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This 4Q number is not a slam-dunk. But its outlook should be less conservative than we usually hear from COLM. There are still issues here…but things might be aligning to start 'going their way.’

COLM is a tough one heading into this quarter. We all know their shtick…blow away the quarter, but guide down.  I’m not sure we’ll get that this time. In fact, we could get a bit of the opposite.  Why? There’s not as much wiggle room to smoke this quarter. On one hand, the company is keeping order trends very tight, and is not producing enough to beef up its ‘at once’ business. So revenue should track backlog fairly well. That means top line down close to double digits, but it also means less volatility on the gross margin line. But on the flip side, last quarter COLM ended with +8% growth in inventories, and -15.5% revenue/backlog growth.  That’s not exactly a bullish 3Q GM setup either. 

The saving grace this quarter? Outerwear has started off on a very positive note, as has winter-related sportswear. Blame it on the weather, but either way, it’s a fact. The maps below are tough to argue with. When we layer a little cold snap on top of lean inventories at retail (COLM will have cleared out its inventory by qtr end), the brand’s performance at retail inflecting to the upside, and FX finally reversing – we’re setting the stage here for backlog to begin to creep higher with bullish Gross Margin implications for FY10.

The stock is still largely hated, with 1 Buy, 3 Sells, 7 Holds, and 23% of the float short. Fundamentally, I think that this company has problems with how it approaches branding as it perennially has too many ‘huge opportunities’ for its content (i.e. never realized due to poor execution or lack of capital commitment). In other words, it is at the mercy of the market, instead of the other way around.  But the reality is that COLM will go through 1-2-year stretches where things just ‘go its way.’  This might be the beginning of one of them.

COLM: Key Callouts into the Print - COLM REV SPORTSCAN

COLM: Key Callouts into the Print - COLM SPORTSWEAR REV SPORTSCAN

COLM: Key Callouts into the Print - 10 22 2009 11 37 29 AM