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Columbia Sportswear Company Reports 22% Net Sales Increase in Q1 2022

First Quarter 2022 Highlights:

• Net sales increased 22 percent to a record $761.5 million, compared to first quarter 2021.
• Operating income increased 19 percent to $83.7 million, or 11.0 percent of net sales, compared to first quarter 2021 operating income of $70.5 million, or 11.3 percent of net sales.
• On April 22, 2022, the Board of Directors approved a $500 million increase to the Company’s share repurchase authorization.

Full Year 2022 Financial Outlook

• Net sales of $3.63 to $3.69 billion (unchanged) representing net sales growth of 16 to 18 percent (unchanged) compared to 2021.
• Operating income of $477 to $502 million (prior $472 to $498 million), representing operating margin of 13.2 to 13.6 percent (prior 13.0 to 13.5 percent).

Chairman, President and Chief Executive Officer Tim Boyle commented, “Our strong financial performance in the first quarter, including 22 percent net sales and 23 percent diluted earnings per share growth, validates our strategies and demonstrates that our brands are resonating with consumers. Business momentum was broad based, with growth across all brands, channels and geographies. SOREL led the charge with 37 percent year-over-year growth, despite supply challenges, highlighting phenomenal demand for the brand’s year-round styles. We are confident in our ability to realize the tangible growth opportunities that we have ahead, and this confidence is reflected in our repurchase of over $200 million in common stock during the quarter.

“Based on an encouraging start to 2022 and lower share count, we are increasing our full year earnings and diluted earnings per share outlook and reiterating our net sales outlook despite removing future sales to our Russian-based distributor for the balance of the year.

First Quarter 2022 Financial Results
(All comparisons are between first quarter 2022 and first quarter 2021, unless otherwise noted.)

Net sales increased 22 percent to $761.5 million from $625.6 million for the comparable period in 2021. The increase in net sales primarily reflects strong consumer demand and shipments of higher Spring 2022 orders, with growth across all brands, channels and geographies.

Gross margin contracted 170 basis points to 49.7 percent of net sales from 51.4 percent of net sales for the comparable period in 2021. Gross margin contraction was primarily driven by higher inbound freight costs, unfavorable year-over-year changes in inventory provisions, unfavorable regional sales mix, and lower wholesale product margins, partially offset by higher direct-to-consumer (“DTC”) product margins.

SG&A expenses increased 18 percent to $299.1 million, or 39.3 percent of net sales, from $254.4 million, or 40.7 percent of net sales, for the comparable period in 2021. SG&A expense growth primarily reflects expenses to support the growth of the business and investments to drive our brand-led consumer-focused strategies. The increase in SG&A expenses includes higher demand creation, global retail and personnel expenses, and unfavorable year-over-year changes in bad debt provisions compared to first quarter 2021.

Operating income increased 19 percent to $83.7 million, or 11.0 percent of net sales, compared to operating income of $70.5 million, or 11.3 percent of net sales, for the comparable period in 2021.

Net income increased 20 percent to $66.8 million, or $1.03 per diluted share, compared to net income of $55.9 million, or $0.84 per diluted share, for the comparable period in 2021.

Balance Sheet as of March 31, 2022
Cash, cash equivalents and short-term investments totaled $610.3 million, compared to $874.6 million as of March 31, 2021.

The Company had no borrowings as of March 31, 2022 or 2021.

Inventories increased 36 percent to $714.4 million, compared to $525.7 million as of March 31, 2021. Inventory at quarter-end primarily consisted of current and future season product. Aged inventories represent a manageable portion of our total inventory mix.

Cash Flow for the Three Months Ended March 31, 2022
Net cash used in operating activities was $33.8 million, compared to net cash provided by operating activities of $110.9 million for the same period in 2021.

Capital expenditures totaled $12.9 million, compared to $3.9 million for the same period in 2021.

Full Year 2022 Financial Outlook

Net sales are expected to increase 16 to 18 percent (unchanged) to $3.63 to $3.69 billion (unchanged) from $3.13 billion in 2021. We have paused taking any new orders from our Russia-based distributor and removed any future sales to it from this outlook. This equates to an approximate 2 percent headwind to full year 2022 consolidated net sales.

Gross margin is expected to contract approximately 130 basis points (prior approximately 160 bps contraction) to approximately 50.3 percent (prior approximately 50 percent) of net sales from 51.6 percent of net sales in 2021.

SG&A expenses are expected to increase at a slightly slower rate than net sales growth. SG&A expense as a percent of net sales is expected to be 37.3 to 37.7 percent (prior 37.2 to 37.5 percent), compared to SG&A expenses as a percent of net sales of 37.8 percent in 2021. Demand creation as a percent of net sales is anticipated to be 6.0 percent in 2022, compared to 5.9 percent in 2021.

Operating income is expected to be $477 to $502 million (prior $472 to $498 million), resulting in operating margin of 13.2 to 13.6 percent (prior 13.0 to 13.5 percent), compared to operating margin of 14.4 percent in 2021.

Net income is expected to be $363 to $382 million (prior $359 to $379 million), resulting in diluted earnings per share of $5.70 to $6.00 (prior $5.50 to $5.80). This diluted earnings per share range is based on estimated weighted average diluted shares outstanding of 63.6 million.

Balance Sheet and Cash Flows

Operating cash flow is expected to be at least $170 million.

Capital expenditures are planned to be between $80 to $100 million.

First Half 2022 Financial Commentary

Net sales growth of low-teens percent (prior high-teens to low-20 percent), compared to first half 2021. The revision to our first half 2022 net sales outlook is primarily due to the removal of future sales to our Russia-based distributor and the financial impact of recent mandatory quarantines in China, related to the continued COVID-19 outbreak in that region.

Gross margin is anticipated to contract approximately 200 basis points (prior over 300 basis points) compared to first half 2021.

SG&A expenses are anticipated to grow faster than net sales growth, resulting in modest SG&A deleverage (prior was modest leverage).