January 31, 2023

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Columbia Sportswear (COLM) Looks Well Placed on DTC Business

Columbia Sportswear Company COLM looks well-placed for growth. The company has been benefiting from its robust direct-to-consumer (DTC) business, which along with a full-price selling landscape boosted fourth-quarter 2021 results.  During the quarter, the top and bottom lines increased year over year and surpassed the respective Zacks Consensus Estimate due to the strength of the company’s brands.

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

Columbia Sportswear Company Price, Consensus and EPS Surprise

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

Robust DTC Business & Strategic Priorities

Columbia Sportswear remains committed to expanding and enhancing its global DTC business through accelerated investments. In the fourth quarter, the DTC channel displayed sales growth of 33% and wholesale net sales rose 13%. DTC’s brick-and-mortar net sales jumped 39%. DTC’s e-commerce net sales rose 25% in the quarter. In 2021, DTC’s e-commerce sales contributed 18% to the company’s total sales. DTC e-commerce has been seeing robust momentum, with more consumers opting to shop online. This channel is likely to continue performing well in the forthcoming periods as with stores reopening, a lot of consumers prefer to shop online. Management’s 2022 sales growth guidance includes the continued strength in the DTC business.

Management remains focused on its strategic priorities. It intends to continue with its demand creation investments, which aim at driving brand awareness and aiding sales. Further, COLM remains committed to enhancing consumers’ experiences and its digital capacity in all networks and regions. It will also continue exploring growth opportunities in the DTC business and improving support processes. Finally, the company is keen on investing in its people and optimizing its organization across its brand portfolio.

Columbia Sportswear undertakes brand-enhancing and unique marketing initiatives that further strengthen its presence in the apparel industry. Amid the pandemic, Columbia Sportswear remains committed to undertaking 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 spectacular consumer response. On its fourth-quarter earnings call, management stated that it remains encouraged about the successful global launch of Omni-Heat Infinity. A continued focus on innovation helps the company attract more consumers and drive sales.

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A Look at Q4 & Beyond

The company posted fourth-quarter 2021 earnings of $2.39 per share compared with $1.44 recorded in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.78. Net sales rose 23% to $1,129.7 million, driven by DTC growth (which was backed by solid demand) and increased Fall 2021 wholesale shipments as the company cycled year-ago pandemic-inflicted disruptions. Net sales beat the Zacks Consensus Estimate of $1,059 million.

For 2022, Columbia Sportswear expects net sales to grow 16-18% to the $3.63-$3.69 billion range. The net sales increase is anticipated to be broad-based across brands, channels and regions, with SOREL likely to be the fastest growing. Management envisions earnings per share (EPS) in the range of $5.5-$5.80 for 2022, suggesting growth from $5.33 recorded in 2021. For the first half of 2022, management projects net sales growth between the high teens and a low 20% range compared with the first half of 2021.

Although escalated SG&A expenses and high ocean freight costs pose threats for margins, the abovementioned growth drivers are likely to fuel growth for this Oregon-based company. Shares of Columbia Sportswear have declined 4.2% in the past three months, outpacing the industry’s decline of 18.8%.

Other Stocks to Consider

Some other top-ranked stocks are Delta Apparel DLA, GIII Apparel GIII and Gildan Activewear Inc. GIL.

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

The Zacks Consensus Estimate for Delta Apparel’s current fiscal-year sales and EPS suggests growth of 12.3% and 19.1%, respectively, from the year-ago reported figure. DLA has a trailing four-quarter earnings surprise of 21.3%, on average.

GIII Apparel, which designs, sources and markets women’s and men’s apparel, sports a Zacks Rank #1 at present. Shares of GIII Apparel have moved up 1.2% in the past three months.

The Zacks Consensus Estimate for GIII Apparel’s current fiscal-year sales and EPS suggests growth of 8.7% and 5.2%, respectively, from the year-ago reported number. GIII has a trailing four-quarter earnings surprise of 160.6%, on average.

Gildan Activewear, which manufactures and sells various apparel products, carries a Zacks Rank #2 at present. Shares of Gildan Activewear have dipped 9.8% in the past three months.

The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and EPS suggests growth of 8.9% and 3.3%, respectively, from the year-ago reported figure. GIL has a trailing four-quarter earnings surprise of 66.6%, on average.

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Columbia Sportswear Company (COLM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.