A slump of more than 30 percent in sales to distributors in Europe, the Middle East and Africa hurt Columbia Sportswear's performance in the region for the third quarter. Chiefly attributed to Russia, where Columbia works through Sportmaster, this decline could not be entirely compensated with sales expansion at a high-teens rate in constant currencies in European countries covered by the group's own operations. The Columbia brand alone achieved a sales hike at a mid-twenties rate in these markets for the quarter.
The group's sales in EMEA slipped by 3 percent in constant currencies and by 14 percent to $67.4 million in dollars. Tim Boyle, the company's chief executive, said in a conference call that the Columbia brand was continuing its resurgence in markets where the group has its own business. Managers have been rebuilding relationships with key accounts, with a focus on Germany, France and the U.K. Surging sales of trail footwear strongly contributed to the turnover increase in such European markets, and the company anticipates sustaining a comparable expansion rate for the full year.
Boyle added that the European management had raised sales while streamlining the business cost structure. This was achieved on the back of wider supply chain initiatives, although they have yet to be fully implemented in Europe. Boyle declined to provide details on a return to black ink in Europe but he saw continued drive to raise sales and improve profitability in the region next year.
Columbia Sportswear had a sluggish quarter in Latin America and Asia-Pacific, where its sales declined by 5 percent in constant currencies and by 11 percent in dollars to $109.4 million. The company attributed this to falling sales of the Columbia brand in some Asian markets. The company said that new management was tackling issues in South Korea, with a reduction of 26 percent in inventories at the end of the quarter in constant currencies.
However, the issues in Russia and Asia were easily compensated by a sales increase of 26 percent to $513.1 million in the U.S. market, where all of the group's brands were on the rise, led by Columbia and Sorel. Sales were pushed up by earlier deliveries of advance fall orders worth about $40 million, which could lead to a weaker rise in wholesale turnover for the last quarter. The Columbia and Sorel brands drove a sales jump of 39 percent in constant currencies in Canada, where sales advanced by 16 percent in reported terms.
The group's North American turnover amplified by 28 percent in constant currencies for the quarter. The Columbia brand's sales advanced by 23 percent in constant currencies in North America, with strong gains in wholesale along with a 20 percent rise in own retail sales. It enjoyed strong sales of trail footwear and lightweight apparel, as well as outerwear when the weather chilled.
The Sorel brand's sales nearly doubled in the U.S. market for the quarter and they surged by almost 80 percent in constant currencies in all of North America. Again, Boyle pointed to early deliveries, as the Sorel brand sold out last year and there was strong pent-up demand. Apart from winter products, Sorel has been growing sales of fall products, such as wedges, and the brand appears to have much more runway with added categories such as outerwear and international sales.
The entire group's sales were up by 14 percent to $767.6 million, with an increase of 18 percent in constant currencies. The Columbia brand alone raised its sales by 10 percent to $609.7 million, up by 14 percent in constant currencies. Sorel managed a sales increase of 48 percent to $86.2 million, equivalent to a rise of 59 percent before currency impacts.
The Prana brand of yoga and outdoor apparel acquired by the group last year contributed sales of $33.4 million, which was an increase of 22 percent in dollars and in constant currencies. Mountain Hardwear, which was under pressure earlier this year, saw its sales increase by 12 percent to $34.8 million in the quarter, up by 17 percent in constant currencies, which was made easier by the brand's relatively weak performance last year.
Footwear is the category that delivered the fastest sales increase for the quarter, up by 36 percent to $171.5 million. The rise amounted to 46 percent in constant currencies, compared with 12 percent for apparel, accessories and equipment. The reported turnover of $596.1 million in this category was up by 9 percent.
The group's gross profit margin rose by 1.0 percentage point to 46.4 percent. The operating margin amplified by 2.6 percentage points to 17.2 percent and the company ended the quarter with net income of $91.1 million, an increase of 39 percent.
The group's sales for the first nine months of the year amounted to $1,626.8 million, up by 14 percent in dollars. They climbed by 19 percent in constant currencies, driven by an increase of 27 percent in the U.S., while sales inched up by 2 percent in EMEA and 1 percent in Latin America and Asia-Pacific.
Columbia Sportswear's gross margin for the first three quarters climbed by 1.0 percentage point to 46.5 percent. Operating income reached $167.4 million and net income soared by 36 percent to $111.0 million, with incremental profit from the acquisition of Prana.
Upgrading its guidance, Columbia Sportswear predicts a sales increase of about 10.5 percent to more than $2.3 billion for the full year, which would amount to a rise of 14.5 percent in constant currencies. The gross margin is to advance by 0.75 percentage points and the operating margin by 0.9 to 1.0 percentage points, to a range of 10.4 to 10.5 percent. Net income after non-controlling interest is anticipated to reach $165 to $169 million, up by 20 to 23 percent.
Boyle said that the expanded gross margin supported an increase of 13 percent in the marketing spend this year, more than the predicted sales rise of 10.5 percent. Marketing spend would thus amount to 5.4 percent of sales compared with 5.2 percent last year. A few weeks ago the group launched a global integrated campaign worth about $50 million around the Columbia brand.