Competition, slow consumer demand and cautious retailers in the U.S. drove softer net sales at Columbia Sportswear in the second quarter of 2024, delivering results CEO Tim Boyle said were largely in line with the company’s expectations.
Columbia reported net sales of $570 million for the quarter, an 8% decrease year over year. The company had a net loss of $11.8 million compared to net income of $8.4 million for the same quarter in 2023. Gross margins fell from 50.6% in the second quarter of 2023 to 47.9% in 2024, and lower supply chain costs helped drive SG&A down by 3% in the quarter.
Columbia attributed its sales decrease to lower wholesale sales across all brands. Direct-to-consumer (DTC) sales were flat, but there was some growth in brick-and-mortar DTC. U.S. sales were down by 15% year over year and Canadian sales decreased by 4%. Softer domestic sales were offset by international growth, with a 3% increase in EMEA and 7% in LAAP.
“Outside the U.S., we’re experiencing strong demand for our products in most international markets, including China and our Europe direct business,” Boyle said on the company’s earnings call on July 25.
Columbia’s cost reduction strategy and other priorities have been in full swing through the first half of 2024 after the company reported disappointing full-year results for 2023. It decreased inventory by 29% year over year through the first half of 2024, and its profit improvement plan is on track to deliver between $75 million and $90 million in cost savings this year, Boyle said.
“With much of the cost containment and inventory reduction actions well underway, our focus is on returning to growth,” Boyle said.
That growth isn’t anticipated until the fourth quarter of 2024 at the earliest, however. Columbia’s guidance for the year remains unchanged, with net sales of $3.35 to $3.42 billion expected in 2024, a decline of 2% to 4% compared to 2023.
Three of Columbia’s four brands – Columbia, Sorel, and Prana, are in transitional phases with a focus on new product lines, stronger marketing, and new hires. Boyle said the recently rebranded Mountain Hardwear is already gaining traction.
“Mountain Hardwear is benefiting from its recent brand refresh and is on track to deliver growth this year,” he said.
Columbia Brand Focused on Innovation, Loyalty to Drive Growth
Sales of Columbia brand products decreased by 5% year over year in the second quarter of 2024 to $508 million.
“Our goal is to establish columbia.com as the best expression of the brand, ensuring that visitors to the site see our latest products and innovations with enriched brand storytelling,” Boyle said.
The company also launched its revamped Columbia Greater Rewards loyalty program, which gives consumers personalized rewards through a points system. Spending $300 per year or more earns customers “Titanium” status, with additional rewards like a three-month subscription to Outside magazine.
Cooling technology and sun protection are a major focus on the production innovation front, such as in the Omni-Shade Broad Spectrum Air Flow line. The new Omni-Max light hiking shoe was highlighted in media such as Women’s Health Magazine, Boyle said. This fall and winter, Columbia will expand its line of Omni-Heat footwear with Omni-Heat Arctic, which is inspired by polar bears.
“Omni-Heat Arctic starts with a translucent outer layer that lets solar energy in,” Boyle said. “Heat is then transmitted to an insulation layer close to the body for maximum warmth, mimicking polar bears’ warmth protection system. The result is lightweight, highly efficient warmth boosted by solar power.”
Mountain Hardwear Sales Increase
Sales of the recently refreshed Mountain Hardwear brand increased by 2% in the quarter to $19 million, largely through DTC growth, which was boosted in part through promotions. Net sales were offset by lower wholesale results.
Its Be Sunwise marketing campaign showcased the brand’s UV protective outdoor gear, and partnerships with the Strava app encouraged outdoor athletes to complete challenges to earn rewards.
Through the second half of 2024, Mountain Hardwear will expand its cold weather Ghost Whisperer line and relaunch its snow sports offerings. The brand will also appear at the Olympics this summer.
“I’m also excited for the next month when USA climbing team member and Mountain Hardwear athlete Jesse Grupper will be competing for gold in Paris,” Boyle said. “Good luck, Jesse.”
Prana Net Sales Down by 21% in Second Quarter
Prana’s net sales decreased by 21% to $22 million in the second quarter of 2024, driven by lower Spring 2024 wholesale orders and softer consumer demand in DTC.
Boyle said the brand’s new leadership team has improved its talent, product, and marketing strategies, and growth is on the horizon.
“While it’s not evident in second quarter results, Prana’s revitalization is apparent in future season orders, which suggests a return to growth,” he said.
Sorel’s Net Sales Down by 44%
Net sales of Sorel products decreased by 44% in the quarter to $21 million, with less demand for its Spring 2024 products in both wholesale and DTC. Boyle said the second quarter is historically the brand’s lowest volume quarter, representing approximately 10% of full-year net sales.
Similarly to Prana, the pressure is on Sorel’s new leadership – such as Brand VP Michael Minter and President Corey Long – to revitalize the brand.
“This evolution will take time, but I remain confident in Sorel’s future,” Boyle said.
Debt-Free and Poised for Growth
Columbia generated more than $100 million in operating cash flow in the first half of 2024 and will generate more than $350 million by the end of the year, Boyle said. It exited the quarter with cash and investments totaling $710 million and it carries no debt.
Wholesale sales will improve in 2024 and growth could return as early as the fourth quarter, Boyle said.
“Our fortress balance sheet remains a competitive advantage and enables us to take a thoughtful approach to unlocking the long-term growth and profit improvement opportunities we see across the business.”
Kate Robertson can be reached at kate.robertson@emeraldx.com.
