columbia’s post-release earnings revisions positivity helps it snag a Zacks Rank #1 (Strong Buy) right now, alongside an “A” grade for Growth in our Style Scores system. The company’s growth outlook appears solid and it’s prepared to benefit from pent-up demand and the continued economic reopening as people start vacationing again.

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V.F. Corporation (VFC) : Free Stock Analysis Report

Target Corporation (TGT) : Free Stock Analysis Report

NIKE, Inc. (NKE) : Free Stock Analysis Report

lululemon athletica inc. (LULU) : Free Stock Analysis Report

Canada Goose Holdings Inc. (GOOS) : Free Stock Analysis Report

DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report

Columbia Sportswear Company (COLM) : Free Stock Analysis Report

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