Columbia Sportswear Company COLM posted robust fourth-quarter 2021 results as both the top and the bottom lines increased year over year and cruised past the respective Zacks Consensus Estimate. The solid performance reflects the strength of the company’s brands. The company gained from the robust direct-to-consumer or DTC business and a full-price selling landscape. Management remains encouraged about the successful global launch of Omni-Heat Infinity.
For 2022, management remains focused on tapping growth opportunities while combating supply-chain and inflationary challenges. Its robust brand portfolio keeps it well-placed.
Quarter in Detail
This designer, marketer and distributor of outdoor and active lifestyle apparel, footwear and accessories posted earnings of $2.39 per share compared with $1.44 recorded in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate, which was pegged at $1.78 per share.
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote
Net sales rose 23% year over year to $1,129.7 million, driven by DTC growth (which was backed by solid demand) and increased Fall 2021 wholesale shipments as the company cycled year-ago pandemic-inflicted disruptions. Net sales beat the Zacks Consensus Estimate of $1,059 million.
In the reported quarter, the DTC channel displayed sales growth of 33% and wholesale net sales rose 13%. DTC’s brick-and-mortar net sales jumped 39% and DTC’s e-commerce net sales rose 25% in the quarter.
The gross margin increased 160 basis points (bps) to 52.2% on reduced DTC promotional levels, elevated wholesale product margins and an improved channel mix. These were somewhat negated by increased inbound freight expenses and year-over-year alterations in inventory provision activity.
SG&A expenses escalated by 12% to $280.1 million. As a percentage of sales, the same contracted from 37.5% to 34%. The year-over-year rise in SG&A expenses can be attributed to costs related to supporting business growth, which includes increased global retail, incentive compensation, demand creation and personnel costs. These were somewhat countered by reduced retail impairments and store closure costs.
The company’s operating income came in at $211.6 million, up 71% from $123.7 million reported in the year-ago quarter. The operating margin increased from 13.5% to 18.7%.
In the United States, net sales jumped 27% year over year to $762.1 million. Net sales increased 33% to $113.6 million in the EMEA. In Canada, net sales rose 14% to $81.2 million. LAAP net sales advanced 8% to $172.8 million.
Sales by Product Category & Brand
Net sales in the Apparel, Accessories and Equipment category increased 28% to $846.1 million as the same for Footwear increased 12% to $283.6 million. Columbia, SOREL and Mountain Hardwear brands registered sales growth of 28%, 9% and 30%, respectively. Net sales in the prAna brand declined 7%.
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Other Financial Updates
Columbia Sportswear ended the quarter with cash and cash equivalents and short-term investments of $894.5 million as well as shareholders’ equity of $1,989.3 million. The company had no borrowings on its balance sheet as of Dec 31, 2021. For the year ended 2021, net cash flow provided by operating activities came in at $354.4 million. Capital expenditures were $34.7 million during this time. For 2022, COLM expects operating cash flow of at least $170 million, while capital expenditures are envisioned in the band of $80-$100 million.
During the twelve months ended Dec 31, the company repurchased 1,655,407 shares for $165.9 million. On Dec 31, 2021, the company had $316.3 million available under its current share buyback authorization. On Jan 28, 2022, management announced a 15% hike in its quarterly cash dividend, taking it to 30 cents per share. This is payable on Mar 21, 2022, to shareholders of record as of Mar 11.
Most of the company-owned stores were open throughout the quarter, apart from some isolated temporary closures. Management highlighted that overall brick-and-mortar traffic remained less than the pre-pandemic level.
Challenges related to the supply chain continued to negatively impact operations, leading to delayed receipt and the delivery of Fall and Spring products. Further, management highlighted that demand for ocean vessels and containers remained high compared with its available capacity, thus causing a massive spike in ocean freight costs.
Management offered its guidance for 2022, which reflects expected impacts of the pandemic as well as economic conditions, such as supply-chain hurdles, inflation, labor shortage, consumer behavior changes and geopolitical headwinds.
For 2022, Columbia Sportswear expects net sales to grow 16-18% to the $3.63-$3.69 billion range. Management expects the gross margin to contract about 160 bps and reach nearly 50%.
SG&A expenses are anticipated to rise at a softer rate than net sales growth. As a percentage of net sales, SG&A expenses are anticipated in the range of 37.2-37.5% compared with 37.8% in 2021. The company expects demand creation (as a percentage of net sales) to be 6% in 2022 compared with 5.9% in 2021.
For 2022, operating income is expected in the band of $472-498 million, implying an operating margin of 13-13.5%. In 2021, the operating margin came in at 14.4%. Management envisions earnings per share (EPS) in the range of $5.5-$5.80 for 2022.
For the first half of 2022, management projects net sales growth to range between the high teens and low 20% range compared with the first half of 2021. The gross margin is likely to contract more than 300 bps. EPS in the quarter are anticipated between 90 cents and $1.10.
Shares of this Zacks Rank #4 (Sell) company have declined 11.1% in the past six months compared with the industry’s drop of 14.2%.
Stocks to Consider
Some better-ranked stocks are Crocs, Inc. CROX, Guess?, Inc. GES and Gildan Activewear Inc. GIL.
Crocs, the designer, developer, manufacturer, marketer and distributor of casual lifestyle footwear and accessories, currently sports a Zacks Rank #1 (Strong Buy). Shares of Crocs have declined 29.6% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Crocs’ 2022 sales and EPS suggests growth of 48.7% and 23.2%, respectively, from the year-ago reported figure. CROX has a trailing four-quarter earnings surprise of 41.6%, on average.
Guess?, which designs, markets, distributes and licenses lifestyle collections of apparel and accessories, carries a Zacks Rank #2 (Buy) at present. Shares of Guess? have moved up 3.5% in the past six months.
The Zacks Consensus Estimate for Guess?’s fiscal 2022 sales and EPS suggests growth of 6% and 11.7%, respectively, from the year-ago reported number. GES has a trailing four-quarter earnings surprise of 97%, on average.
Gildan Activewear, which manufactures and sells various apparel products, carries a Zacks Rank #2 at present. It has a trailing four-quarter earnings surprise of 9.7%, on average. Shares of Gildan Activewear have moved up 14.8% in the past six months.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.2% and 9.4%, respectively, from the year-ago reported figure. GIL has a trailing four-quarter earnings surprise of around 85%, on average.
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