17 Feb Columbia Sportswear Posts Record Q4 Results
Columbia Sportswear Company reported record fourth quarter net sales of $699.4 million for the period ending Dec. 31, 2015, a 3 percent increase (7 percent constant-currency) compared with net sales of $677.0 million for the fourth quarter of 2014.
Fourth quarter 2015 operating income increased to a fourth quarter record $82.3 million. Fourth quarter 2015 net income increased 14 percent to $63.4 million, or $0.90 per diluted share, also a fourth quarter record, compared with fourth quarter 2014 net income of $55.6 million, or $0.79 per diluted share.
Full year 2015 net sales increased $225.6 million, or 11 percent (15 percent constant-currency), to a record $2.33 billion, while operating income increased 26 percent to a record $249.7 million, representing operating margin of 10.7 percent compared with operating margin of 9.5 percent in 2014. Full year 2015 net income, including five months of incremental results from the prAna brand, increased 27 percent to a record $174.3 million, or $2.45 per diluted share, compared with full year 2014 net income of $137.2 million, or $1.94 per diluted share.
Chief Executive Officer Tim Boyle commented, “2015 was another outstanding year for Columbia Sportswear Company. Record net sales, record operating income, expanded operating margin, and record net income validate that our strategies are driving growth and improved profitability. The Columbia, Sorel, and prAna brands each generated double digit constant-currency net sales growth, concentrated in North America. In Europe, the Columbia brand achieved mid-20-percent constant-currency growth and began reclaiming share in key markets.
“We had high expectations entering the year and are encouraged that we exceeded those expectations despite unseasonably warm weather, macroeconomic challenges, and currency headwinds in many of our key markets. We believe this illustrates that active consumers appreciate the versatility and relevance of our brands, each offering products that connect them with their passions year-round in all weather conditions.”
Boyle concluded, “Looking forward to 2016, our balance sheet gives us the financial flexibility to continue to drive sales growth, expand gross margins, increase brand awareness through investments in demand-creation, and prioritize SG&A investments strategically to further strengthen our brands and improve profitability.”
Fourth Quarter Results
(All comparisons are between fourth quarter 2015 and fourth quarter 2014, unless otherwise noted.)
Fourth quarter consolidated net sales growth of 3 percent (7 percent constant-currency) was driven by U.S. net sales growth of 10 percent to $446.2 million, reflecting growth from the Columbia, Sorel, prAna and Mountain Hardwear brands. This growth was partially offset by:
- a 15 percent net sales decline (6 percent constant-currency) in the Europe/Middle East/Africa (EMEA) region to $58.2 million, including mid-teen constant-currency net sales growth in the company’s Europe-direct business (flat in U.S. dollars) that was more than offset by a decline of more than 30 percent in net sales to EMEA distributors;
- a 4 percent net sales decline (2 percent growth constant-currency) in the Latin America/Asia Pacific (LAAP) region to $149.7 million, including net sales growth of more than 40 percent to LAAP distributors that was more than offset by net sales declines in the company’s Asian markets, although Japan and China posted net sales growth on a constant-dollar basis; and
- a 7 percent net sales decline (10 percent growth in constant-currency) in Canada. (See “Geographical Net Sales” table below.)
Global Columbia brand net sales of $528.9 million increased less than 1 percent compared with the fourth quarter of 2014 (up 3 percent constant-currency). Global Sorel brand net sales increased 14 percent (21 percent constant-currency) to $105.3 million. Global prAna brand net sales increased 39 percent (39 percent constant-currency) to $27.7 million, and global Mountain Hardwear brand net sales increased 2 percent (5 percent constant-currency) to $35.2 million. (See “Brand Net Sales” table below.)
Global Apparel, Accessories & Equipment net sales increased 1 percent (4 percent constant-currency) to $515.6 million, and Footwear net sales increased 10 percent (16 percent constant-currency) to $183.8 million. (See “Categorical Net Sales” table below.)
Fourth quarter income from operations totaled $82.3 million, or 11.8 percent of net sales, compared to $82.1 million, or 12.1 percent of net sales, for the same period in 2014.
Fourth quarter net income increased 14 percent to $63.4 million, or $0.90 per diluted share. Net income for same period in 2014 totaled $55.6 million, or $0.79 per diluted share.
Fiscal Year 2015 Results
(All comparisons are between fiscal 2015 and fiscal 2014, unless otherwise noted.)
Consolidated 2015 net sales increased 11 percent (15 percent constant-currency) to $2.33 billion, compared with 2014 net sales of $2.10 billion. Organic growth equated to approximately 8 percent (12 percent constant-currency), excluding five months of incremental net sales of approximately $56.0 million from the prAna brand, which the company acquired in May 2014.
Consolidated 2015 net sales growth of 11 percent included:
- 21 percent growth in U.S. net sales, to $1.46 billion, including five months of incremental prAna net sales of approximately $48.5 million. Organic U.S. net sales increased 17 percent.
- 11 percent net sales growth in Canada (30 percent constant-currency) to $168.6 million.
- A 10 percent net sales decline in the EMEA region (flat constant-currency) to $233.2 million, reflecting a low single-digit net sales increase (low 20-percent constant-currency) in the company’s Europe-direct markets, more than offset by a mid-20-percent decline in net sales to EMEA distributors.
- A 5 percent net sales decline in the LAAP region (2 percent growth constant-currency) to $469.2 million, reflecting mid-20-percent growth in net sales to LAAP distributors, more than offset by lower sales in Korea and Japan although, on a constant-currency basis, Japan posted net sales growth. Net sales in China were essentially flat (2 percent growth constant-currency). (See “Geographical Net Sales” table below.)
Global Columbia brand net sales increased 7 percent (10 percent constant-currency) to $1.86 billion. Global Sorel brand net sales increased 26 percent (34 percent constant-currency) to $209.2 million. Global prAna brand net sales increased 133 percent to $125.3 million, including approximately $56.0 million of incremental net sales in the first five months of 2015. Global Mountain Hardwear brand net sales declined 3 percent (increased 1 percent constant-currency) to $116.3 million. (See “Brand Net Sales” table below.)
Global Apparel, Accessories & Equipment net sales increased 9 percent (12 percent constant-currency) to $1.82 billion. Global Footwear net sales increased 19 percent (26 percent constant-currency) to $505.0 million. (See “Categorical Net Sales” table below.)
Full year 2015 income from operations, including accretion from the prAna brand, increased 26 percent to $249.7 million, or 10.7 percent of net sales, compared with full year 2014 income from operations of $198.8 million, or 9.5 percent of net sales.
Full year 2015 net income totaled $174.3 million, or $2.45 per diluted share, an increase of 27 percent compared with 2014 net income of $137.2 million, or $1.94 per diluted share.
2016 Financial Outlook
The company currently expects mid-single-digit 2016 net sales growth compared to 2015 net sales of $2.33 billion, including approximately 1 percentage point negative effect from changes in foreign currency exchange rates.
The company expects fiscal year 2016 gross margins to improve by up to 40 basis points, and for selling, general and administrative expenses to increase at a rate slightly faster than net sales, resulting in approximately 40 basis points of SG&A expense deleverage, including a planned increase in global demand-creation spend to 5.4 percent of sales from 5.2 percent in 2015.
Based on the above assumptions, the company expects operating income to increase up to 7 percent, to between $257 million and $267 million, resulting in anticipated 2016 operating margin of up to 10.8 percent. Net income after non-controlling interest is expected to be between approximately $179 million and $186 million, or approximately $2.55 to $2.65 per diluted share. The strengthening of the U.S. Dollar is expected to have an unfavorable impact of approximately $(0.28) on full year 2016 earnings per share, compared to an estimated unfavorable impact of $(0.10) per share in 2015, comprising lower gross margins within many of our foreign subsidiaries as a result of increased costs of inventory, and, to a lesser degree, the translation of net income, revaluation of foreign-currency denominated assets and liabilities, and net losses on the settlement of intercompany transactions.
The company’s annual net sales are weighted more heavily toward the fall/winter season, while operating expenses are more equally distributed throughout the year, resulting in a highly seasonal profitability pattern weighted toward the second half of the fiscal year.