Columbia Sportswear Co. posted sales of $820.6 million for the first quarter of 2023, a 10% increase in constant currency compared to first quarter 2022, despite inventory challenges and softer performance in certain segments.
“2023 is off to a solid start and we are reiterating our full-year net sales outlook, while narrowing our diluted EPS range,” said Tim Boyle, chairman, president and chief executive officer of Columbia.
“We are executing on our plan to reduce inventory levels, while focusing on profitability.”
The Portland, Oregon-based company expects full-year revenue in the range of $3.57 billion to $3.67 billion, representing net sales growth of 3% to 6% compared to 2022.
“Looking at first quarter results, consumer demand in many areas of our business remains strong,” Boyle said.
Q1 Company Financial Results
Net sales: $820.6 billion, up 10% in constant currency, reflecting earlier shipment of spring 2023 wholesale orders and direct-to-consumer growth.
Global Wholesale: $452.5 million, up 14% in constant currency.
Global DTC: $368.1 million, up 7% in constant currency.
Gross margin: Fell 100 basis points to 48.7% versus the same period last year largely due to increased promotions.
Net income: Fell 31% to $46.2 million.
Q1 Results by Brand
Columbia: $702.8 million, up 12% in constant currency
Sorel: $60.5 million, down 3%
Prana: $32.5 million, down 1%
Mountain Hardwear: $24.8 million, up 18%
Bright Spots
Boyle mentioned the resiliency of international markets, growing 17% on a reported basis “as consumers seek out value and promotions in the marketplace.”
The performance of the apparel category was also a bright spot for Columbia as sales benefited from better availability of Spring ‘23 product at retail.
Apparel sell-through is trending above last year, Boyle pointed out.
U.S. direct-to-consumer net sales increased low single digits, with brick-and-mortar up high single digits, and healthy outlet store performance driven by strong traffic trends. New stores that opened last year also contributed to strong DTC performance.
Challenges
In other areas of the business, consumer demand was more challenging.
The e-commerce site Columbia.com had a softer start to the quarter, but performance improved in February and March as the company increased promotional levels to spur demand.
U.S. e-commerce net sales were down high single-digit percent, primarily because of the slow start for Columbia.com.
In the U.S., footwear market headwinds impacted both the Columbia brand and Sorel performance.
He mentioned Columbia’s Facet 75 hiking shoe as a key product to help with sales.
“We’re very focused on creating great products which are highly differentiated and democratic in terms of their pricing and promotion,” Boyle said. “I still have confidence that the company can provide innovative differentiated products, to have our business grow and get to the proper levels.”
Other key categories such as hike and trail have softened after the growth of the past several years.
“Reducing our inventory and aligning it with demand is a top priority,” Boyle said. “We remain focused on unlocking the long-term growth in the footwear category and continue to make strategic investments in this business.”
Inventory Issues
Inventory at the end of the quarter was up 34% year-over-year due to more carryover inventory, earlier reception of current season inventory, and increased older season inventory.
“During the quarter we incurred higher-than-expected warehousing fulfillment expenses largely resulting from elevated inventory levels,” Boyle said.
The company expects the inventory issues will normalize toward the end of the year.
Columbia is working on a plan to reduce inventory by more than $200 million compared to last year.
As for its retail partners, the biggest seasonal sales period for the Columbia brand is Father’s Day, and Boyle said the stores are well-stocked.
“Certainly, in better shape than they were last year,” he said. “Our expectations are for a good second-quarter sell-through with our retailers.”
International
In the U.S. region, sales were $517.5 million, up 3%.
Net sales in China increased in the mid-20% range, driven by several factors, including enhanced store productivity and investments in talent in the region.
“Initial sell-through performance has been exceptional (in China),” Boyle said. “We’re encouraged by the first quarter performance and anticipate China to be one of our fastest-growing markets in 2023.”
Japan net sales increased in the high teens, and South Korea was down in the high teens. Columbia is trying to rebuild its team in South Korea, as it sees a significant market-share opportunity there.
In the Europe, Middle East and Africa region, Columbia’s sales increased 20%.
Canada net sales were up 43% driven by strong demand across all channels.
The company exited the quarter with $461 million in cash and short-term investments and no bank borrowings.
For more detailed looks at the Q1 performance of Columbia’s other brands, see our stories on Sorel and Prana.
Bart Schaneman can be reached at bart@ordaily.outdoorretailer.com.
