Columbia Sportswear Company,a leading innovator in the global active outdoor apparel and footwear industries,announced net sales of$545.0 million for the quarter ended September 30,2012,a 4 percent decline compared with net sales of$566.8 million for the same period in 2011.Changes in currency exchange rates reduced reported net sales by approximately 2 percentage points.
Third quarter net income totaled$64.4 million,or$1.88 per diluted share,compared with net income of$67.5 million,or$1.98 per diluted share,for the same period in 2011.A higher effective tax rate contributed$0.11 to the reduction in third quarter 2012 earnings per share compared with the third quarter of 2011.
Tim Boyle,Columbia's president and chief executive officer,commented,"Our third quarter benefited from improved gross margins and disciplined expense management,resulting in higher operating margin and further demonstrating our ability to navigate effectively through a slow-growth environment.We are pleased to raise our 2012 operating margin outlook based on better-than-expected results through the first nine months of the year."
Boyle concluded,"Looking ahead to 2013,we anticipate continued slow growth through at least the first half of the year,based in part on advance Spring 2013 wholesale orders,the fragile U.S.recovery,continued uncertainty in Europe,and signs of slowing in key Asian markets.However,we believe that our continued focus on innovation,performance and enhanced design is elevating our brand portfolio,which holds substantial long-term growth potential."
Third Quarter Results
The$21.8 million net sales decline in the third quarter was concentrated primarily in the company's Europe/Middle East/Africa(EMEA)region,where net sales declined$39.8 million,or 40 percent,to$60.5 million,including an 8 percentage point negative effect from changes in currency exchanges rates.
The decline reflected lower net sales in the company's EMEA direct markets,against an increase of more than 70 percent in the comparable 2011 period.Last year's warm winter and persistent unfavorable macro-economic conditions weighed on both the Sorel and Columbia brands,creating headwinds against our ongoing efforts to revitalize the Columbia brand in key European markets.
In addition,approximately 45 percent of the decline in EMEA net sales was attributable to previously-referenced timing differences in shipments of fall orders to EMEA distributors,which were heavily concentrated in the Columbia brand.Year-to-date Fall 2012 shipments to EMEA distributors are up 7 percent compared with Fall 2011 shipments in the comparable period.
Net sales in Canada decreased$8.1 million,or 13 percent,including a 3 percentage point negative effect from changes in currency exchange rates.These declines were partially offset by net sales increases in the U.S.of$14.2 million,or 4 percent,to$347.8 million,and in the Latin America/Asia Pacific(LAAP)region of$11.9 million,or 16 percent,to$84.7 million,including a 3 percentage point negative effect from changes in currency exchange rates.
Apparel,Accessories&Equipment net sales declined$8.7 million,or 2 percent,to$429.5 million;and Footwear net sales declined$13.1 million,or 10 percent,to$115.5 million.
Columbia and Sorel brand net sales declined$11.0 million,or 2 percent,and$10.8 million,or 15 percent,respectively,accounting for the entire net sales decline in the quarter.
Balance Sheet
The company ended the third quarter with$96.3 million in cash and short-term investments,compared with$90.4 million at September 30,2011.
Consolidated inventories totaled$475.7 million at September 30,2012,approximately 10 percent higher than at the same time last year.Higher average unit costs accounted for all of the increase in inventory valuation,on a mid-single-digit percentage decline in units.
Raised 2012 Earnings Outlook
The company currently expects full year 2012 net sales of approximately$1.7 billion,a 25 to 35 basis point decrease in gross margin,and 40 to 50 basis points of SG&A expense leverage(including first quarter restructuring charges of approximately$4.0 million),resulting in operating margin of approximately 8.3 percent compared with 8.1 percent operating margins in fiscal 2011.
For the fourth quarter of 2012,the company expects net sales to increase up to 1.5 percent from net sales of$526.1 million in the fourth quarter of 2011,a 50 to 75 basis point decrease in gross margin,and 150 to 200 basis points of SG&A expense leverage,resulting in estimated operating margin expansion of approximately 100 to 150 basis points.
All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties which may cause actual results to differ,perhaps significantly.
Columbia Sportswear Company is a leading innovator in the global outdoor apparel,footwear,accessories and equipment industry.Founded in 1938 in Portland,Oregon,Columbia products are sold in approximately 100 countries and have earned an international reputation for innovation,quality and performance.
