Columbia Reports Second Quarter 2024 Financial Results; Updates Full Year 2024 Financial Outlook

Columbia Sportswear Company (NASDAQ: COLM, the "Company") announced second quarter 2024 financial results for the period ended June 30, 2024.

Second Quarter 2024 Highlights

• Net sales decreased 8 percent (7 percent constant-currency) to $570.2 million, compared to second quarter 2023.
• Loss from operations of $23.8 million, or (4.2) percent of net sales, compared to second quarter 2023 operating income of $6.2 million, or 1.0 percent of net sales.
• Net loss per share of $(0.20), compared to second quarter 2023 diluted earnings per share of $0.14.
• Exited the quarter with $711.1 million of cash, cash equivalents and short-term investments and no borrowings.
• Exited the quarter with $823.6 million of inventories, a decrease of 29 percent compared to June 30, 2023.

Full Year 2024 Financial Outlook

The following forward-looking statements reflect our expectations as of July 25, 2024 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 2024 Financial Outlook section below and the CFO Commentary and Financial Review presentation.

• Net sales of $3.35 to $3.42 billion (unchanged), representing a net sales decline of 4.0 to 2.0 percent (unchanged) compared to 2023.
• Operating income of $256 to $288 million (prior $259 to $291 million), representing operating margin of 7.7 to 8.4 percent (prior 7.7 to 8.5 percent).
• Diluted earnings per share of $3.65 to $4.05 (unchanged).

Chairman, President and Chief Executive Officer Tim Boyle commented, “Second quarter results were generally in line with expectations. We are working to maximize sales in a challenging U.S. marketplace. Most international markets, including China and Europe-direct, continue to see strong demand. We have made meaningful progress on our top priorities, including inventory reduction, rationalizing expenses through our Profit Improvement Program, and developing actionable strategies to reinvigorate long-term profitable growth. We are reiterating our net sales and diluted earnings per share outlook and remain on track to generate over $350 million in operating cash flow.

“Our Fall ‘24 order book supports sequential improvement in wholesale sales, with the potential for overall sales to return to growth by the fourth quarter. I’m thrilled with our line-up of innovations for this Fall, including Omni-Heat Infinity, Omni-Max footwear and our newest innovation, Omni-Heat Arctic. As we look toward 2025, I am pleased to report that early indications from our Spring ’25 wholesale orderbook suggest a return to wholesale growth in the first half.

“Our fortress balance sheet remains a strategic advantage, with over $710 million in cash and short-term investments, and no debt, at quarter end. I’m confident our team and our strategies position us to re-accelerate growth and capture market share over time. 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 second quarter 2024 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/financial-results at approximately 4:15 p.m. ET today. Analysts and investors are encouraged to review this commentary prior to participating in our conference call.

Second Quarter 2024 Financial Results
(All comparisons are between second quarter 2024 and second quarter 2023, unless otherwise noted.)

Net sales decreased 8 percent (7 percent constant-currency) to $570.2 million from $620.9 million for the comparable period in 2023. The decline in net sales primarily reflects lower wholesale net sales in the United States ("U.S.") due to retailer cautiousness, a difficult competitive environment, and generally soft consumer demand.

Gross margin contracted 270 basis points to 47.9 percent of net sales from 50.6 percent of net sales for the comparable period in 2023. Gross margin contraction primarily reflects the impact of efforts to spur demand and reduce inventory in the U.S., as well as changes in sales provisions, partially offset by lower inbound freight costs.

SG&A expenses were $302.7 million, or 53.1 percent of net sales, compared to $312.5 million, or 50.3 percent of net sales, for the comparable period in 2023. The largest changes in SG&A expenses primarily reflect lower supply chain and variable demand creation expenses, partially offset by higher direct-to-consumer ("DTC") expenses.

Loss from operations was $23.8 million, or (4.2) percent of net sales, compared to operating income of $6.2 million, or 1.0 percent of net sales, for the comparable period in 2023.

Interest income, net of $8.3 million, compared to $3.5 million for the comparable period in 2023, reflects higher yields on increased levels of cash, cash equivalents, and investments.

Income tax benefit of $3.2 million resulted in an effective income tax rate of 21.6 percent, compared to income tax expense of $1.2 million, or an effective income tax rate of 12.6 percent, for the comparable period in 2023.

Net loss of $11.8 million, or $(0.20) per diluted share, compared to net income of $8.4 million, or $0.14 per diluted share, for the comparable period in 2023.

First Half 2024 Financial Results
(All comparisons are between the first six months 2024 and the first six months 2023, unless otherwise noted.)

Net sales decreased 7 percent (6 percent constant-currency) to $1,340.2 million from $1,441.5 million for the comparable period in 2023.

Gross margin of 49.5% percent of net sales was flat compared to the comparable period in 2023.

SG&A expenses were $652.0 million, or 48.6 percent of net sales, compared to $659.9 million, or 45.8 percent of net sales, for the comparable period in 2023.

Operating income decreased 67 percent to $20.9 million, or 1.6 percent of net sales, compared to operating income of $62.7 million, or 4.3 percent of net sales, for the comparable period in 2023.

Interest income, net was $17.5 million, compared to $6.7 million for the comparable period in 2023.

Income tax expense of $8.6 million resulted in an effective income tax rate of 22.0 percent, compared to income tax expense of $15.5 million, or an effective income tax rate of 22.2 percent, for the comparable period in 2023.

Net income decreased 44 percent to $30.6 million, or $0.51 per diluted share, compared to net income of $54.6 million, or $0.88 per diluted share, for the comparable period in 2023.

Balance Sheet as of June 30, 2024

Cash, cash equivalents, and short-term investments totaled $711.1 million, compared to $302.8 million as of June 30, 2023.

The Company had no borrowings as of either June 30, 2024 or June 30, 2023.

Inventories decreased 29 percent to $823.6 million, compared to $1,162.5 million as of June 30, 2023.

Cash Flow for the Six Months Ended June 30, 2024

Net cash provided by operating activities was $108.9 million, compared to $9.7 million for the same period in 2023.

Capital expenditures totaled $27.8 million, compared to $22.8 million for the same period in 2023.

Share Repurchases for the Six Months Ended June 30, 2024

The Company repurchased 1,414,437 shares of common stock for an aggregate of $110.7 million, or an average price per share of $78.29.

At June 30, 2024, $234.6 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 August 29, 2024 to shareholders of record on August 15, 2024.

Full Year 2024 Financial Outlook
(Additional financial outlook details can be found in the CFO Commentary and Financial Review presentation.)

The Company's full year 2024 and third quarter 2024 Financial Outlook are each forward-looking in nature, and the following forward-looking statements reflect our expectations as of July 25, 2024 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.

Net sales are expected to decrease 4.0 to 2.0 percent (unchanged), resulting in net sales of $3.35 to $3.42 billion (unchanged), compared to $3.49 billion in 2023.

Gross margin is expected to expand 40 to 60 basis points (prior 80 to 120 basis points) to 50.0 to 50.2 percent of net sales (prior 50.4 to 50.8 percent) from 49.6 percent of net sales in 2023.

SG&A expenses, as a percent of net sales, are expected to be 42.4 to 43.0 percent (prior 43.0 to 43.4 percent), compared to SG&A expense as a percent of net sales of 40.6 percent in 2023.

Operating income is expected to be $256 to $288 million (prior $259 to $291 million), resulting in operating margin of 7.7 to 8.4 percent (prior 7.7 to 8.5 percent), compared to operating margin of 8.9 percent in 2023.

Interest income, net is expected to be approximately $28 million.

Effective income tax rate is expected to be 24.0 to 25.0 percent (unchanged).

Net income is expected to be $215 to $239 million (prior $217 to $240 million), resulting in diluted earnings per share of $3.65 to $4.05 (unchanged). This diluted earnings per share range is based on estimated weighted average diluted shares outstanding of 59.3 million (unchanged).

Foreign Currency

• Foreign currency translation is anticipated to decrease 2024 net sales growth by approximately 70 basis points (prior 20 basis points).
• Foreign currency is expected to have an approximately $0.07 negative impact on diluted earnings per share (prior $0.04) due to negative foreign currency transactional effects from hedging of inventory production, as well as unfavorable foreign currency translation impacts.

Cash Flows

Operating cash flow is expected to be at least $350 million (unchanged).

Capital expenditures are planned to be in the range of $60 to $80 million (unchanged).

Third Quarter 2024 Financial Outlook

• Net sales are expected to be $927 to $959 million, representing a decline of 6 to 3 percent from $985.7 million for the comparable period in 2023.
• Operating income is expected to be $94 to $107 million, resulting in operating margin of 10.1 to 11.2 percent, compared to operating margin of 13.7 percent in the comparable period in 2023.
• Diluted earnings per share is expected to be $1.27 to $1.43, compared to $1.70 for the comparable period in 2023.