Columbia Sportswear is having a vintage year, scoring record results for the past two quarters. Revenues rose by 14 percent in the third quarter ended on Sept. 30 to $906.8 million, while net income improved by 19 percent to $119.3 million – both all-time records for the group. The gross margin gained 1.1 percentage points to 49.3 percent, while the operating margin inched up by 0.6 percentage points to 16.8 percent. Net earnings jumped by 19 percent to $119.2 million in the quarter.
The progress was driven mainly by the Columbia and Sorel brands, as retailers replenished inventories before winter. The two brands grew by 14 percent and 27 percent respectively. Mountain Hardwear was back in negative territory, dipping by 1 percent, and Prana was off by 4 percent. The growth was aided by earlier shipment of autumn/winter products, as well as higher closeout sales.
The management said the company is seeing momentum across its various distribution channels and pointed to the financial benefits of its Project Connect, a new transformation plan launched in 2017 and designed to adjust the business to the structural changes facing the retail sector. It includes measures such as driving brand awareness and sales through increased and more-focused demand creation, and enhancing the consumer experience and digital capabilities.
In Europe, the Middle-East and Africa (EMEA), sales were up by 4 percent in terms of dollars. Direct sales and sales to distributors the region both grew by a high single-digit rate. The management said it is continuing to experience a challenging retail environment in several European markets but remains optimistic about long-term growth opportunities given its relatively low market shares today.
The U.S. region showed strong growth in the third quarter with a 17 percent increase for the period, while Canada rose by 22 percent. The Latin America/Asia-Pacific region was up by 4 percent. Columbia is working to turn its China and South Korea businesses positive but Japan was up by high-single digits.
By category, the apparel/accessories/equipment segment advanced by 11 percent to $684.7 million, while footwear jumped by 25 percent to $222.1 million. Revenues from wholesale climbed by 19 percent to $652.6 million, while direct-to-consumer sales improved by 3 percent to $2254.2 million.
During the quarter, the company launched a new technology for non-winter footwear, called Shift, in certain retail chains and some sneaker stores. The shoes, which target younger adults, are aiming to combine city-inspired style and athletic comfort for outdoor activities. Men's Health awarded the Shift OutDry Mid a 2019 sneaker award in the hiking category.
For the first nine months of this year, the group's reported net revenues were up by 11 percent to $2,087.6 million, with a growth of 12 percent on a currency-neutral basis. In terms of local currencies, Columbia Sportswear's sales increased during the first nine months of this year by 8 percent in EMEA, by 5 percent in the LAAP region and by 15 percent in Canada. On the same basis, sales went up by 12 percent for the Columbia brand, by 29 percent for Sorel and declined by 1 percent at Prana and by 2 percent for Mountain Hardwear.
The company raised the low end of its full-year sales guidance, and now expects a growth of 7.5 to 8.5 percent, up from a previous forecast of 7.0 to 8.5 percent, with the gross margin expanding by 0.8 percentage points and the operating margin reaching a level of up to 13.0 percent.
The Columbia brand and Sorel are expected to continue on their growth paths. Mountain Hardwear is expecting a strong quarter, but Prana, which is being challenged by Lululemon, should lose more sales.