After posting a sales decrease for the fourth quarter of 2023 and forecasting a revenue decline for 2024, Columbia Sportswear announced Thursday that it will enact a 3%-5% reduction in corporate personnel costs as part of a “workforce reduction plan.”
During a conference call with investors, CEO Tim Boyle said the company’s overall headcount and personnel expenses have “outpaced the growth of our business.”
“This work will be done with respect and thoughtfulness consistent with our core values, while taking the actions required to get back to sustainable growth,” he added.
Columbia expects most of the cuts to be made by the end of March.
“A Challenging Year” Ahead
Columbia reduced its 2024 net sales outlook to $3.35 to $3.42 billion, representing a net sales decline of 4% to 2% percent compared to 2023. That’s down from a previous outlook of a 0.5% to 2% increase.
“Looking ahead, we expect 2024 to be a challenging year. Retailers are placing orders cautiously, and economic and geopolitical uncertainty remains high,” Boyle said. “We are working diligently to maximize sales in this environment, while optimizing our product, brand marketing and marketplace strategies to accelerate growth in 2025 and beyond.”
The company’s multi-year profit improvement program is expected to result in $125 million to $150 million in annual savings by 2026.
Another prong of the profit improvement program is operational cost savings.
“In addition to eliminating expenses associated with carrying excess inventory, we are optimizing our distribution network and driving cost efficiencies throughout our supply chain,” Boyle said. “We’re also optimizing our technology cost structure, while increasing the throughput and agility of our digital technology teams.”
The company also plans to streamline its operating model and drive cost savings in its indirect, or non-inventory, spending.
“This profit improvement program is an integral component of our goal to restore operating margins to a low-teens percent rate,” Boyle said. “We have achieved this level of operating margin performance before and we’re confident it’s achievable again.”
Q4 2023 Results
A warm start to winter impacted cold weather categories in the fourth quarter, Boyle said.
Across the company, net sales decreased 10% in constant currency to $1.06 billion, compared to the fourth quarter 2022.
Gross margin expanded 20 basis points to 50.6% from 50.4% for the comparable period in 2022.
Geographically, for the quarter ended Dec. 31, United States sales were $689.4 million, down 12% in constant currency compared to the prior-year period.
In the Latin America and Asia Pacific region, sales for the quarter were $175.3 million, up 7% in constant currency.
In Europe, the Middle East, and Africa, sales were $123.5 million, down 7% in constant currency.
And in Canada, sales were $65.2 million, down 29% in constant currency.
Company-wide, wholesale sales for the quarter were $424.7 million, down 17% in constant currency compared to the prior-year period.
DTC sales company-wide were $628.7 million, down 4% in constant currency compared to the prior-year period.
Full-Year 2023 Results
Columbia exited the year with inventory down 27% compared to last year, according to Boyle.
“This inventory reduction helped us generate over $600 million in operating cash flow for the year,” he said.
For full-year 2023, net sales increased 1% to $3.48 billion, compared to 2022.
Gross margin expanded 20 basis points to 49.6% compared to 49.4% for the comparable period in 2022.
Geographically, in the United States, sales for the year were $2.24 billion, down 3% in constant currency compared to the previous year. Consumer demand and traffic in the U.S. tapered off throughout the year, Boyle said.
International markets were a bright spot, growing 7% year-over-year in constant currency.
In Latin America and Asia Pacific, sales were $541.8 million, up 14% in constant currency.
In Europe, the Middle East, and Africa, sales were $469.2 million, up 5% in constant currency.
And in Canada, sales were $256.8 million, up 6% in constant currency.
Company-wide, wholesale sales for the year were $1.88 billion, up 1% in constant currency compared to the previous year.
DTC sales company-wide were $1.625 billion, up 2% in constant currency compared to the prior-year period.
Full-Year 2023 Results by Brand
The Columbia brand was the only brand that grew revenue in 2023.
Columbia: $2.9 billion, up 3% in constant currency.
Sorel: $336.7 million, down 3% in constant currency.
Prana: $113.6 million, down 21% in constant currency.
Mountain Hardwear: $101.8 million, down 6% in constant currency.
CEO Boyle Disappointed
Boyle ended his remarks on the call by saying that he was “personally very disappointed.”
“Our global team is focused on returning and surpassing the levels of growth and profitability that we’ve historically produced,” he said.
