Columbia sportswear

Columbia Sportswear (COLM) hurt by high costs, help with growth plans

Columbia sportswear company COLM has benefited from its strategic priorities. Apart from that, the company’s direct-to-consumer or DTC business helped, while high SG&A and ocean freight costs were a concern. Shares of the company have fallen 8.5% in the past six months, compared to a 15% decline in the industry.

Main Headwinds

Columbia Sportswear has been experiencing high SG&A costs and high ocean freight costs for some time. The year-over-year increase in SG&A expenses can be attributed to the costs of supporting business growth, which include increased global retail, incentive compensation, demand creation and staff costs. SG&A spending is expected to grow at a slower pace than net sales growth in 2022. COLM expects demand creation (as a percentage of net sales) of 6% in 2022, compared to 5.9% in 2021. Apart from that, in its fourth quarter 2021 earnings release, Columbia Sportswear said demand for ocean vessels and containers remained high relative to its available capacity, leading to a massive spike in ocean freight costs. .

Although the company’s gross margin increased year-over-year in the fourth quarter, it was partially impacted by increased inbound freight spending. Management expects gross margin to contract by around 160 basis points (bps) and reach nearly 50% in 2022. For 2022, operating margin is expected at 13-13.5%, indicating a down from the 14.4% recorded in 2021. For the first half of 2022, the gross margin is expected to contract by more than 300 basis points.

Columbia Sportswear Company Price, Consensus and Surprise EPS

Columbia Sportswear Company price-consensus-eps-surprise-chart | Columbia Sportswear Company Quote


Management remains focused on its strategic priorities. It intends to continue its investments in demand generation, which aim to increase brand awareness and drive sales. Additionally, Columbia Sportswear remains committed to improving consumer experiences and its digital capability across all networks and regions. He will also continue to explore growth opportunities in the DTC business and improve support processes. Finally, the company wants to invest in its employees and optimize its organization through its brand portfolio.

Apart from this, Columbia Sportswear undertakes unique marketing and brand enhancement initiatives that further strengthen its presence in the apparel industry. Even in the midst of the pandemic, COLM remains committed to innovation. The company launched its fifth annual Star Wars collection in December 2020. The company’s 2020 collection based on the hit Disney series has helped generate dramatic consumer response. During its fourth quarter earnings call, management said it remains encouraged by the successful global launch of Omni-Heat Infinity. A continuous focus on innovation helps the company attract more consumers and drive sales.

Columbia Sportswear remains committed to growing and improving its global DTC business through accelerated investments. In the fourth quarter, the DTC channel posted sales growth of 33% and wholesale net sales increased by 13%. DTC’s bricks and mortar net sales jumped 39%. DTC’s e-commerce net sales increased 25% in the quarter. In 2021, DTC’s e-commerce sales contributed 18% of the company’s total sales. DTC e-commerce has seen strong momentum with more and more consumers opting for online shopping. This channel is expected to continue to perform well in the coming periods, as with the reopening of stores, many consumers prefer to shop online. Management’s sales growth forecast for 2022 includes continued strength in DTC business.

For 2022, this Zacks #3 (Hold) company expects net sales to grow 16-18% to $3.63-3.69 billion. The increase in net sales is expected to be widespread across brands, channels and regions, with SOREL likely to be the fastest growing. Management expects earnings per share (EPS) of between $5.5 and $5.80 for 2022, suggesting growth from the $5.33 recorded in 2021. For the first half of 2022, management expects growth in net sales between the high teens and the low range of 20% compared to the first half of 2021.

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A renowned consumer discretionary stock

A popular choice in Zacks’ wider consumer discretionary sector is Crocs, Inc. CROX, which benefited from its focus on product innovation and marketing and digital capabilities. The potential gains from the takeover of HEYDUDE also bode well. Crocs, which designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories, currently carries a No. 3 Zacks rank. Shares of CROX are down 46% in the past six months. The Zacks consensus estimate for Crocs current-year EPS suggests growth of 22.1% from the figure reported a year ago.

Let’s check these solid bets

Some higher ranked stocks are Funko Inc. FNKO and Gildan Activewear Inc. GILL.

Funko, the pop culture consumer products company, currently sports a Zacks #1 (Strong Buy) rating. Funko shares are down 3.5% in the past six months. You can see the full list of today’s Zacks #1 Rank stocks here.

Zacks’ consensus estimate for Funko’s 2022 sales and EPS suggests growth of 22.7% and 26.8%, respectively, from the figure published a year ago. FNKO has a surprise on the profits of the last four quarters of 96.2% on average.

Gildan Activewear, which manufactures and sells various wearable products, currently holds a Zacks rank of No. 2 (buy). Gildan Activewear shares have fallen 1.5% over the past six months.

Zacks consensus estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.9% and 3.3%, respectively, compared to the figure published a year ago. GIL has a surprise on earnings for the last four quarters of 66.6% on average.

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