Columbia Sportswear Company is the latest retailer to see the impact of changing consumer habits amid inflation.
The Portland, Oregon-based company said Wednesday that net income fell 82% to $7.2 million, or $0.11 per diluted share. Net sales increased 2% to $578.1 million, compared to the second quarter of 2021.
As of Thursday morning, Columbia shares were down more than 3%.
On a call with investors, Columbia CEO Tim Boyle said earnings were impacted by inflationary pressures, rising interest rates and recession fears. As a result, the company lowered its full-year outlook and now expects net sales to rise 10-12% to $3.44-3.50 billion. This outlook takes into account an expected increase in order cancellations, a decrease in DTC sales and a more promotional environment.
“Economic news, inflation in particular, and the sheer risk of recession continued to weigh on the minds of the American consumer,” said chief financial officer Jim Swanson, who said the impact was felt. despite lighter traffic levels and less demand in the second. half of Q2 and until July.
Due to a more conservative consumer, Columbia faces higher than usual inventory, up 42% in the quarter. It might take some time.
“We expect a few quarters of significant margin compression as they work on excess inventory as apparel demand falls,” CFRA Research equity analyst Zachary Warring wrote in a note to investors, downgrading the title from “Buy” to “Hold”.
Higher-than-usual inventories due to changing consumer habits have also been a problem for other retailers, especially as consumer prices hit record highs. Executives at Target, Foot Locker, Macy’s and others said last quarter that they expected to see increased discounts as they sought to correct their high inventory levels. Steve Madden CEO Edward Rosenfeld said Wednesday he’s seen slowing sales across wholesale and DTC channels as consumers cut back on spending.
To liquidate inventory, Boyle said the company has an advantage through its chain of outlets, which can be used to offload items if needed. He also noted that a large percentage of that inventory includes evergreen items, which can be sold year-round.
“We have the potential to improve our situation,” Boyle said. “But a lot of that depends on what the consumer does in the next few months.”
Despite the conservative outlook for 2022, Columbia is still recording gains across its business. Sorel was its fastest growing brand in the second quarter, with net sales up 24%.
“Sorel’s potential to become a billion-dollar footwear brand is clear, and we are investing in demand creation and product design to fuel that growth,” Boyle said.