Columbia(US:COLM)2022-10-28 01:16Financial Data and Key Metrics Changes - Third quarter net sales grew 19% on a reported basis and 22% on a constant currency basis [9] - Diluted earnings per share increased 18% to $1.80 [9] - Gross margin contracted 270 basis points primarily due to higher inbound expenses [9] - Operating margin contracted 140 basis points [9] Business Line Data and Key Metrics Changes - SOREL brand net sales increased 28% year-over-year, driven by function-first fashion footwear [6][19] - Columbia brand net sales grew 19%, with balanced growth across apparel and footwear [14] - DTC (Direct-to-Consumer) business was up 8%, with 9% growth in e-commerce and 8% in brick-and-mortar [9] Market Data and Key Metrics Changes - US net sales increased 19%, with mid-20% wholesale growth [10] - Latin America and Asia Pacific region net sales increased 24% [12] - EMEA (Europe, Middle East, Africa) net sales increased 54% [13] Company Strategy and Development Direction - The company aims to align inventory with anticipated demand and manage excess inventory effectively [7][8] - Focus on innovations like Omni-Heat Infinity and Omni-Heat Helix to differentiate products [14][15] - Continued investment in footwear as a growth accelerator for the Columbia brand [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the threat of recession impacting the market but expressed confidence in their strategies [7][8] - Anticipated headwinds in the fourth quarter due to higher order cancellation risk and a more promotional environment [7] - Reiterated full-year net sales and diluted earnings per share outlook, expecting 10% to 12% net sales growth [21] Other Important Information - Inventory levels increased by 47% exiting the third quarter [7] - The company plans to liquidate excess inventory through regular retail sales and outlet stores [26][64] - The partnership with Dude Perfect aims to enhance brand engagement and consumer experiences [17] Q&A Session Summary Question: Can you elaborate on cancellations and inventory adjustments? - Cancellations were nearly 100% due to late deliveries, primarily affecting fall '22 products [26] - Retailers ended up with low inventories from the previous season, indicating a potentially good season ahead [27] Question: What is the strength of SOREL's sales by gender? - SOREL's sales are predominantly women's, with 80% of sales being non-winter styles [30] Question: What is driving the change in footwear growth guidance? - Slight shifts in revenue from Q3 to Q4 due to timing of wholesale shipments and cancellations [32] Question: How is the company performing in Europe and China? - The European market is performing well despite economic pressures, and the Chinese market shows resilience with strong e-commerce performance [35][36] Question: What is the outlook for gross margins and promotional activity? - Increased promotional activity is expected in Q4 due to inventory levels across the industry [39] Question: Will some inventory be held for future sales? - The intention is to manage inventory liquidation over the next several quarters rather than holding for future seasons [62][64]