COLM: Turning the Corner

It shouldn’t be too much of a surprise with Outdoor Outerwear up 17% YTD according to weekly SportScan data, that this has been a key driver of Columbia’s recent uptick in top-line trends as well as a tailwind for the company’s shares.  In light of improving consumer spending, easing top-line and margin compares over the next 2 quarters, positive trends through Q1 particularly in footwear (~20% of sales – see charts below), and the anniversary of close-out sales that significantly weighed on margins (200bps+), we expect the company to come in at $0.25 – ahead of consensus at $0.21.  Both better top-line and gross margins are key sources of upside. Sources of additional strength could also come from the company’s recent efforts in its direct-to-consumer business, an effort which includes a 20% increase in retail doors since last year and the launch of ecommerce last summer.

We also note that this is one of the few names in apparel/retail that face 5 straight quarters of favorable margin compares beginning now, when most others have only one or two quarters of easy compares remaining.  With EBIT margins halved over the last 2-years, we expect to start seeing the benefit of the company’s re-investment efforts in 2010. We believe tonight’s results will mark the first quarter of margin expansion in the last 10, which may also prove to be a key turning point for company and the shares.

See below for the detailed puts and takes on the quarter:

COLM: Turning the Corner - COLM Q1 Table 1 4 10

COLM: Turning the Corner - COLM Q1 Table 2 4 10

 

COLM: Turning the Corner - COLM FW Trends 4 10

 

COLM: Turning the Corner - COLM APP Trends 4 10

 

COLM: Turning the Corner - COLM S 4 10