Like other apparel companies, Columbia Sportswear Company COLM also had to keep stores closed due to the coronavirus outbreak. This largely affected its first-quarter 2020 performance, wherein both top and bottom lines deteriorated year over year and fell short of the Zacks Consensus Estimate.
Nonetheless, the company recently announced plans to reopen a few stores and bring back furloughed workers. With restrictions to contain the spread of coronavirus, several companies are slated to reopen their stores. In this regard, Columbia Sportswear reopened 30 Columbia branded stores across 10 states on May 15. Incidentally, the company brought back more than 250 retail employees who were furloughed in the past. Prior to this, the company already reopened one Columbia branded store in Nebraska. Further, management plans to keep reopening more U.S. stores in the coming months, per government guidelines.
This has surely boosted investors’ sentiments as shares of Columbia Sportswear have rallied 17.8% in the past month. In the past three months, this apparel company’s stock has dropped 7.1% compared with the industry’s decline of 9.6%.
COVID-19 Hits Q1 Results, Cost Woes Linger
Columbia Sportswear’s first-quarter 2020 results were largely affected by concerns related to the coronavirus outbreak. Net sales dropped 13% to $568.2 million and fell short of the consensus mark of $594 million. Sales declined across all brands, categories, channels and regions. Coronavirus adversely impacted the performance in China in late January, Japan and Korea at the beginning of February, and North America and Europe in March. While retail store closures in North America and Europe were commenced in mid-March, traffic started declining from the early days of the month. Coronavirus-related concerns marred performances of many other apparel companies like Hanesbrands HBI, Ralph Lauren RL and Under Armour UAA, to name a few.
Meanwhile, Columbia Sportswear expects sales and margins to be hurt by elevated promotions to clear off excess inventory. It is also battling supply-chain disruptions, primarily due to temporary raw material and finished goods supplier shutdowns in Asia. Additionally, the company has been grappling with high SG&A expenses, which increased 10% in the first quarter of 2020 due to elevated bad debt costs, higher personnel expenses and escalated IT costs. The company reported an operating loss of $2 million against an operating income of $88 million in the year-ago period. Apart from this, gross margin declined 360 basis points to 47.8% due to coronavirus-led impacts.
The Brighter Side
Management said that as of Apr 30, 2020, most of the stores had reopened in China and Korea, though many of them work for limited hours. Retail traffic was improving in these regions, though it was well below the pre-coronavirus level. Nonetheless, the company’s e-commerce platform has been largely operational during the pandemic, except for some distribution center closures.
Notably, Columbia Sportswear has been on track with its Experience First initiative or the X1 initiative, which is aimed at enhancing e-commerce operations to keep pace with the evolving consumer environment. In April, the company’s U.S. e-commerce business surged 60% year over year. The company is focused on implementing X1 in a phased manner. In this regard, the initiative was implemented across 10 countries in Europe-direct and for the prAna brand in the United States in 2019. The company expects to keep implementing X1 in North America in 2020. It anticipates this platform to become operational for Columbia, SOREL and Mountain Hardwear brands ahead of the holiday season peak.
These upsides are likely to aid this Zacks Rank #3 (Hold) company amid the crisis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Columbia Sportswear Company (COLM) : Free Stock Analysis Report
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