Columbia Sportswear has announced that it will go into online sales in Canada and in up to eight European key markets by autumn 2011. In Europe, these markets are probably going to be the U.K., France, Germany, Italy, Austria, the Netherlands, Spain and Belgium. The move concerns both the Columbia and Sorel footwear brands. Christian Finell, the company’s chief for the Europe, Middle East and Africa region (EMEA), explained that the respective web shops for both brands are going to be strictly separated since there is no intention to tell the consumer that they belong to the same group. It is possible that Mountain Hardwear, the higher-end brand within the Columbia family, might follow, once it is seen that Columbia and Sorel work well on the internet.
Finell does not expect major conflicts with Columbia’s existent retail customers provoked by the company’s own B2C retail activities. He sees the move rather as an advantage to them since the online sales will help to strengthen the brand’s visibility among consumers. To Finell, the move into web-based retailing is a logical sequence after Columbia’s new positioning as a more functional and technical brand. According to the EMEA chief, the online activities will help speed up the two brands’ awareness among the end customers – also to the benefit of the retail customers. Besides, The North Face has similarly launched electronic sales to final customers in several European countries already.
There apparently no specific business plan calling for a defined percentage of direct B2C sales contributing to Columbia’s overall business in the EMEA region. On the other hand, Finell emphasized that there are no strategic plans either for a major rollout of corporate brick-and-mortar stores across Europe. Currently, Columbia operates only three stores in Europe, in London, Munich and Frankfurt, along with seven factory outlets. Additionally, there are a couple of franchised shops, mainly in France.
Columbia Sportswear’s net income increased by 38 percent to $12.8 million in the first quarter of this year, while sales rose by 11 percent to $333.1 million. As of March 31, the wholesale backlog for the autumn collection was a record $860.8 million, 19 percent higher than a year earlier. The increase in sales and backlog include a positive 2-percentage-point contribution from currency exchange rates.
Among the company’s leading brands, Columbia increased sales by 8 percent to $288.1 million, Sorel grew by 158 percent to $10.3 million and Mountain Hardwear added 24 percent to $31.7 million.
All product categories increased revenues, with sportswear up by 5 percent to $154.2 million, outerwear by 13 percent to $98.8 million, footwear by 18 percent to $54.4 million, and accessories and equipment by27 percent to $25.7 million.
By region, sales grew by 11 percent to $192.5 million in America, driven primarily by increased direct-to-consumer sales. The Latin America & Asia Pacific (LAAP) region was up by 20 percent to $67.3 million, including a 7-percentage-point benefit from exchange rates. Canada increased by 19 percent to $28.9 million, including an 8-point boost from exchange rates.
However, the Europe, Middle East and Africa (EMEA) region declined by 5 percent to $44.4 million, including a negative 1-point impact from currency rates. The drop in EMEA was due to a higher proportion of spring collection orders shipped in the fourth quarter of 2010.
A turnaround is around the corner in the region. Order backlogs for autumn shipments grew by more than 50 percent in the EMEA. The American backlog increased by a low double digit, driven by growth in the Sorel and Columbia brands. Orders for the LAAP region increased more than 30 percent, including growth in Japan, while the backlog for Canada grew by a mid single digit, largely due to currency rates.
The autumn backlog was supported by increases in each of the company’s four major brands, geographic regions and product categories. The Columbia brand’s autumn wholesale backlog was up by a low double digit as advance orders for Omni-Heat styles more than doubled compared with a year earlier and Columbia footwear booked high-teen growth. Sorel continued to expand with existing wholesale customers and added hundreds of specialty footwear customers around the world, boosting orders by more than 80 percent. Orders for the Mountain Hardwear and Montrail brands grew by a high single digit and more than 70 percent, respectively.
The global autumn wholesale backlog for footwear increased by more than 50 percent. All three footwear brands contributed to the growth, led by a rise of more than 80 percent for Sorel and high-teen growth for Columbia. The global backlog for apparel, accessories and equipment increased by a low double digit, driven primarily by the Columbia brand.
The consolidated wholesale backlog, which includes both spring and autumn orders, was up by 14 percent to $990.3 million, lifted by a 3-point contribution from exchange rates. Inventories increased by 36 percent to $303.1 million at the end of March.
In the first quarter, the gross margin went up to 44.9 percent from 42.4 percent and operating profits swelled to $18.2 million from $13.0 million. Net income rose to $12.8 million from $9.2 million.
The group expects sustained growth for the full year, forecasting a 14-16 percent increase in sales. The gross margin is seen rising by about 1.0 percentage points from the 42.4 percent booked in 2010 thanks to lower airfreight costs and a larger share of direct-to-consumer sales, partially offset by higher manufacturing costs. Meanwhile, the operating margin is expected to increase by 0.5-0.7 points from the 7.0 percent level achieved in 2010.
In the second quarter, the company’s lowest in terms of volumes, sales are estimated to grow by a mid- to high-teen range compared with a year earlier. The gross margin is forecast to contract by 2.0 percentage points year-on-year because of a higher proportion of distributor shipments, which carry lower gross margins; a product mix shift; and a higher proportion of closeout product sales at lower gross margins. The quarterly operating loss is seen widening to $22-24 million.