Columbia Sportswear Company COLM reported robust second-quarter 2019 results, with revenues and earnings improving year over year, as well as beating the Zacks Consensus Estimate. Moreover, management also raised its view for 2019. The solid quarterly outcome perked up investors' sentiments. Evidently, the stock gained almost 3% in the after-hours trading session on Jul 25.
Notably, the top line marked its 10th straight quarter of beat and the bottom line delivered positive surprise for 26 quarters in a row. Columbia Sportswear’s solid surprise history has been a treat to investors. We note that shares of this Zacks Rank #2 (Buy) company have rallied 20% in the past six months compared with the industry’s rise of 9.1%.
Q2 in Detail
Quarterly adjusted earnings came in at 23 cents per share, which beat the Zacks Consensus Estimate of 1 cent. Also, quarterly earnings rose nearly 44% year over year.
Net sales advanced nearly 9% to $526.2 million. On a constant-currency (cc) basis, net sales grew almost 11%. The top line surpassed the consensus estimate of $507.4 million. Performance was mainly driven by strength in the Columbia, Mountain Hardwear and Sorel brands.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
In the reported quarter, DTC channels depicted sales growth of nearly 6% (up 7% at cc) and wholesale net sales advanced 12% (up 14% at cc).
Gross profit grew 10.9% to $253.6 million. Gross margin expanded 70 basis points (bps) to 48.2%, mainly driven by benefits from Project CONNECT.
Also, operating income came in at $16.4 million, depicting a rise of almost 68% year over year. Also operating margin came in at 3.1%, up 110 bps.
United States: Net sales jumped 13% to $315.5 million, owing to growth across the DTC and wholesale businesses.
Europe/Middle East/Africa (EMEA): Net sales grew 8% (up 11% at cc) to $91.6 million.
Canada: Net sales increased 12% (up 17% at cc) to $17.5 million.
Latin America/Asia Pacific (LAAP): Net sales improved 1% (up 5% at cc) to $101.6 million.
Category and Brand Segments
The Columbia and SOREL prAna brands registered growth of 10% to $454.9 million and 32% to $15.1 million, respectively. Moreover, net sales in the Global Mountain Hardwear and prAna brands increased 9% to $17.5 million and 2% to $38.7 million, respectively.
Further, net sales at the Apparel, Accessories and Equipment category improved 10% to $432.2 million and Footwear sales rose 8% to $94 million.
Other Financial Updates
Columbia Sportswear ended the quarter with cash and cash equivalents of $386.2 million and total equity of $1,655.2 million. Inventories advanced 33% to $756.4 million as of Jun 30, 2019.
During the first half of 2019, the company generated cash flow of $2.6 million from operating activities, while it incurred capital expenditures of $50.8 million.
Further, Columbia Sportswear paid out dividends worth nearly $33 million to shareholders and repurchased 1,032,972 shares for nearly $100.4 million in the first half of 2019.
Additionally, on Jul 19, 2019, management announced quarterly dividends of 24 cents per share, payable Aug 29 to shareholders of record as on Aug 15.
Management is impressed with the sales and profitability momentum achieved in the second quarter. The company expects to continue reaping financial gains from Project CONNECT. Further, management intends to continue with its investments related to demand creation, drive brand awareness and enhance digital capabilities. It will also continue exploring growth opportunities in DTC business and improve support processes.
That said, management raised its view for 2019. Net sales are expected in the range of $3.00-$3.04 billion compared to the earlier prediction of $2.98-$3.04 billion. The revised top-line view depicts growth of nearly 7-8.5% year over year. Adverse currency movements are likely to impede sales by nearly 90 bps.
Further, operating income is estimated in the band of $388-$396 million compared with $378-$391 million projected earlier. Operating margin is expected to be 12.9-13%.
Management expects earnings per share for 2019 to be $4.65-$4.75, up from the prior view of $4.40-$4.55. The Zacks Consensus Estimate for earnings for 2019 is currently pegged at $4.57.
Other Top-Ranked Stocks From the Same Industry
Guess', Inc. GES has an expected long-term earnings growth rate of 17.5%. Moreover, it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Under Armour, Inc. UAA, also a Zacks Rank #1 stock has an expected long-term earnings growth rate of 27.1%.
Lululemon Athletica Inc. LULU carries a Zacks Rank #2 at present and has expected long-term earnings growth rate of 18.4%.
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