Columbia Beats Earnings Estimates and Raises Outlook — So Why Is Its Stock Down?
Concerns over lingering supply chain issues and operational hurdles are among the factors sending Columbia Sportswear Co.’s stock down in Friday midday trading despite a quarterly earnings and sales beat as well as raised guidance for the year ahead.
For the three months ended March 31, the outdoor and active company notched profits of $55.9 million, or earnings of 84 cents per share, breaking even with the prior year period and surpassing estimates of earnings of 33 cents per share. Revenues rose 10% to $625.6 million, versus consensus bets of $583 million.
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As a result, Columbia boosted its outlook: It expects 2021 fiscal year revenues to increase in the range of 21.5% to 23% to between $3.04 billion and $3.08 billion, compared with the previous forecast of an 18% to 20% gain to $2.95 billion to $3 billion. Profits are predicted to be in the range of $271 million to $288 million, with earnings per share of between $4.05 and $4.30, versus prior projections of profits of $250 to $270 million and earnings per share of between $3.75 and $4.05.
Still, analysts largely kept their ratings neutral.
While Columbia’s balance sheet remains robust with $875 million in cash and short-term investments with no bank borrowings, the ongoing port congestions and shortage in containers led its inventories to arrive in the United States about three weeks later than anticipated, management noted.
In a distribution note, BTIG analyst Camilo Lyon wrote, “When combined with a clean marketplace that is undersupplied of inventory, COLM’s prospects look good; however, supply chain delays are expected to continue for the balance of the year, thus pressuring wholesale upside and shortening the reorder windows. Taken together, COLM is managing the environment well; however, we see near-term headwinds that could pressure the business.”
As of 11:30 a.m. ET, COLM stock was down more than 6% to $106.54.
Maintaining his rating, CL King & Associates managing director of research Steven Marotta was slightly more optimistic: “While the supply chain is a small bugaboo running roughly three weeks behind schedule and demand was not fully satiated in Q1 (or currently), there have been no material chargebacks from the wholesale channel regarding late deliveries, and, moreover, the company is more than hitting its target from a sell-through standpoint.”
Geographically, the gains were led by the Europe-Middle East-Africa, with sales up 27%, as well as the United States and Latin America-Asia Pacific regions, both climbing 9%. Canada saw a 1% uptick.
As for its channels, Columbia’s direct-to-consumer business grew 20% in the period, with owned e-commerce surging 35%. Wholesale, which bore the brunt of the supply chain disruptions, still managed to crawl up 3%.
“Not only is the company benefitting from strong execution, reopening and fiscal stimulus, but also the pandemic has renewed consumers’ enthusiasm for outdoor activities,” explained UBS analyst Jay Sole. “We believe this is serving as an outerwear industry sales tailwind.”
What’s more, Sole — who raised his price target from $114 to $116 and reiterated his neutral rating — indicated that delays at the docks have “peaked and is starting to clear up,” which could lead Columbia to beat its fiscal year guidance.
“We believe COLM’s solid portfolio of outdoor brands will come out stronger post COVID-19,” he added. “We expect its resilient wholesale partners and DTC digital expansion to drive sales growth.”
Looking at performance by brand, sales at the company’s namesake label — the largest in its portfolio — advanced 12%, while Sorel jumped 20%. On the other hand, prAna fell 14% and Mountain Hardwear slipped 4%. Footwear as a category swelled 35% in the quarter, while revenues for apparel, accessories and equipment sales saw a 4% boost.
“COLM could be well positioned to deliver mid-single digit top-and bottom-line growth over the next five years, driven by its portfolio of active, outdoor lifestyle brands, led by Columbia and Sorel,” said Cowen analyst John Kernan, who had an outperform rating on the retail group. The analyst added that the company could see recovery toward pre-COVID-19 levels in its operating margin “if sales momentum reaccelerates post-COVID-19.”
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