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Columbia Sportswear Company Report Strong DTC Sales in Q3

Columbia Sportswear Company reports third quarter and first nine months 2021 financial results and updates full year 2021 financial outlook and provides preliminary 2022 commentary.

Financial Highlights

Third quarter 2021 net sales increased 15 percent to $804.7 million, compared to third quarter 2020. Third quarter 2021 operating income increased 56 percent to $133.5 million, or 16.6 percent of net sales, compared to third quarter 2020 operating income of $85.6 million, or 12.2 percent of net sales. Exited the quarter with $600.6 million in cash and short-term investments and no borrowings.

Chairman, President and Chief Executive Officer Tim Boyle commented,
“Our third quarter results reflect high consumer demand for our products and strong operating performance amidst unprecedented supply chain challenges. Despite delayed inventory receipts which impacted U.S. wholesale shipments, favourable gross margin performance and expense management fuelled above plan earnings. Early-season Fall 2021 sell-through has been encouraging and our global marketing campaign to support the largest innovation launch in our Company’s history, Omni-Heat Infinity, is off to a great start. “As we finish the year and look forward to 2022, I’m excited about our innovative product pipeline and the momentum we see across the brand portfolio. Based on this strength, we believe we can achieve mid-teens or better net sales growth in 2022, on top of the low-twenties percent growth we anticipate in 2021.“

While there were isolated temporary store closures resulting from local regulations or safety concerns, the majority of the Company’s owned stores remained open throughout third quarter 2021. Overall brick & mortar store traffic trends improved significantly compared to third quarter2020, but still remain below pre-pandemic levels. During the quarter, government mandated factory closures in Vietnam disrupted there manufacturing partners operations and impacted production of Fall 2021 and Spring 2022 product. Supply chain constraints continue to impact operations, resulting in delayed receipt and delivery of products for their Fall 2021 and Spring 2022 seasons. Demand for ocean vessels and containers continues to far outstrip available capacity, resulting in significant year-over-year increases in ocean freight costs.

Third Quarter 2021 Financial Results

Net sales increased 15 percent to $804.7 million from $701.1 million for the comparable period in 2020. The increase in net sales primarily reflects direct-to-consumer (“DTC”) growth and higher Fall 2021 wholesale orders, as we anniversary prior year pandemic disruptions. Net sales growth was constrained by supply chain disruptions that resulted in later inventory receipts and reduced wholesale shipments during the quarter. Gross margin expanded 180 basis points to 50.7 percent of net sales from 48.9 percent of net sales for the comparable period in 2020. Gross margin expansion was primarily driven by lower DTC promotional levels and favourable wholesale product margins, partially offset by higher inbound freight costs, the non-recurrence of inventory provision activity that benefited third quarter 2020 and unfavourable channel sales mix. Operating income increased 56 percent to $133.5 million, or 16.6 percent of net sales, compared to operating income of $85.6 million, or 12.2 percent of net sales, for the comparable period in 2020.

First Nine Months 2021 Financial

Net sales increased 26 percent to $1,996.7 million from $1,585.9 million for the comparable period in 2020. Gross margin expanded 320 basis points to 51.2 percent of net sales from 48.0 percent of net sales for the comparable period in 2020. SG&A expenses increased 5 percent to $796.3 million, or 39.9 percent of net sales, compared to $755.7 million, or 47.6 percent of net sales, for the same period in 2020.Operating income of $238.9 million, or 12.0 percent of net sales, compared to operating income of $13.4 million, or 0.8 percent of net sales, for the same period in 2020.

Inventories decreased 7 percent to $720.9 million, compared to $771.7 million at September 30, 2020. The reduction in inventory was driven by increased sales and to a lesser extent, delayed Fall 2021 inventory production resulting from the cumulative effects of supply chain disruptions. Exiting the quarter, finished goods inventory in there distribution centers was down 35 percent, year-over-year, while in-transit inventory increased 127 percent, year-over-year. Inventory at quarter-end primarily consisted of current and future season product. Aged inventories represent a manageable portion of their total inventory mix.

Fourth Quarter 2021 Financial Outlook

“Net sales of $1.04B to $1.08, representing net sales growth of 14 to 18 percent. Their Spring 2022 wholesale sales forecast reflects over 30-percent growth. We anticipate ongoing supply chain disruptions will continue to impact the timing of receipts and shipments of Spring 2022 inventory and may result in higher than planned cancellations that would impact net sales performance. We recently commenced there Fall 2022 order taking process. It is important to note that Fall 2021 sell-through performance can have a material impact on there Fall 2022 orders and resulting Fall 2022 wholesale sales forecast. Based on momentum we see across the business, we believe mid-teens percent or better net sales growth for the full year is attainable. Given there current view of product and freight costs as well as the likelihood of a more normalized promotional environment, we anticipate gross margin pressure in 2022. We do not expect planned price increases will be able to fully offset these headwinds. Their preliminary planning for 2022 contemplates an operating margin similar to the range provided in their 2021 financial outlook.”