Columbia Sportswear reported a 12 percent increase in third-quarter sales to $566.8 million, with a currency-neutral gain of 9 percent. Net income went up by 29 percent to $67.5 million, due in part to lower air freight charges. The biggest growth drivers were the Europe, Middle East and Africa (EMEA) region and footwear.
The net income of the group jumped by 29 percent to $67.5 million. By brand, the Columbia core label improved by 4 percent to $447.8 million in turnover, followed by Mountain Hardwear, the group's high-end brand, which went up by 17 percent to $44.7 million. This brand was clearly surpassed by Sorel, which more than doubled (+116 percent) to $72 million. Apparently, Columbia Sportswear now harvests the fruits from its radical efforts to let Sorel be not only a rugged footwear brand, but also highly desirable fashion gear. Other sales developed by 10 percent to $2.3 million.
The evolution in the third quarter basically reflects the development over the first nine months, even though the performance over the year to this point was even better than the last quarter: Columbia Sportswear as a group went up from $1,026 million to $1,168 million with the Columbia brand in front: Its turnover soared by 9 percent to $975 million. Mountain Hardwear was up by 21 percent to $99.1 million and Sorel by a stunning 119 percent to $86 million.
In terms of geography, all regions went up in the third quarter with the U.S. home market the flattest with an increase of 2 percent to $333.6 million, still representing around 59 percent of the entire business. The shooting star, however, is the EMEA region with an increase of 51 percent to $100.3 million. Latin America and Asia-Pacific jumped by 23 percent to $72.8 million. Canada, a traditionally strong market for the company, improved by 13 percent to $60.1 million.
By category, Columbia Sportswear saw a very interesting development with its apparel business rather flat and an amazing rise of its footwear segment, due to the splendid performance of the Sorel brand. Outerwear dipped by 1 percent to $222.5 million, while sportswear improved by 7 percent to $179.8 million. Footwear, including the brands Columbia, Montrail and Sorel, soared by 55 percent to $128.6 million, meaning that Sorel contributed some 55 percent to the entire group's footwear sales.
In his comments on the third quarter during a conference call with analysts, Tim Boyle, the company's chief executive, explained in detail the recent success, including innovations such as the new heating systems applied to shoes and apparel, which helped to differentiate the company's offer from its competitors. In the U.S., the new city line was well received during its first two months in the shops. According to Boyle, the sales of Sorel footwear will be even more encouraging for the fourth quarter than they were in the previous three months. Sorel is especially well received in Europe.
Columbia also managed to improve in terms of profitability from July through September: The gross profit went up from 42.5 to 44 percent. In the same period, the net income increased from $52.2 million to $67.5 million. After a third quarter that was better than expected, the company is optimistic that it will be able to increase sales by 15-16 percent for the full year, expecting an increase in turnover of 18-20 percent.
Another reason for the positive outlook is the evolution of direct-to-consumer sales, which are expected to represent 25 percent of total sales for the whole year. As announced before, both the Columbia and the Sorel brands have now gone live with online stores in Canada and eight European countries: the U.K., the Netherlands, Belgium, Germany, Austria, France, Italy and Spain. Combining the brands and the already existing web shops in the U.S., South Korea and Japan, there are now 24 localized e-commerce sites serving 12 markets around the globe. They come along with 28 non-commercial sites for Columbia and 20 more for Sorel informing customers in other countries.
Boyle said that he would like to keep the ratio of direct-to-consumer trading at the same level next year, since the focus will continue to serve the wholesalers and retail customers in the first place, while e-commerce activities help boost awareness of brands, also to the benefit of the retail partners. They should remain on the same level in the next years to come. Tom Cusick, chief financial officer, specified that the company opened three doors in the U.S. in the third quarter and intends to add three more stores a year there. A similar number of shops – both franchise and own – are scheduled for Canada and Europe. According to Cusick, Columbia currently runs 112 single-brand doors in Japan and 228 in South Korea through its operations or retail partners. In 2010 the share of direct-to-consumer retailing of the whole business was 22 percent.