A rebound in European sales helped Columbia Sportswear to post a 15.6 percent increase in total revenues to $324.2 million for the second quarter ended June 30. For the whole Europe, Middle East and Africa (EMEA) region, they were up by 39.1 percent to $72.9 million in the quarter, with two percentage points attributable to currencies, and they were lifted in particular by the success of Columbia's trail and hiking shoes.
The increase in EMEA accounted for 45 percent of the total growth in the group's revenues for the period. An additional share of 34 percent came from an 18.3 percent jump to $96.1 million in the group's revenues from the Asia-Pacific and Latin America regions. Incremental revenues from Columbia's new joint venture in China more than made up for small declines in South Korea and Japan.
Tim Boyle, president and chief executive, pointed out that Korea has become one of the most challenging markets for the group. He said that it has become “highly promotional and heavily inventoried” because the recent strong popularity of outdoor lifestyles has triggered a rush into the market by local and international brands.
Meanwhile, China is poised to eventually become a bigger market than the U.S. for the group. This is in line with the general evolution of the Chinese and Korean outdoor markets, on which we are reporting in detail in The Outdoor Industry Compass.
The group's sales in the U.S. grew at a more modest pace of 4.6 percent to $146.3 million, and they would have been flat without a first-time contribution of $5.5 million from the recently acquired Prana brand. Sales in Canada rose by 39.1 percent to $8.9 million.
On a global basis, the Columbia brand raised its sales by 15.2 percent to $291.0 million. Sorel inched up by 3.4 percent to $3.0 million, and the management feels that it is making progress as a brand for the autumn season. Mountain Hardwear declined by 3.1 percent to $21.8 million.
In terms of products, footwear made a big jump of 36.6 percent to $61.2 million across all the brands. Boyle noted that Columbia Trail shoes have been gaining momentum in key markets around the world, leading more consumers to perceive Columbia as a broad-based, year-round outdoor footwear brand rather than a winter-specific brand. The group's sales of apparel, accessories and equipment rose by 11.6 percent to $263 million in the quarter.
Columbia Sportswear's gross margin improved by 1.5 percentage points to 44.4 percent. Operating expenses rose by three full percentage points as a percentage of sales, leading to a 70 percent higher operating loss of $17.0 million in the second quarter, which is the least profitable for the group throughout the year. Still, net losses were down to $6,329,000 from $7,077,000 a year ago.
The management has raised its projections for the full financial year. Group revenues are seen rising by between 19 and 21 percent, reaching a level of between $2.01 billion and $2.04 billion, including $155 million for the new joint Chinese venture with Swire and $55 million from Prana. Organically, the growth is projected at 18 percent. The operating margin looks set to reach 8.3 percent, with 0.5 percentage points coming from Prana. Net earnings could grow to an implied level of between $115 million and $120 million for the year as compared to $93.6 million in 2013.