Columbia Sportswear's sales were flat on a constant-currency basis in Europe, the Middle East and Africa (EMEA) during the third quarter ended Sept. 30. In terms of dollars, EMEA sales increased by 1 percent to $78.8 million.
The group's revenues were up in dollars by 26 percent in the U.S. and by 34 percent in Canada. They jumped by 72 percent in the Latin America/Asia Pacific (LAAP) region, where incremental sales of $50.7 million from the new Chinese joint venture with Swire contributed to reach a regional turnover of $123.5 million, despite a decline in the important South Korean market.
The acquisition of Prana led to extra sales of $28.2 million in the period. The brand's sales continued to grow rapidly in the quarter, rising by 19 percent asncompared to the year-ago period.
The group's organic sales went up by 14 percent in the quarter, but Prana and the establishment of its Chinese joint venture helped to boost the total turnover by 29 percent to $675.3 million.
The gross margin improved by one percentage point to 45.4 percent, and the group ended up with a 20 percent increase in net income to $65.6 million.
The company plans to continue to invest the extra margins in advertsiing. It has raised the marketing budget for this year by $34 million, lifting it from 4.6 to 5.4 percent of revenues.
The company will also invest more in single-brand stores in the U.S. It plans to open three new Columbia stores, two Performance Fishing Gear (PFG) stores and one pop-up Sorel shop in New York. Measuring 3,176 square feet, the first PFG came onstream on Oct. 30 in the Avalon Mall of Alpharetta, Georgia, offering innovative accessories in addition to its new apparel and footwear products in this sector.
A strong order book for next spring and rising retail sales have led the management to improve its forecast for this year, with sales and profits rising by 22 percent and 35 percent, respectively, and to predict another double-digit increase in revenues for 2015. The operating margin should continue to iprove, getting closer to a long-terl goal of around 15 percent.
All the subsidiaries reported higher sales in the third quarter except for Mountain Hardwear, which is expected to resume growth in 2015. The Columbia and Sorel brands had an outstanding performance in North America, and the Columbia brand strengthened its position in the European markets that are directly controlled by the group.
Sales of apparel, accessories and equipment enjoyed a global sales increase of 28 percent to $549.4 million, driven by fleece, rainwear and insulated products including Columbia's much-advertised TurboDown.
Columbia's trail running shoes and Sorel's new lightweight products contributed to a 33 percent jump in the group's footwear sales to $125.9 million.
The management sees labor costs stabilizing. It is worried about rising leather prices, but they should be partially offset by the lower cost of cotton and oil.