Press Release:
Columbia Sportswear Company Reports First Quarter 2012 Financial Results; Refines FY2012 Financial Outlook
First Quarter Highlights:
First quarter 2012 consolidated net sales totaled $333.1 million, equal to first quarter 2011 net sales.
First quarter 2012 net income totaled $3.9 million, or $0.11 per diluted share, including restructuring charges of approximately $2.8 million, net of tax, or $0.08 per diluted share, compared with first quarter 2011 net income of $12.8 million, or $0.37 per diluted share.
The board of directors approved a quarterly dividend of $0.22 per share, payable on May 31, 2012 to shareholders of record on May 17, 2012.
Refined 2012 Outlook:
Net sales growth of up to 1 percent.
Operating margin, including restructuring charges, expected to approximate 2011 operating margin of 8.1 percent; expects slight operating margin leverage excluding restructuring charges.
PORTLAND, Ore.–(BUSINESS WIRE)–
Columbia Sportswear Company (NASDAQ: COLM – News), a leading innovator in the active outdoor apparel and footwear industries, today announced net sales of $333.1 million for the quarter ended March 31, 2012, essentially equal to net sales for the same period of 2011, including less than 1 percentage point negative effect from changes in foreign currency exchange rates.
First quarter net income totaled $3.9 million, or $0.11 per diluted share, including restructuring charges of approximately $2.8 million net of tax, or $0.08 per diluted share, compared with net income of $12.8 million, or $0.37 per diluted share, for the same period of 2011.
Tim Boyle, Columbia’s president and chief executive officer, commented, “As expected, our first quarter results and 2012 outlook reflect muted sales growth due to the lingering effects of the warm winter globally and continued economic weakness across Europe. During the quarter, we implemented difficult but necessary cost containment measures designed to maintain our profitability while we work to liquidate excess inventory levels.
“These near-term challenges deepen our long-term resolve to continue to elevate each of our brands and strengthen their year-round presence in the marketplace. With Omni-Heat firmly established as a leading warmth technology, our innovation pipeline for 2013 features new visible cooling technologies that will be offered in both our Columbia and Mountain Hardwear brands.”
Boyle concluded, “We remain focused on our strategic priorities – driving innovation, transforming our supply chain and ERP platform, managing inventory and expenses and, above all else, nurturing stronger emotional connections with consumers to drive long-term growth.”
First Quarter 2012 Results
(All comparisons are between first quarter 2012 and first quarter 2011, unless otherwise noted.)
First quarter 2012 U.S. net sales of $193.0 million were essentially unchanged from first quarter 2011. Latin America and Asia Pacific (LAAP) region net sales grew 14 percent to $76.8 million, including a 2 percentage point benefit from changes in currency exchange rates. Europe, Middle East, and Africa (EMEA) region net sales decreased 14 percent to $38.1 million, including a 3 percentage point negative effect from changes in currency exchange rates. Canada net sales decreased 13 percent to $25.2 million, including a 2 percentage point negative effect from changes in currency exchange rates. (See “Geographical Net Sales” table below.)
First quarter apparel, accessories & equipment net sales increased 2 percent to $284.3 million. Footwear net sales decreased 10 percent to $48.8 million. (See “Categorical Net Sales” table below.)
First quarter Columbia brand net sales increased $5.0 million, or 2 percent, to $293.1 million, offset by a $3.9 million, or 38 percent, decline in Sorel net sales to $6.4 million, and a $1.0 million, or 3 percent, decline in Mountain Hardwear net sales to $30.7 million. (See “Brand Net Sales” table below.)
Balance Sheet
The company ended the quarter with $252.8 million in cash and short-term investments, compared with $243.9 million at December 31, 2011 and $335.3 million at March 31, 2011.
Consolidated inventories totaled $366.6 million at March 31, 2012, compared with $303.1 million at March 31, 2011, reflecting the effects of the warm winter, changes in product mix and higher average unit costs on 7 percent fewer units. A majority of the excess inventory is being held for disposition through our direct-to-consumer channels.
See Page 2 for 2012 financial outlook details
2012 Financial Outlook
The company currently expects net sales growth of up to 1 percent in 2012 compared to 2011, with higher direct-to-consumer sales in the U.S., Korea and Japan and increased wholesale sales in its Japan and international distributor businesses, largely offset by lower wholesale sales in Europe, Canada and the U.S.
Full year 2012 gross margin is expected to contract 30 to 50 basis points, reflecting an inventory liquidation strategy involving a higher proportion of promotional and close-out sales at lower gross margins and higher input costs, partially offset by favorable foreign currency hedge rates and reduced air freight costs.
Full year 2012 selling, general and administrative expenses, including restructuring charges, are expected to increase at a rate comparable to net sales growth.
2012 operating margin, including restructuring charges and anticipated higher licensing income, is expected to be comparable to 2011 operating margin of 8.1 percent. Excluding restructuring charges, the company expects slight operating margin improvement over 2011. The company is modeling a full year effective tax rate of 26 percent; however, the actual rate could differ, perhaps significantly, based on the status of tax uncertainties, the geographic mix of pre-tax income, as well as other discrete events that may occur during the year.
The company’s annual net sales are weighted more heavily toward the fall/winter season, while operating expenses are more equally distributed throughout the year, resulting in a highly seasonal profitability pattern weighted toward the second half of the fiscal year. In addition, the company’s cost containment measures are expected to benefit the second half of 2012 more significantly than the first half, resulting in operating margin deleverage during the first half of 2012, offset by operating margin leverage in the second half of 2012.
Second Quarter 2012 Outlook
The second quarter is the company’s lowest volume quarter, which amplifies the effect of changes in the timing of shipments and the fixed costs of the company’s operations.
The company expects a high single-digit percentage increase in second quarter 2012 net sales compared with second quarter 2011, primarily reflecting earlier shipment of international distributors’ increased Fall 2012 advance orders and increased direct-to-consumer sales.
The company expects second quarter 2012 operating margin to improve by 50 to 100 basis points compared to second quarter 2011. The second quarter outlook anticipates approximately 275 to 325 basis points of SG&A expense leverage, partially offset by gross margin contraction of approximately 200 basis points and slightly lower licensing income. The contraction in second quarter gross margin incorporates increased promotional and close-out sales at lower gross margins, a higher proportion of distributor shipments which carry lower gross margins, and higher input costs, partially offset by favorable foreign currency hedge rates.
The company is modeling an effective income tax rate for the second quarter of 40 percent, which is driven primarily by the anticipated pre-tax loss and the geographic mix of income.
All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties which may cause actual results to differ, perhaps significantly.
Dividend
The board of directors authorized a quarterly dividend of $0.22 per share, payable on May 31, 2012 to shareholders of record on May 17, 2012.
About Columbia Sportswear
Columbia Sportswear Company is a leading innovator in the global outdoor apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, Columbia products are sold in approximately 100 countries and have earned an international reputation for innovation, quality and performance. Columbia products feature innovative technologies and designs that protect outdoor enthusiasts from the elements, increase comfort, and make outdoor activities more enjoyable. In addition to the Columbia® brand, Columbia Sportswear Company also owns outdoor brands Mountain Hardwear®, Sorel®, and Montrail®. To learn more, please visit the company’s websites at www.columbia.com, www.mountainhardwear.com, www.sorel.com, and www.montrail.com.
