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Columbia Sportswear Q3 Earnings Beat, Soft Demand Hurts Sales
COLMColumbia(COLM) ZACKS·2024-10-31 18:46

Core Insights - Columbia Sportswear Company (COLM) reported a decline in both earnings and net sales for Q3 2024, with earnings per share at 1.56,down8.21.56, down 8.2% year-over-year, but exceeding the Zacks Consensus Estimate of 1.36. Net sales fell 5% to 931.8million,missingtheconsensusmarkof931.8 million, missing the consensus mark of 947 million [1][4]. Financial Performance - The gross margin improved by 150 basis points to 50.2%, attributed to lower inbound freight costs and a favorable sales mix, despite negative impacts from foreign exchange hedging [5]. - Selling, General and Administrative (SG&A) expenses rose 2.7% to 361.2million,withapercentageofsalesincreasingto38.8361.2 million, with a percentage of sales increasing to 38.8%. The rise was mainly due to higher direct-to-consumer (DTC) and incentive compensation costs [6]. - Operating profit decreased 16.4% to 112.5 million, with the operating margin contracting 160 basis points to 12.1% [6]. Sales Performance by Region - In the United States, net sales dropped 10% to 571.3million.Conversely,Europe,MiddleEast,andAfrica(EMEA)sawa10571.3 million. Conversely, Europe, Middle East, and Africa (EMEA) saw a 10% increase in net sales to 141.8 million, while Latin America and Asia Pacific (LAAP) net sales rose 17% to 135million.Canadiansalesfell21135 million. Canadian sales fell 21% to 83.7 million [7]. Product Category Performance - Net sales in the Apparel, Accessories, and Equipment category increased by 1% to 735.4million,whileFootwearsalesdeclinedby23735.4 million, while Footwear sales declined by 23% to 196.4 million [8]. - Sales for the Columbia, SOREL, and prAna brands decreased by 1%, 39%, and 7%, respectively, while Mountain Hardwear brand sales increased by 2% [9]. Cash Flow and Capital Management - As of September 30, 2024, the company had cash and cash equivalents of 306.7millionandnodebt.Inventoriesdecreasedby10306.7 million and no debt. Inventories decreased by 10% to 798.2 million [10]. - For the first nine months of 2024, operating cash flow was 76.6million,withcapitalexpendituresof76.6 million, with capital expenditures of 41.7 million. The company anticipates operating cash flow of at least 300millionforthefullyear[11].ShareRepurchaseandDividends−Thecompanyrepurchased2,916,970sharesfor300 million for the full year [11]. Share Repurchase and Dividends - The company repurchased 2,916,970 shares for 230.9 million in the first nine months of 2024 and announced a 600millionincreaseinitssharerepurchaseauthorization.Aquarterlycashdividendof30centspershareisscheduledforDecember4,2024[12].FutureOutlook−For2024,ColumbiaSportswearexpectsnetsalestodeclineby3−5600 million increase in its share repurchase authorization. A quarterly cash dividend of 30 cents per share is scheduled for December 4, 2024 [12]. Future Outlook - For 2024, Columbia Sportswear expects net sales to decline by 3-5% to a range of 3.31-3.38billion,withgrossmarginanticipatedtoexpandby40−90basispoints[14].−Thecompanyprojectsoperatingincomebetween3.38 billion, with gross margin anticipated to expand by 40-90 basis points [14]. - The company projects operating income between 257-284millionandearningspershare(EPS)intherangeof284 million and earnings per share (EPS) in the range of 3.70-4.05for2024[15].−ForQ42024,netsalesareexpectedtodeclineby24.05 for 2024 [15]. - For Q4 2024, net sales are expected to decline by 2% to a range of 1,040-1,110million,withanoperatingincomeforecastof1,110 million, with an operating income forecast of 123-$151 million [16].