Columbia Reports First Quarter 2023 Financial Results; Updates Full Year 2023 Financial Outlook

 Columbia Sportswear Company (NASDAQ: COLM, the "Company"), a multi-brand global leading innovator in outdoor, active and lifestyle products including apparel, footwear, accessories, and equipment, today announced first quarter 2023 financial results for the period ended March 31, 2023.

First Quarter 2023 Highlights

• Net sales increased 8 percent to $820.6 million, compared to first quarter 2022.
• Operating income decreased 33 percent to $56.4 million, or 6.9 percent of net sales, compared to first quarter 2022 operating income of $83.7 million, or 11.0 percent of net sales.
• Diluted earnings per share decreased 28 percent to $0.74, compared to first quarter 2022 diluted earnings per share of $1.03.
• Exited the quarter with $461.0 million of cash and short-term investments and no borrowings.

Full Year 2023 Financial Outlook

The following forward-looking statements reflect our expectations as of April 27, 2023 and are subject to significant risks and business uncertainties, including those factors described under “Forward-Looking Statements” below. Additional disclosures and financial outlook details can be found in the Full Year 2023 Financial Outlook section below and the CFO Commentary and Financial Review presentation.

• Net sales of $3.57 to $3.67 billion (unchanged) representing net sales growth of 3 to 6 percent (unchanged) compared to 2022.
• Operating income of $413 to $431 million (prior $413 to $448 million), representing operating margin of 11.6 to 11.8 percent (prior 11.6 to 12.2 percent).
• Diluted earnings per share of $5.15 to $5.40 (prior $5.15 to $5.55).

Chairman, President and Chief Executive Officer Tim Boyle commented, “First quarter results highlight the importance and value of our diversified global business model. We were able to generate healthy net sales growth, up 8 percent year-over-year, as consumer demand remained strong in many areas of our business. After three years of pandemic related supply chain constraints, it’s gratifying to see that our wholesale on-time delivery rates have returned to pre-pandemic service levels. As we look towards the summer, Columbia’s differentiated portfolio of sun protection and cooling technologies has never been stronger, including our latest innovation, Omni-Shade Broad Spectrum. We are also making targeted marketing investments across footwear and apparel, including our largest PFG campaign to date, Protect What You Love.

“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 $460 million in cash and short-term investments, and no bank borrowings. I am confident we have the right strategies in place to drive profitable growth, and we are committed to investing in our strategic priorities to:

• 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 Securities and Exchange Commission (the "SEC") on a Current Report on Form 8-K and published on the Investor Relations section of the Company's website at http://investor.columbia.com/results.cfm at approximately 4:15 p.m. ET today. Analysts and investors are encouraged to review this commentary prior to participating in our conference call.

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 $820.6 million from $761.5 million for the comparable period in 2022. The increase in net sales primarily reflects earlier shipment of Spring 2023 wholesale orders and direct-to-consumer (DTC) growth.

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 $347.4 million, or 42.3 percent of net sales, from $299.1 million, or 39.3 percent of net sales, for the comparable period in 2022. SG&A expense growth primarily reflected higher supply chain costs related to elevated inventory levels and third-party logistics transition costs, higher DTC expenses to support growth, and investments to support our strategies.

Operating income decreased 33 percent to $56.4 million, or 6.9 percent of net sales, compared to operating income of $83.7 million, or 11.0 percent of net sales, for the comparable period in 2022.

Income tax expense of $14.4 million resulted in an effective income tax rate of 23.7 percent, compared to income tax expense of $17.3 million, or an effective income tax rate of 20.5 percent, for the comparable period in 2022.

Net income decreased 31 percent to $46.2 million, or $0.74 per diluted share, compared to net income of $66.8 million, or $1.03 per diluted share, for the comparable period in 2022.

Balance Sheet as of March 31, 2023

Cash, cash equivalents and short-term investments totaled $460.6 million, compared to $610.3 million as of March 31, 2022.

The Company had no borrowings as of March 31, 2023 or 2022.

Inventories increased 34 percent to $959.2 million, compared to $714.4 million as of March 31, 2022. Elevated carryover inventory, earlier receipt of current season inventory, and to a lesser extent, increased older season inventory resulted in higher inventory levels. Older season inventories represent a manageable portion of our total inventory mix.

Cash Flow for the Three Months Ended March 31, 2023

Net cash provided by operating activities was $78.0 million, compared to net cash used in operating activities of $33.8 million for the same period in 2022.

Capital expenditures totaled $14.0 million, compared to $12.9 million for the same period in 2022.

Share Repurchases for the Three Months Ended March 31, 2023

The Company repurchased 179,421 shares of common stock for an aggregate of $15.8 million, or an average price per share of $87.80.

At March 31, 2023, $513.6 million remained available under our stock repurchase authorization, which does not obligate the Company to acquire any specific number of shares or to acquire shares over any specified period of time.

Quarterly Cash Dividend

The Board of Directors approved a regular quarterly cash dividend of $0.30 per share, payable on June 1, 2023 to shareholders of record on May 18, 2023.

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 April 27, 2023 and are subject to significant risks and business uncertainties, including those factors described under “Forward-Looking Statements” below. These risks and uncertainties limit our ability to accurately forecast results. This outlook reflects our estimates as of April 27, 2023 regarding the impact of economic conditions, including inflationary pressures; supply chain constraints and expenses; elevated marketplace inventories; changes in consumer behavior and confidence; as well as geopolitical tensions. This outlook and commentary assume macro-economic conditions, particularly in the United States, do not materially deteriorate. Projections are predicated on normal seasonal weather globally.

Net sales are expected to increase 3 to 6 percent (unchanged) to $3.57 to $3.67 billion (unchanged) from $3.46 billion in 2022.

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 $413 to $432 million (prior $413 to $448 million), resulting in operating margin of 11.6 to 11.8 percent (prior 11.6 to 12.2 percent), compared to operating margin of 11.3 percent in 2022.

Effective income tax rate is expected to be approximately 24.5 percent (unchanged).

Net income is expected to be $322 to $336 million (prior $322 to $347 million), resulting in diluted earnings per share of $5.15 to $5.40 (prior $5.15 to $5.55). This diluted earnings per share range is based on estimated weighted average diluted shares outstanding of 62.4 million (prior 62.5 million).

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 $0.03 negative impact (prior $0.05 negative impact) on diluted earnings per share due primarily to unfavorable foreign currency transactional effects from hedging of inventory production.

Balance Sheet and Cash Flows

Operating cash flow is expected to be over $600 million (prior over $500 million).

Capital expenditures are planned to be in the range of $70 to $80 million (prior $70 to $90 million).

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 $0.75 to $0.90. 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.
• 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.