Columbia sportswear

Columbia Sportswear (COLM) Looks Good on DTC Business

Columbia sportswear company COLM seems well placed to grow. The company benefited from its strong direct-to-consumer (DTC) business, which, coupled with a full-price retail landscape, drove results in the fourth quarter of 2021. During the quarter, revenue and net income increased year over year and exceeded Zacks’ respective consensus estimate due to the strength of the company’s brands.

Let’s take a closer look at the factors driving this Zacks #2 (Buy) company before taking a look at its fourth quarter results and 2022 guidance.

Columbia Sportswear Company Price, Consensus and Surprise EPS

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

Strong DTC business and strategic priorities

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.

Management remains focused on its strategic priorities. It intends to continue its demand creation investments, which aim to increase brand awareness and drive sales. Additionally, COLM 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.

Columbia Sportswear undertakes unique branding and marketing initiatives that further strengthen its presence in the apparel industry. Amid the pandemic, Columbia Sportswear remains committed to innovation. The company had launched its fifth annual Star Wars collection in December 2020. The company’s 2020 collection, based on the hit Disney series, helped generate a 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.

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A look at Q4 and beyond

The company posted fourth-quarter 2021 earnings of $2.39 per share, compared to $1.44 in the year-ago quarter. Net income topped Zacks’ consensus estimate of $1.78. Net sales increased 23% to $1,129.7 million, driven by growth in DTC (which was supported by strong demand) and increased wholesale shipments in fall 2021, while that the company navigated the disruption caused by the pandemic a year ago. Net sales exceeded Zacks’ consensus estimate of $1,059 million.

For 2022, Columbia Sportswear 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 highest teens and a low range of 20% from the first half of 2021.

Although escalating SG&A spending and high ocean freight costs are threatening margins, the aforementioned growth drivers are likely to fuel the growth of this Oregon-based company. Shares of Columbia Sportswear are down 4.2% over the past three months, beating the industry’s 18.8% decline.

Other actions to consider

Some other top ranked stocks are Delta Clothing DLA, GIII Clothing GIII and Gildan Activewear Inc. GILL.

Delta Apparel, which designs, manufactures, sources and markets activewear and lifestyle apparel, currently boasts a Zacks #1 (Strong Buy) rating. Shares of Delta Apparel are down 1.4% in the past three months. You can see the full list of today’s Zacks #1 Rank stocks here.

Zacks’ consensus estimate for Delta Apparel’s current-year sales and EPS suggests growth of 12.3% and 19.1%, respectively, from the figure reported a year ago. DLA has a surprise on earnings for the last four quarters of 21.3% on average.

GIII Apparel, which designs, sources and markets women’s and men’s apparel, currently sports a No. 1 Zacks rank. Shares of GIII Apparel are up 1.2% over the past three months.

Zacks’ consensus estimate for GIII Apparel’s current-year sales and EPS suggests growth of 8.7% and 5.2%, respectively, from the figure reported a year ago. GIII has a four-quarter earnings surprise of 160.6%, on average.

Gildan Activewear, which manufactures and sells a variety of apparel products, currently carries a No. 2 Zacks rank. Shares of Gildan Activewear have fallen 9.8% over the past three months.

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

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