The strength of the direct-to-consumer (DTC) industry has helped Columbia sportswear company COLM for a while now. The company’s focus on brand enhancement initiatives is remarkable. That said, Columbia Sportswear is not immune to an inflationary environment.
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DTC Business – Major Engine
Columbia Sportswear is committed to growing and improving its global DTC business through accelerated investment. During the first quarter of 2022, the company’s DTC and wholesale businesses grew by 22% each. Within the DTC business, brick and mortar grew 22% and e-commerce grew 21%. On its latest earnings call, management said it was impressed with the recent sale of DTC. DTC e-commerce has seen strong momentum, with more and more consumers opting for online shopping. This channel will likely continue to perform well in future periods as stores reopen and many consumers prefer to shop online. Incidentally, management is on track to expand DTC’s global operations.
Strategic initiatives driving growth
The Zacks Rank #3 (Hold) company remains focused on its strategic priorities. To this end, it intends to continue its demand creation investments to increase brand awareness and drive sales. Additionally, the company remains committed to improving consumer experience and 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. Management continued to innovate with various new product technologies, such as ODX mesh fabric in outerwear and lightweight technical plush padding in footwear during the first quarter. The company highlighted that its Spring 2022 product portfolio includes the launch of many new technologies and differentiated products. Certainly, the continuous focus on innovation helps the company attract more consumers and boost sales.
Cost barriers along the way
Columbia Sportswear has seen higher SG&A costs for some time. In the first quarter of 2022, its SG&A expenses increased 18% to $299.1 million. The year-over-year increase in SG&A spending was primarily driven by costs incurred to support business growth and investments to fuel consumer-focused brand strategies. The rise in the metric also reflects increases in demand creation, global retail and personnel spending.
During the quarter, Columbia Sportswear’s gross margin contracted by 170 basis points (bps) to 49.7%, primarily due to higher inbound freight costs, negative year-over-year the other due to inventory provisions, unfavorable regional sales mix and reduced wholesale product margins. For 2022, management expects gross margin to contract by approximately 130 basis points and reach nearly 50.3%. The company expects an operating margin of around 13.2 to 13.6%, compared to 14.4% in 2021.
That said, focusing on the aforementioned perks is likely to offer some respite. Although shares of COLM have fallen 23.1% over the past six months, they have surpassed the industry’s 35.2% decline.
Top 3 Picks
Delta Clothing, Inc. DLA, an activewear and lifestyle apparel company, boasts a Zacks #1 (Strong Buy) ranking. DLA has a surprise on earnings for the last four quarters of 41.1% on average. You can see the full list of today’s Zacks #1 Rank stocks here.
Zacks’ consensus estimate for Delta Apparel’s sales and earnings per share (EPS) for the current fiscal year suggests growth of 14.6% and 45.8%, respectively, over figures released a year ago. one year old.
steven madden SHOO is involved in the design, sourcing, marketing and sale of private label shoes, handbags and accessories for women, men and children. It currently boasts a No. 1 Zacks rank. SHOO has a trailing four-quarter earnings surprise of 44%, on average.
Steven Madden’s Zacks consensus estimate for current-year sales and earnings suggests growth of nearly 15% and 19.2%, respectively, from numbers released a year ago.
G-III Clothing Group, Ltd. GIII, a women’s and men’s apparel company, currently holds a Zacks rank of 2 (buy). GIII has an earnings surprise for the last four quarters of 97.5% on average.
Zacks’ consensus estimate for G-III Apparel’s current year sales suggests 12.9% growth, while the same for EPS indicates a 10.4% increase over the numbers. respective published a year ago.
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