Columbia to Close Stores as COVID-19 Pressures Weigh on Brick-and-Mortar Business
Columbia Sportswear Company suffered a disappointing third-quarter earnings season as brick-and-mortar sales remained under heavy pressure due to the coronavirus pandemic. The company has also indicated its plans to shutter several stores.
For the period ended Sept. 30, the athletic and outdoor retail group reported earnings of 94 cents per share, significantly below the prior year’s earnings of $1.75 per share, and missing analysts’ expectations of $1.16 in earnings per share. Revenues also decreased 23% to $701.1 million, compared with market watchers’ forecasts of $767.13 million.
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Although the vast majority of its global direct-to-consumer fleet remained open during the quarter, Columbia Sportswear noted that overall physical store traffic and sales trends were well below prior-year levels. In particular, its outposts in frequented travel destinations are “some of the most severely impacted” locations, including those in major consumer markets like China.
“I think the biggest hurdle for us in part is going to be with regard to the direct-to-consumer business and particularly the brick-and-mortar stores until there’s essentially an end to the pandemic and we see a resumption of traffic back to more of a normalized level — particularly in those destination-based stores or these tourist markets,” SVP and CFO Jim Swanson said during the company’s third-quarter conference call.
President and CEO Tim Boyle added, “While September was our strongest month of the quarter in our U.S. DTC business, we have not seen a sustained improvement in brick-and-mortar store traffic to date… We anticipate traffic in these markets to remain depressed until tourism resumes.”
In line with its physical store performance, Columbia Sportswear announced that it would permanently shut down a “small number” of stores but did not specify a number. So far this year, it has closed eight stores in the United States, as well as one in Europe.
“We continue to evaluate portfolio and anticipate closing additional underperforming stores,” Boyle added. “To enhance store profitability, we’re focused on improving store labor efficiency, and lease negotiations are ongoing.”
E-commerce, on the other hand, was a bright spot for Columbia Sportswear; sales in its digital direct-to-consumer business surged 55% year over year. At its namesake label, new customers purchasing products on Columbia.com grew 65% from the prior year period.
Among its footwear brands, Columbia saw a 23% decline in sales during the three months, while Sorel recorded a 21% drop. The company shared expectations for holiday marketing and promotional activities to start earlier than usual as retailers seek to mitigate shipping capacity pressures and consumers have already begun shopping for gifts.
“All this is to say that it will be an unusual season, and we are prepared to maximize our sales volume within these constraints,” Boyle explained.
Columbia Sportswear exited the third quarter with $315 million in cash and short-term investments, no bank borrowings and nearly $1 billion in total liquidity. For the fourth quarter, it anticipates “continued sequential fundamental improvement,” with sales expected to sink 8% to 11% and earnings per share in the range of $1.07 to $1.32. It also predicted a 19% to 20% plunge in revenues for the full year, and earnings per share of $1.25 to $1.50.
