Columbia Sportswear’s second quarter wasn’t its best, but its Fall 2024 order book suggests sequential improvement in the quarters ahead for wholesale sales.
Meanwhile, the company seems to be in good shape despite some supply chain disruptions due to the Red Sea issues.
“We continue to monitor disruption options in the Red Sea. At this time, delays appear manageable, and the vast majority of our product line is expected to be delivered on time,” chairman, president and CEO Tim Boyle told investors during a conference call last week.
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And he noted that the company has seen a spike in spot pricing for ocean freight in recent months. “We utilize contracted pricing for the bulk of our ocean freight, which minimizes our exposure to spot pricing. With that said, we have noted an increase in peak season surcharges,” Boyle said.
He explained that the contracts in place are with “high quality carriers that are keeping their contracts.” Boyle also said the company is in good shape because a “fairly good percentage of our merchandise” has already been delivered to the company’s warehouses.
“We’re working to maximize sales in a challenging U.S. marketplace characterized by slow consumer demand and cautious retailers outside the U.S.,” Boyle told investors. “We’re experiencing strong demand for our products in most international markets, including China and Europe.” He also said that China is expected to be one of Columbia’s “fastest growing markets in 2024.”
Boyle said the focus for the company is on returning to growth. At Columbia, the brand working on a strategy to bring in new consumers through an enhancement of its product line. “Our efforts to stabilize Sorel and lay the foundation for its next phase of growth are in motion,” Boyle said, adding that there are signs that PrAna’s turnaround efforts are “on a path to return to growth in the seasons ahead. At Mountain Hardware, he said the brand is benefiting from its recent refresh and “is on track to deliver growth this year.”
Looking ahead, Boyle said that in the back half of the year, the “Fall 2024 order book supports sequential improvement in wholesale sales, with the potential for overall sales to return to growth by the fourth quarter.” That would be an improvement from the tough outdoor and wholesale challenges the company faced in 2024 due to cautious retail partners.
On the innovation front, Boyle said Columbia’s cooling technologies and sun protection products have been key differentiators. Omni-Shade Sun Deflector allows for broad spectrum airflow and provides lightweight, breathable UV protection, he said. Boyle also noted that in the spring, the company introduced its new Omni-Max footwear system featuring versatile cushioning, enhanced stability and increased traction, which is offered in several key footwear styles.
Boyle said this fall, its warming technology Omni-Heat Infinity will be expanded to include Omni-Heat Arctic, a “new biomimicry insulation system inspired by how polar bears keep warm in extreme conditions.”
As for progress thus far, Boyle said the company exited the second quarter with inventory down 29 percent from year-ago levels, and that its Profit Improvement Program is on track to deliver between $75 million to $90 million in cost savings. In addition, he said the company generated operating cash flow of over $100 million through the first half of the year, and is “on track to generate over $350 million in operating cash flow this year.”
For the second quarter ended June 30, the company posted a net loss of $11.7 million, or 20 cents a diluted share, from net income of $8.4 million, or 14 cents, a year ago. Net sales fell 8.2 percent to $570.2 million from $620.9 million.
For the six months, net income dropped nearly 44 percent to $30.6 million, or 51 cents a diluted share, from net income of $54.6 million, or 88 cents, in the same year-ago period. Net sales were down 7 percent to $1.34 billion from $1.44 billion.
For the full year 2024 outlook, Columbia is projecting net income between $215 million to $239 million, with diluted earnings per share (EPS) between $3.65 to $4.05, on a net sales decrease of 2 percent to 4 percent, or between $3.35 billion to $3.42 billion. The net income projection is slightly below the prior estimated range of $217 million to $240 million.
For the third quarter, diluted EPS was guided to $1.27 to $1.43, with net sales down 3 percent to 6 percent, or $927 million to $959 million.
