Columbia Sportswear (COLM) Hurt by Soft Demand, High Costs
Several companies in the apparel space are grappling with soft consumer demand stemming from a tough operating landscape. Columbia Sportswear Company COLM is no exception, which saw its fourth-quarter 2023 sales decline across all channels, categories and brands. Apart from this, the company has been seeing elevated SG&A expenses for a while now.
The persistence of these factors poses concerns for the near term. The Zacks Consensus Estimate for 2024 earnings per share has descended 4.6% to $3.70 over the past 30 days. This suggests a 15.7% decline from the figure reported in the year-ago period. The consensus mark for sales also indicates a 2.5% year-over-year drop.
Obstacles in Detail
Columbia Sportswear continued navigating a tough operating landscape in the United States, which, along with the warm winter, affected fourth-quarter 2023 results. During the quarter, net sales declined 9% to approximately $1,060 million and missed the consensus mark of $1,081 million. Net sales declined 10% at constant currency or cc.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
The sales decline resulted from earlier shipments of Fall 2023 wholesale orders (in the third quarter of 2023), along with reduced U.S. direct-to-consumer (DTC) net sales. The company battled decelerating consumer demand and traffic throughout 2023.
Additionally, SG&A costs, as a percentage of sales, have been increasing year over year for a while now. In the fourth quarter of 2023, SG&A expenses, as a percentage of sales, expanded 360 bps to 38.2% due to elevated direct-to-consumer (DTC) expenses.
Management expects 2024 to be a difficult year, with retailers placing orders cautiously, and elevated economic and geopolitical uncertainty. It also expects SG&A expenses to increase in 2024 due to escalated DTC incentive compensations and enterprise technology expenses, partly countered by cost-curtailment actions and reduced supply-chain costs. As a percentage of net sales, SG&A expenses are anticipated in the range of 43.2-43.5% in 2024, up from the 40.6% reported in 2023.
What’s Ahead?
For 2024, Columbia Sportswear expects net sales to decline 4-2% to the $3.35-$3.42 billion band. Management expects the net sales decline to lead to an operating margin contraction in 2024 despite the company’s cost-containment efforts.
For 2024, the operating margin is expected in the range of 7.6-8.4%, which suggests a contraction of 130-50 basis points from 2023. Management envisions 2024 EPS in the range of $3.45-$3.85 in 2024, suggesting a decline of 16-6% from the $4.09 reported in 2023.
For the first half of 2024, management expects net sales to decline 9-6% to the $1,310-$1,352 million band. The EPS is envisioned in the band of 1-26 cents for the first half of 2024 compared with 88 cents reported in the year-ago period.
For the first quarter of 2024, COLM anticipates a net sales decline of 11-8% to the $730-$753 range. For the quarter, the operating margin is expected to be 2.2-3.8%, down from the 6.9% reported in the first quarter of 2023. Finally, management envisions first-quarter EPS of 30-45 cents compared with 74 cents reported in the year-ago period.
Columbia Sportswear is working toward maximizing sales in a tough landscape while improving its products, marketing and marketplace strategies to fuel growth in 2025 and thereafter. That said, we cannot ignore the abovementioned headwinds in the near term. Shares of this Zacks Rank #5 (Strong Sell) company have tumbled 9% in the past year against the industry’s growth of 24.8%.
3 Solid Apparel Picks
Ralph Lauren RL, which designs, markets, and distributes lifestyle products, currently sports a Zacks Rank #1 (Strong Buy). RL has a trailing four-quarter earnings surprise of 18.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and earnings indicates growth of 2.7% and 22.7%, respectively, from the year-ago reported number.
Crocs CROX, which designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Crocs’ current fiscal-year sales and earnings suggests growth of 3.9% and 2.9%, respectively, from the year-ago reported numbers. CROX has a trailing four-quarter earnings surprise of 14.2%, on average.
PVH Corp. PVH holds a Zacks Rank #2 at present. PVH, which operates as an apparel company, has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for PVH Corp.’s current fiscal-year sales and EPS suggests growth of 1.3% and 16.7%, respectively, from the year-ago reported figure.
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