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COLM Impresses with Strong Q4 Earnings

Zacks Equity Research

Columbia Sportswear Company (COLM) reported fourth-quarter 2013 earnings of $1.21, registering growth of 5.2% from $1.15 per share earned in the year-ago quarter and surpassing the Zacks Consensus Estimate of 89 cents by a substantial margin. Strong growth in the quarter was driven by sturdy top-line growth trend coupled with improved customer demand.

Net sales of this leading apparel and footwear designer improved 6% year over year to $533.1million, while it came ahead of the Zacks Consensus Estimate of $497 million.

Strong results in the quarter boosted investor confidence, which caused the shares of Columbia Sportswear to escalate nearly 7.1% in the afterhours trading session yesterday.

During the quarter, the company witnessed strong demand for its products that drove improved results in the U.S. direct-to-consumer business. Further, the company’s wholesale segment continued to gain momentum as evident from the greater demand for its new Fall 2014 line among wholesale customers.

Gross profit rose 14.9% to $237.7 million due to superior sales performance. Gross margin expanded 330 basis points to 44.6% during the quarter. Operating income grew 2.2% to $52.2 million, while operating margin shriveled 40 basis points to 9.8%.

Q4 Revenue Break-up

Geographically, Columbia Sportswear’s net sales in the U.S. rose 12% to $307.9 million in the reported quarter. In the Europe/Middle East/Africa (:EMEA) region, net sales surged 11% to $68.8 million aided by a positive effect from changes in foreign currency exchange rates. Despite a negative currency impact, sales in Canada grew 16% to $38.5 million. Offsetting these positives, the company’s Latin America/Asia Pacific region posted an 11% decline in sales to $118.1 million impacted by a negative currency translation.

Category-wise, net sales for the Apparel, Accessories & Equipment escalated 6% to $416.0 million, while Footwear sales rose 8% to $117.1 million.

Brand-wise, net sales of the Columbia brand moved up 7% to $427.8 million and Sorel brand increased 17% to $66.0 million. However, Mountain Hardwear brand sales waned 13% to $37.3 million on a year-over-year basis.

Other Financial Updates

Columbia Sportswear gracefully ended the year with cash and short-term investments balance of $529.2 million, up from $335.4 million last year. Moreover, inventories of $329.2 million remained clean, coming 9% lower than $363.3 million in the prior year. The company’s balance sheet exhibited further strength ending the year with no long-term debt.

Total shareholders’ equity stood at $1,245.4 million, excluding non-controlling interest of $7.4 million compared to $1,166.2 million last year. The company generated strong operating cash flows of $274.3 million in fiscal 2013.

Dividend Information

Taking cue from the strong balance sheet and projections of renewed growth in its wholesales business and improved brand potential, the directors of the company announced a 12% hike in dividend to 28 cents, which is payable on Mar 18, 2014 to stakeholders of record as of Mar 7, 2014.

Fiscal 2014 Outlook

Going forward, Columbia Sportswear expects to gain from renewed growth in its wholesale business, expansion of its direct-to-customer business worldwide as well as added contributions from its new joint venture in China. As a result, the company projects strong sales growth and improved operating income in 2014.

The company anticipates net sales growth of about 15% to 17% in fiscal 2014 from $1.68 billion reported in fiscal 2012. Compared to last year, management envisions its full-year gross margin to increase about 50 basis points, while selling, general and administrative expense is expected to increase by 16%. Expenses for the year should relate to the additional costs for the China joint venture, increased spending for boosting demand, higher costs associated with the U.S. ERP implementation, and reserves for continued expansion of the global direct-to-consumer platform.

Adjusted operating margin for 2014 is estimated at 8.0% with operating income expected to grow in the high-teens range.

Other Stocks to Consider

Columbia Sportswear carries a Zacks Rank #2 (Buy). Stocks in the textile apparel sector that warrant a look include Hanesbrands Inc. (HBI), Joe's Jeans Inc. (JOEZ) and Michael Kors Holdings Limited (KORS), all of which carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on COLM
Read the Full Research Report on HBI
Read the Full Research Report on JOEZ
Read the Full Research Report on KORS

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