PORTLAND, Ore.--(BUSINESS WIRE)-- Columbia Sportswear Company (COLM) today announced that net sales for the quarter ended June 30, 2015 grew 17 percent (21 percent constant-dollar), to a second-quarter record $380.2 million, compared with net sales of $324.2 million for the same period in 2014.
Second quarter 2015 net loss totaled $6.5 million, or $(0.09) per share. Second quarter 2014 net loss totaled $6.3 million, or $(0.09) per share, including a net tax benefit of $5.6 million, or $0.08 per share, from the favorable resolution of uncertain tax positions, and acquisition costs totaling approximately $2.1 million net of tax, or $(0.03) per share, related to the purchase of prAna Living, LLC.
Through the first six months of 2015, the company’s net sales grew $110.9 million, or 15 percent (19 percent constant-dollar), to $859.2 million, compared to $748.3 million in the first half of 2014, including approximately $57.7 million of incremental net sales from the prAna brand.
First-half 2015 operating income, including accretion from the prAna brand, grew 90 percent, to $35.2 million, compared with operating income of $18.5 million in the first half of 2014, which included acquisition costs totaling approximately $3.4 million related to the purchase of prAna Living, LLC.
First half net income increased 25 percent, to $19.9 million, or $0.28 per diluted share, compared with net income of $15.9 million, or $0.23 per diluted share, in last year’s first half, which included the net tax benefit of $5.6 million, or $0.08 per diluted share, noted above, and acquisition costs totaling approximately $2.1 million net of tax, or $(0.03) per diluted share, related to the purchase of prAna Living, LLC.
Tim Boyle, Columbia’s chief executive officer, commented, “Our exceptional first-half results and our improved full year outlook illustrate the increasing earnings power of our expanded brand portfolio, seasonally diverse product offerings, and enhanced operational platforms. Strong sell-through of Spring 2015 products in North America and Europe drove demand in the second quarter and is fueling encouraging Spring 2016 wholesale advance orders.”
Boyle concluded, “We enter the Fall season with robust momentum in North America behind our Columbia, Sorel and prAna brands. In addition, we are gaining traction with the Columbia brand in Europe, despite slow economic growth in that region. As planned, with earlier receipt of Fall season inventory, we are very well positioned to deliver against our strong Fall advance order book. Together, these factors give us confidence in our expectations to deliver mid-teen constant-dollar net sales growth, operating margin of approximately 10.3 percent, and better than expected earnings growth in 2015.”
Second Quarter Results
(All comparisons are between second quarter 2015 and second quarter 2014, unless otherwise noted.)
The second quarter is the company’s smallest revenue quarter, historically accounting for a mid-teens percentage of annual net sales. As a result, year-over-year regional, brand and category net sales comparisons often produce large percentage variances in relation to the prior year’s comparable period due to the small base of comparison and shifts in the timing of shipments which, when coupled with the company’s fixed cost structure, can have an amplified effect on operating results.
U.S. net sales increased 45 percent, including $19.0 million of incremental prAna net sales. Net sales in Canada increased 27 percent (43 percent constant-dollar), including $1.0 million of incremental prAna net sales. Latin America/Asia Pacific (LAAP) region net sales increased 1 percent (7 percent constant-dollar), including $0.3 million of incremental prAna net sales. Europe/Middle East/Africa (EMEA) region net sales decreased 18 percent (11 percent constant-dollar), including $0.3 million of incremental prAna net sales. (See “Geographical Net Sales” table below.)
Columbia brand net sales increased 12 percent (16 percent constant-dollar) to $325.1 million. Sorel brand net sales increased 43 percent to $4.3 million. Mountain Hardwear net sales decreased 3 percent to $21.2 million. prAna net sales totaled $26.1 million, including $20.6 million of incremental sales. (See “Brand Net Sales” table below.)
Apparel, Accessories & Equipment net sales increased 18 percent (21 percent constant-dollar) to $310.2 million, and Footwear net sales increased 14 percent (21 percent constant-dollar) to $70.0 million. (See “Categorical Net Sales” table below.)
Balance Sheet and Cash Flow
The company ended the quarter with $417.5 million in cash and short-term investments, compared with $394.4 million at June 30, 2014.
Consolidated inventories of $581.0 million at June 30, 2015 were 27 percent higher compared with the $456.4 million balance at June 30, 2014, in line with our expectations. The majority of inventory growth at June 30, 2015 was concentrated in North America and resulted from earlier production of Fall 2015 inventory that was in-transit or on-hand to meet earlier requested delivery of increased Fall 2015 advance wholesale orders, and to support our expanded North American direct-to-consumer business.
The company paid quarterly cash dividends of $21.1 million during the first half of 2015 and repurchased approximately 259,000 shares of common stock for an aggregate purchase price of approximately $14.5 million in the second quarter of 2015. Approximately $229.0 million remains available under the current repurchase authorization, which does not obligate the company to acquire any specific number of shares or to acquire shares over any specified period of time.
The board of directors authorized a regular quarterly dividend of $0.15 per share, payable on September 3, 2015 to shareholders of record on August 20, 2015.
Upward-Revised 2015 Financial Outlook
All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ, perhaps materially. The company’s annual net sales are weighted more heavily toward the second half of the fiscal year, 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.
The company expects low double-digit percentage 2015 net sales growth (mid-teen percentage constant-dollar growth) compared to 2014 net sales of $2.1 billion.
The company expects fiscal year 2015 gross margins to improve by approximately 50 basis points, and selling, general and administrative expenses to increase at a rate slightly lower than anticipated sales growth, generating approximately 30 basis points of operating expense leverage.
Based on the above assumptions, the company expects:
- high-teen percentage growth in operating income, generating operating margin of approximately 10.3 percent, compared with operating income of $198.8 million and operating margin of 9.5 percent in 2014;
- an effective tax rate of approximately 28.0 percent; and
- net income after non-controlling interest of approximately $160 million to $168 million, or approximately $2.25 to $2.35 per diluted share, an increase of approximately 17 percent to 22 percent compared with net income of $137.2 million, or $1.94 per diluted share, in 2014.
The above full year outlook includes an estimated unfavorable impact of approximately $0.11 per diluted share from the stronger U.S. Dollar, resulting from lower gross margins within our foreign subsidiaries as a result of increased costs of inventory and, to a lesser degree, the translation of net income.
About Columbia Sportswear
Columbia Sportswear Company has assembled a portfolio of brands for active lives, making it a leader in the global active lifestyle apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, the company’s brands are currently sold in approximately 100 countries. In addition to the Columbia® brand, Columbia Sportswear Company also owns the Mountain Hardwear®, Sorel®, prAna®, Montrail® and OutDry® brands. To learn more, please visit the company's websites at www.columbia.com, www.mountainhardwear.com, www.sorel.com, www.prana.com, www.montrail.com, and www.outdry.com.