Columbia(COLM) - 2024 Q3 - Quarterly Results

Financial Highlights and Outlook Third Quarter 2024 Highlights In Q3 2024, Columbia Sportswear experienced a 5% decrease in net sales to $931.8 million and a decline in diluted EPS to $1.56 from $1.70 in the prior year Despite the sales dip, the company maintained a strong balance sheet with $373.9 million in cash and no debt, and announced a new 'ACCELERATE Growth Strategy' to elevate the Columbia brand Q3 2024 Financial Highlights | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $931.8 million | $985.7 million | -5% | | Operating Income | $112.5 million | $134.6 million | -16.4% | | Operating Margin | 12.1% | 13.7% | -160 bps | | Diluted EPS | $1.56 | $1.70 | -8.2% | - The company ended the quarter with a strong liquidity position, holding $373.9 million in cash, cash equivalents, and short-term investments, with no outstanding borrowings[1] - A new 'ACCELERATE Growth Strategy' was announced, aimed at elevating the Columbia brand[1] - The Board of Directors approved a $600 million increase to the company's share repurchase authorization on October 24, 2024[1] Full Year 2024 Financial Outlook Summary The company updated its full-year 2024 outlook, lowering its net sales forecast to a range of $3.31 to $3.38 billion, which represents a sales decline of 3.0% to 5.0% The diluted EPS forecast is now projected to be between $3.70 and $4.05, while the operating margin is expected to be between 7.7% and 8.4% Full Year 2024 Financial Outlook Comparison | Metric | Updated FY 2024 Outlook (Billions USD) | Prior FY 2024 Outlook (Billions USD) | | :--- | :--- | :--- | | Net Sales | $3.31 to $3.38 billion | $3.35 to $3.42 billion | | Net Sales Growth | -5.0% to -3.0% | -4.0% to -2.0% | | Operating Income | $257 to $284 million | $256 to $288 million | | Operating Margin | 7.7% to 8.4% | 7.7% to 8.4% (Unchanged) | | Diluted EPS | $3.70 to $4.05 | $3.65 to $4.05 | Management Commentary and Strategy CEO Commentary CEO Tim Boyle noted that Q3 results were characterized by strong performance in most international markets, which was offset by continued weakness in North America Warm weather negatively impacted early-season demand for Fall 2024 products However, he expressed confidence in the company's product innovations and the newly launched ACCELERATE Growth Strategy - Third-quarter performance showed a contrast between robust international markets and persistent softness in North America[4] - Warm weather has dampened early demand for Fall 2024 cold-weather products[4] - The company is focusing on key product innovations like Omni-Heat Infinity, Omni-Heat Arctic, and the Omni-Max footwear platform[4] - The company maintains a strong financial position with over $370 million in cash and short-term investments and no bank borrowings[6] ACCELERATE Growth Strategy The company has launched 'ACCELERATE,' a multi-year growth strategy designed to elevate the Columbia brand and attract younger, more active consumers This initiative involves consumer-centric shifts across brand, product, and marketplace strategies, supported by enhanced operational methods - The ACCELERATE strategy is a multi-year effort to elevate the Columbia brand and attract a younger, more active consumer base[5][9] - Key strategic priorities include accelerating profitable growth, creating iconic and innovative products, driving brand engagement, enhancing consumer experiences, and amplifying marketplace excellence with a digitally-led approach[7] Detailed Financial Performance Third Quarter 2024 Financial Results For the third quarter of 2024, net sales fell 5% to $931.8 million due to lower wholesale orders and weak U.S. demand Gross margin improved by 150 basis points to 50.2%, driven by lower freight costs However, higher SG&A expenses led to a decrease in operating income to $112.5 million, with an operating margin of 12.1% Net income was $90.2 million, or $1.56 per diluted share Q3 2024 Detailed Financial Results | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | | :--- | :--- | :--- | | Net Sales | $931.8 million | $985.7 million | | Gross Margin | 50.2% | 48.7% | | SG&A Expenses | $361.2 million (38.8% of sales) | $351.6 million (35.7% of sales) | | Operating Income | $112.5 million | $134.6 million | | Net Income | $90.2 million | $103.5 million | | Diluted EPS | $1.56 | $1.70 | - The decline in net sales was attributed to lower Fall '24 wholesale orders and weak consumer demand in the U.S., partly due to warm weather[10] - Gross margin expansion was primarily due to lower inbound freight costs and favorable channel/region mix, partially offset by unfavorable FX hedging[11] First Nine Months 2024 Financial Results In the first nine months of 2024, net sales decreased by 6% to $2.27 billion Gross margin saw a slight expansion of 60 basis points to 49.8% Operating income fell significantly to $133.4 million from $197.2 million in the prior year, resulting in a lower operating margin of 5.9% Consequently, net income declined to $120.7 million, with diluted EPS at $2.04 Nine Months 2024 Financial Results | Metric | Nine Months 2024 (Millions USD) | Nine Months 2023 (Millions USD) | | :--- | :--- | :--- | | Net Sales | $2,272.0 million | $2,427.2 million | | Gross Margin | 49.8% | 49.2% | | Operating Income | $133.4 million | $197.2 million | | Operating Margin | 5.9% | 8.1% | | Net Income | $120.7 million | $158.1 million | | Diluted EPS | $2.04 | $2.56 | Balance Sheet and Cash Flow Analysis As of September 30, 2024, the company's balance sheet remained strong with cash and short-term investments increasing to $373.9 million and no borrowings Inventories were successfully reduced by 10% to $798.2 million For the first nine months, net cash used in operating activities was $76.6 million, a shift from cash provided in the same period last year Balance Sheet Summary | Balance Sheet Item | Sep 30, 2024 (Millions USD) | Sep 30, 2023 (Millions USD) | | :--- | :--- | :--- | | Cash & Short-Term Investments | $373.9 million | $214.8 million | | Inventories | $798.2 million | $885.2 million | | Borrowings | $0 | $0 | - Net cash used in operating activities for the first nine months was $76.6 million, compared to net cash provided of $22.2 million in the prior-year period[18] Shareholder Returns Share Repurchases During the first nine months of 2024, the company repurchased approximately 2.9 million shares for $230.9 million To continue its capital return program, the Board of Directors authorized an additional $600 million for share repurchases in October 2024 - In the first nine months of 2024, the company repurchased 2,916,970 shares of common stock for a total of $230.9 million, at an average price of $79.15 per share[19] - On October 24, 2024, the Board authorized a $600 million increase to the share repurchase program[20] Quarterly Cash Dividend The Board of Directors has approved a regular quarterly cash dividend of $0.30 per share - A quarterly cash dividend of $0.30 per share will be paid on December 4, 2024, to shareholders of record on November 20, 2024[21] Detailed Financial Outlook Full Year 2024 Financial Outlook The company has revised its full-year 2024 guidance, now expecting net sales between $3.31 and $3.38 billion, a decrease of 3.0% to 5.0% Gross margin is anticipated to expand by 40 to 90 basis points Operating income is projected to be $257 to $284 million, with diluted EPS in the range of $3.70 to $4.05 Full Year 2024 Revised Financial Outlook | Metric | Full Year 2024 Outlook | | :--- | :--- | | Net Sales | $3.31 to $3.38 billion (-5.0% to -3.0% change) | | Gross Margin | 50.0% to 50.5% (+40 to +90 bps expansion) | | Operating Income | $257 to $284 million | | Operating Margin | 7.7% to 8.4% | | Diluted EPS | $3.70 to $4.05 | | Operating Cash Flow | At least $300 million | | Capital Expenditures | $60 to $70 million | - Foreign currency is expected to have a modestly unfavorable impact on net sales and an approximately $0.01 negative impact on diluted EPS[26] Fourth Quarter 2024 Financial Outlook For the fourth quarter of 2024, the company anticipates net sales between $1.04 and $1.11 billion, representing a change of -2% to +5% year-over-year Operating income is expected to be in the range of $123 to $151 million, with diluted EPS forecasted between $1.68 and $2.03 Q4 2024 Financial Outlook | Metric | Q4 2024 Outlook (Millions USD) | | :--- | :--- | | Net Sales | $1,040 to $1,110 million | | Sales Growth | -2% to +5% | | Operating Income | $123 to $151 million | | Operating Margin | 11.8% to 13.6% | | Diluted EPS | $1.68 to $2.03 | Preliminary First Half 2025 Commentary Based on its Spring 2025 orderbook, the company is providing a preliminary forecast for the first half of 2025, expecting mid-single-digit percentage growth in global wholesale net sales - The company forecasts mid-single-digit percent growth in global wholesale net sales for the first half of 2025, reflecting growth across all regions and in the Columbia, prAna, and Mountain Hardwear brands[27] Supplemental Financial Information and Statements Net Sales Performance by Segment The company's net sales performance varied significantly across segments In Q3, U.S. sales declined 10%, while LAAP and EMEA regions grew 17% and 10%, respectively For the first nine months, the U.S. was down 11% By brand, SOREL experienced a sharp 39% decline in Q3, while Mountain Hardwear grew 2% By channel, DTC sales grew 2% in Q3, while Wholesale declined 9% Q3 2024 Net Sales Breakdown Q3 2024 Net Sales by Segment | Segment | Q3 2024 Net Sales (Millions USD) | YoY % Change (Reported) | | :--- | :--- | :--- | | By Geography | | | | United States | $571.3 million | -10% | | LAAP | $135.0 million | 17% | | EMEA | $141.8 million | 10% | | Canada | $83.7 million | -21% | | By Brand | | | | Columbia | $799.7 million | -1% | | SOREL | $73.9 million | -39% | | prAna | $28.6 million | -7% | | Mountain Hardwear | $29.6 million | 2% | | By Product | | | | Apparel, Acc. & Equip. | $735.4 million | 1% | | Footwear | $196.4 million | -23% | | By Channel | | | | Wholesale | $605.2 million | -9% | | DTC | $326.6 million | 2% | Nine Months 2024 Net Sales Breakdown Nine Months 2024 Net Sales by Segment | Segment | Nine Months 2024 Net Sales (Millions USD) | YoY % Change (Reported) | | :--- | :--- | :--- | | By Geography | | | | United States | $1,385.9 million | -11% | | LAAP | $373.2 million | 8% | | EMEA | $350.2 million | 3% | | Canada | $162.7 million | -15% | | By Brand | | | | Columbia | $1,972.2 million | -4% | | SOREL | $140.6 million | -36% | | prAna | $81.7 million | -10% | | Mountain Hardwear | $77.5 million | 7% | | By Product | | | | Apparel, Acc. & Equip. | $1,818.4 million | -2% | | Footwear | $453.6 million | -21% | | By Channel | | | | Wholesale | $1,274.5 million | -12% | | DTC | $997.5 million | 2% | Consolidated Financial Statements The report includes unaudited condensed consolidated financial statements for the period ended September 30, 2024 These statements provide detailed financial data, including the Balance Sheets, Statements of Operations, and Statements of Cash Flows, which form the basis for the financial analysis presented in this report