Columbia Sportswear Company Reports First Quarter 2023 Financial Results; Updates Full Year 2023 Financial Outlook
First Quarter 2023 Highlights
-
Net sales increased 8 percent to
, compared to first quarter 2022.$820.6 million -
Operating income decreased 33 percent to
, or 6.9 percent of net sales, compared to first quarter 2022 operating income of$56.4 million , or 11.0 percent of net sales.$83.7 million -
Diluted earnings per share decreased 28 percent to
, compared to first quarter 2022 diluted earnings per share of$0.74 .$1.03 -
Exited the quarter with
of cash and short-term investments and no borrowings.$461.0 million
Full Year 2023 Financial Outlook
The following forward-looking statements reflect our expectations as of
-
Net sales of
to$3.57 (unchanged) representing net sales growth of 3 to 6 percent (unchanged) compared to 2022.$3.67 billion -
Operating income of
to$413 (prior$431 million to$413 ), representing operating margin of 11.6 to 11.8 percent (prior 11.6 to 12.2 percent).$448 million -
Diluted earnings per share of
to$5.15 (prior$5.40 to$5.15 ).$5.55
Chairman, President and Chief Executive Officer
“2023 is off to a solid start and we are reiterating our full year net sales outlook, while narrowing our diluted EPS range. We are executing on our plan to reduce inventory levels, while focusing on profitability.
“In periods of economic uncertainty, our strong financial position is a strategic advantage. We exited the first quarter with over
- accelerate profitable growth;
- create iconic products that are differentiated, functional and innovative;
- drive brand engagement through increased, focused demand creation investments;
- enhance consumer experiences by investing in capabilities to delight and retain consumers;
- amplify marketplace excellence, with digitally-led, omni-channel, global distribution; and
- empower talent that is driven by our core values, through a diverse and inclusive workforce."
CFO's Commentary and Financial Review Presentation Available Online
For a detailed review of the Company's first quarter 2023 financial results, please refer to the CFO Commentary and Financial Review presentation furnished to the
First Quarter 2023 Financial Results
(All comparisons are between first quarter 2023 and first quarter 2022, unless otherwise noted.)
Net sales increased 8 percent (10 percent constant-currency) to
Gross margin contracted 100 basis points to 48.7 percent of net sales from 49.7 percent of net sales for the comparable period in 2022. The primary driver of gross margin contraction was increased promotional activity, compared to exceptionally low promotions in first quarter 2022, partially offset by favorable inbound ocean freight costs.
SG&A expenses increased 16 percent to
Operating income decreased 33 percent to
Income tax expense of
Net income decreased 31 percent to
Balance Sheet as of
Cash, cash equivalents and short-term investments totaled
The Company had no borrowings as of
Inventories increased 34 percent to
Cash Flow for the Three Months Ended
Net cash provided by operating activities was
Capital expenditures totaled
Share Repurchases for the Three Months Ended
The Company repurchased 179,421 shares of common stock for an aggregate of
At
Quarterly Cash Dividend
The Board of Directors approved a regular quarterly cash dividend of
Full Year 2023 Financial Outlook
(Additional financial outlook details can be found in the CFO Commentary and Financial Review presentation.)
The Company's first half and full year 2023 Financial Outlook is forward-looking in nature, and the following forward-looking statements reflect our expectations as of
Net sales are expected to increase 3 to 6 percent (unchanged) to
Gross margin is expected to expand approximately 60 basis points (unchanged) to approximately 50 percent of net sales (unchanged) from 49.4 percent of net sales in 2022.
SG&A expenses as a percent of net sales, is expected to be 39.0 to 39.2 percent (prior 38.3 to 39.0 percent), compared to SG&A expense as a percent of net sales of 37.7 percent in 2022. The increase in the Company’s SG&A expense outlook is primarily related to incremental distribution and third-party logistics costs being incurred to support elevated inventory levels which are expected to normalize late in 2023.
Operating income is expected to be
Effective income tax rate is expected to be approximately 24.5 percent (unchanged).
Net income is expected to be
Foreign Currency
- Foreign currency translation is anticipated to reduce 2023 net sales growth by approximately 20 basis points (prior 30 basis points) reflecting expected unfavorable foreign currency translation impacts through the first half of the year largely offset by expected favorable impacts in the latter part of the year.
-
Foreign currency is expected to have an approximately
negative impact (prior$0.03 negative impact) on diluted earnings per share due primarily to unfavorable foreign currency transactional effects from hedging of inventory production.$0.05
Balance Sheet and Cash Flows
Operating cash flow is expected to be over
Capital expenditures are planned to be in the range of
First Half 2023 Financial Outlook
- Net sales growth of mid-single-digit percent (unchanged), compared to first half 2022.
-
Diluted earnings per share is expected to be at the low end of our prior range of
to$0.75 . The second quarter is typically the Company's lowest volume sales quarter and small changes in the timing of product shipments and expenses can have a material impact on reported results.$0.90 - Inventory growth is anticipated to remain elevated in second quarter, due to expected earlier receipt of Fall ‘23 inventory. The second quarter year-over-year inventory growth rate is anticipated to slow, relative to first quarter inventory growth, before turning to a year-over-year decline starting in third quarter.
Conference Call
The Company will hold its first quarter 2023 conference call at
Second Quarter 2023 Reporting Date
Supplemental Financial Information
Since
The non-GAAP financial measures should be viewed in addition to, and not in lieu of or superior to, our financial measures calculated in accordance with GAAP. The Company provides a reconciliation of non-GAAP measures to the most directly comparable financial measure calculated in accordance with GAAP. See the "Reconciliation of GAAP to Non-GAAP Financial Measures" table included herein. The non-GAAP financial measures presented may not be comparable to similarly titled measures reported by other companies.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the federal securities laws, including statements regarding the Company’s expectations, anticipations or beliefs about the Company's ability to realize growth opportunities, financial position, inventory, full year 2023 net sales, gross margin, SG&A expenses, operating income, effective income tax rate, net income, diluted earnings per share, weighted average diluted shares outstanding, foreign currency translation, cash flows, and capital expenditures, and first half 2023 net sales, diluted earnings per share, and inventory growth rate. Forward-looking statements often use words such as "will," "anticipate," "estimate," "expect," "should," "may" and other words and terms of similar meaning or reference future dates. The Company's expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis; however, each forward-looking statement involves a number of risks and uncertainties, including those set forth in this document, those described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the heading "Risk Factors," and those that have been or may be described in other reports filed by the Company, including reports on Form 8-K. Potential risks and uncertainties include those relating to economic conditions, including inflationary pressures; supply chain disruptions, constraints and expenses; elevated marketplace inventories; changes in consumer behavior and confidence; as well as geopolitical tensions. The Company does not undertake any duty to update any of the forward-looking statements after the date of this document to conform them to actual results or to reflect changes in events, circumstances or its expectations. New factors emerge from time to time and it is not possible for the Company to predict or assess the effects of all such factors or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.
About
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||
(in thousands) |
|
|
|
|
||
ASSETS |
|
|
|
|
||
Current Assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
361,049 |
|
$ |
435,240 |
Short-term investments |
|
|
99,511 |
|
|
175,024 |
Accounts receivable, net |
|
|
466,690 |
|
|
408,186 |
Inventories |
|
|
959,234 |
|
|
714,415 |
Prepaid expenses and other current assets |
|
|
100,880 |
|
|
105,261 |
Total current assets |
|
|
1,987,364 |
|
|
1,838,126 |
Property, plant and equipment, net |
|
|
282,921 |
|
|
290,070 |
Operating lease right-of-use assets |
|
|
318,728 |
|
|
333,356 |
Intangible assets, net |
|
|
81,146 |
|
|
101,496 |
|
|
|
51,694 |
|
|
68,594 |
Deferred income taxes |
|
|
96,865 |
|
|
89,613 |
Other non-current assets |
|
|
70,256 |
|
|
66,724 |
Total assets |
|
$ |
2,888,974 |
|
$ |
2,787,979 |
LIABILITIES AND EQUITY |
|
|
|
|
||
Current Liabilities: |
|
|
|
|
||
Accounts payable |
|
$ |
220,231 |
|
$ |
262,255 |
Accrued liabilities |
|
|
271,625 |
|
|
234,326 |
Operating lease liabilities |
|
|
69,452 |
|
|
68,136 |
Income taxes payable |
|
|
7,377 |
|
|
6,297 |
Total current liabilities |
|
|
568,685 |
|
|
571,014 |
Non-current operating lease liabilities |
|
|
303,571 |
|
|
321,250 |
Income taxes payable |
|
|
33,765 |
|
|
40,299 |
Deferred income taxes |
|
|
146 |
|
|
— |
Other long-term liabilities |
|
|
35,022 |
|
|
36,516 |
Total liabilities |
|
|
941,189 |
|
|
969,079 |
Total shareholders' equity |
|
|
1,947,785 |
|
|
1,818,900 |
Total liabilities and shareholders' equity |
|
$ |
2,888,974 |
|
$ |
2,787,979 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
||||||||
|
|
Three Months Ended |
||||||
(In thousands, except per share amounts) |
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
$ |
820,593 |
|
|
$ |
761,510 |
|
Cost of sales |
|
|
421,093 |
|
|
|
383,063 |
|
Gross profit |
|
|
399,500 |
|
|
|
378,447 |
|
Gross margin |
|
|
48.7 |
% |
|
|
49.7 |
% |
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
347,398 |
|
|
|
299,086 |
|
Net licensing income |
|
|
4,325 |
|
|
|
4,305 |
|
Operating income |
|
|
56,427 |
|
|
|
83,666 |
|
Interest income, net |
|
|
3,283 |
|
|
|
395 |
|
Other non-operating income, net |
|
|
850 |
|
|
|
44 |
|
Income before income tax |
|
|
60,560 |
|
|
|
84,105 |
|
Income tax expense |
|
|
14,358 |
|
|
|
17,268 |
|
Net income |
|
$ |
46,202 |
|
|
$ |
66,837 |
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
||||
Basic |
|
$ |
0.74 |
|
|
$ |
1.04 |
|
Diluted |
|
$ |
0.74 |
|
|
$ |
1.03 |
|
Weighted average shares outstanding: |
|
|
|
|
||||
Basic |
|
|
62,133 |
|
|
|
64,273 |
|
Diluted |
|
|
62,417 |
|
|
|
64,591 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||||||
|
Three Months Ended |
||||||
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
46,202 |
|
|
$ |
66,837 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
||||
Depreciation, amortization, and non-cash lease expense |
|
30,583 |
|
|
|
30,577 |
|
Provision for uncollectible accounts receivable |
|
(90 |
) |
|
|
(3,377 |
) |
Loss on disposal or impairment of property, plant and equipment, and right-of-use assets |
|
287 |
|
|
|
1,598 |
|
Deferred income taxes |
|
(85 |
) |
|
|
2,746 |
|
Stock-based compensation |
|
5,808 |
|
|
|
5,503 |
|
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
|
82,927 |
|
|
|
81,220 |
|
Inventories |
|
71,503 |
|
|
|
(71,108 |
) |
Prepaid expenses and other current assets |
|
23,101 |
|
|
|
(17,604 |
) |
Other assets |
|
(837 |
) |
|
|
(1,443 |
) |
Accounts payable |
|
(95,423 |
) |
|
|
(20,823 |
) |
Accrued liabilities |
|
(59,538 |
) |
|
|
(81,371 |
) |
Income taxes payable |
|
(10,941 |
) |
|
|
(11,004 |
) |
Operating lease assets and liabilities |
|
(17,355 |
) |
|
|
(15,979 |
) |
Other liabilities |
|
1,860 |
|
|
|
440 |
|
Net cash provided by (used in) operating activities |
|
78,002 |
|
|
|
(33,788 |
) |
Cash flows from investing activities: |
|
|
|
||||
Purchases of short-term investments |
|
(98,203 |
) |
|
|
(44,877 |
) |
Sales and maturities of short-term investments |
|
570 |
|
|
|
984 |
|
Capital expenditures |
|
(14,047 |
) |
|
|
(12,885 |
) |
Net cash used in investing activities |
|
(111,680 |
) |
|
|
(56,778 |
) |
Cash flows from financing activities: |
|
|
|
||||
Proceeds from issuance of common stock related to stock-based compensation |
|
2,678 |
|
|
|
2,512 |
|
Tax payments related to stock-based compensation |
|
(4,297 |
) |
|
|
(3,959 |
) |
Repurchase of common stock |
|
(15,293 |
) |
|
|
(217,317 |
) |
Cash dividends paid |
|
(18,649 |
) |
|
|
(19,151 |
) |
Net cash used in financing activities |
|
(35,561 |
) |
|
|
(237,915 |
) |
Net effect of exchange rate changes on cash |
|
47 |
|
|
|
317 |
|
Net decrease in cash and cash equivalents |
|
(69,192 |
) |
|
|
(328,164 |
) |
Cash and cash equivalents, beginning of period |
|
430,241 |
|
|
|
763,404 |
|
Cash and cash equivalents, end of period |
$ |
361,049 |
|
|
$ |
435,240 |
|
Supplemental disclosures of cash flow information: |
|
|
|
||||
Cash paid during the year for income taxes |
$ |
30,775 |
|
|
$ |
18,205 |
|
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
||||
Property, plant and equipment acquired through increase in liabilities |
$ |
2,899 |
|
|
$ |
6,702 |
|
Reconciliation of GAAP to Non-GAAP Financial Measures Net Sales Growth - Constant-currency Basis (Unaudited) |
|||||||||||||||||||
|
|
Three Months Ended |
|||||||||||||||||
|
|
Reported
|
|
Adjust for Foreign Currency |
|
Constant-currency
|
|
Reported
|
|
Reported
|
|
Constant-currency
|
|||||||
(In millions, except percentage changes) |
|
|
2023 |
|
Translation |
|
|
2023(1) |
|
|
|
2022 |
|
% Change |
|
% Change(1) |
|||
Geographical |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
$ |
517.5 |
|
$ |
— |
|
$ |
517.5 |
|
|
$ |
501.9 |
|
3 |
% |
|
3 |
% |
|
|
|
136.4 |
|
|
11.9 |
|
|
148.3 |
|
|
|
121.7 |
|
12 |
% |
|
22 |
% |
|
|
|
108.3 |
|
|
5.3 |
|
|
113.6 |
|
|
|
94.7 |
|
14 |
% |
|
20 |
% |
|
|
|
58.4 |
|
|
3.4 |
|
|
61.8 |
|
|
|
43.2 |
|
35 |
% |
|
43 |
% |
Total |
|
$ |
820.6 |
|
$ |
20.6 |
|
$ |
841.2 |
|
|
$ |
761.5 |
|
8 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Brand |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Columbia |
|
$ |
702.8 |
|
$ |
19.2 |
|
$ |
722.0 |
|
|
$ |
643.8 |
|
9 |
% |
|
12 |
% |
SOREL |
|
|
60.5 |
|
|
0.9 |
|
|
61.4 |
|
|
|
63.6 |
|
(5 |
)% |
|
(3 |
)% |
prAna |
|
|
32.5 |
|
|
— |
|
|
32.5 |
|
|
|
32.7 |
|
(1 |
)% |
|
(1 |
)% |
|
|
|
24.8 |
|
|
0.5 |
|
|
25.3 |
|
|
|
21.4 |
|
16 |
% |
|
18 |
% |
Total |
|
$ |
820.6 |
|
$ |
20.6 |
|
$ |
841.2 |
|
|
$ |
761.5 |
|
8 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Product Category |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Apparel, Accessories and Equipment |
|
$ |
632.6 |
|
$ |
14.9 |
|
$ |
647.5 |
|
|
$ |
565.9 |
|
12 |
% |
|
14 |
% |
Footwear |
|
|
188.0 |
|
|
5.7 |
|
|
193.7 |
|
|
|
195.6 |
|
(4 |
)% |
|
(1 |
)% |
Total |
|
$ |
820.6 |
|
$ |
20.6 |
|
$ |
841.2 |
|
|
$ |
761.5 |
|
8 |
% |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Wholesale |
|
$ |
452.5 |
|
$ |
11.1 |
|
$ |
463.6 |
|
|
$ |
408.2 |
|
11 |
% |
|
14 |
% |
DTC |
|
|
368.1 |
|
|
9.5 |
|
|
377.6 |
|
|
|
353.3 |
|
4 |
% |
|
7 |
% |
Total |
|
$ |
820.6 |
|
$ |
20.6 |
|
$ |
841.2 |
|
|
$ |
761.5 |
|
8 |
% |
|
10 |
% |
(1) Constant-currency net sales is a non-GAAP financial measure. See “Supplemental Financial Information” above for further information.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230427005664/en/
Vice President of Investor Relations and Strategic Planning
(503) 985-4112
aburns@columbia.com
Source: