Columbia Sportswear Company Reports Third Quarter 2024 Financial Results; Updates Full Year 2024 Financial Outlook

Columbia Sportswear Company has announced third quarter 2024 financial results for the period ended September 30, 2024.

Third Quarter 2024 Highlights

• Net sales decreased 5 percent (5 percent constant-currency) to $931.8 million, compared to third quarter 2023.
• Operating income was $112.5 million, or 12.1 percent of net sales, compared to third quarter 2023 operating income of $134.6 million, or 13.7 percent of net sales.
• Diluted earnings per share of $1.56, compared to third quarter 2023 diluted earnings per share of $1.70.
• Exited the quarter with $373.9 million of cash, cash equivalents and short-term investments and no borrowings.
• Repurchased $230.9 million of common stock during the first nine months of 2024. On October 24, 2024, the Board of Directors approved a $600 million increase to the Company's share repurchase authorization.
• Announces the ACCELERATE Growth Strategy, intended to elevate the Columbia brand.

Full Year 2024 Financial Outlook

The following forward-looking statements reflect our expectations as of October 30, 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 $3.31 to $3.38 billion (prior $3.35 to $3.42 billion), representing a net sales decline of 5.0 to 3.0 percent (prior 4.0 to 2.0 percent) compared to 2023.
• Operating income of $257 to $284 million (prior $256 to $288 million), representing operating margin of 7.7 to 8.4 percent (unchanged).
• Diluted earnings per share of $3.70 to $4.05 (prior $3.65 to $4.05).

Chairman, President and Chief Executive Officer Tim Boyle commented, “Third quarter results reflect ongoing strength in most international markets, offset by continued softness in North America. While warm weather has curbed early season demand for Fall 2024 cold weather product, I’m excited about the differentiated innovations we are offering consumers, including Omni-Heat Infinity and Omni-Heat Arctic, as well as the lightweight comfort provided by our Omni-Max footwear platform.

“In recent months, the Columbia brand embarked on ACCELERATE, a growth strategy intended to elevate the brand and attract younger and more active consumers. This multi-year strategy will be centered around several consumer-centric shifts across our brand, product and marketplace strategies. I’m confident the ACCELERATE Growth Strategy will enable brand-right profitable growth and I’m eager to see it come to life in the seasons ahead.

“Our financial position remains strong, with cash and short-term investments of over $370 million and no bank borrowings exiting the quarter. We are committed to investing in our strategic priorities with renewed emphasis 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 third 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.

ACCELERATE Growth Strategy

ACCELERATE is a growth strategy intended to elevate the Columbia brand to attract younger and more active consumers. It is a multi-year effort centered around several consumer-centric shifts to our brand, product and marketplace strategies, as well as enhanced ways of working. For more information on the ACCELERATE Growth Strategy, please refer to the CFO Commentary and Financial Review presentation.

Third Quarter 2024 Financial Results

(All comparisons are between third quarter 2024 and third quarter 2023, unless otherwise noted.)

Net sales decreased 5 percent (5 percent constant-currency) to $931.8 million from $985.7 million for the comparable period in 2023. The decline in net sales reflects lower Fall '24 wholesale orders, as well as weak consumer demand in the U.S. partially attributable to warm weather and outdoor category headwinds.

Gross margin expanded 150 basis points to 50.2 percent of net sales from 48.7 percent of net sales for the comparable period in 2023. Gross margin expansion primarily reflects lower inbound freight costs and favorable channel and region net sales mix, partially offset by unfavorable FX hedging rates.

SG&A expenses were $361.2 million, or 38.8 percent of net sales, compared to $351.6 million, or 35.7 percent of net sales, for the comparable period in 2023. The largest changes in SG&A expenses were higher direct-to-consumer ("DTC") and incentive compensation expenses, partially offset by lower supply chain and demand creation expenses.

Operating income was $112.5 million, or 12.1 percent of net sales, compared to operating income of $134.6 million, or 13.7 percent of net sales, for the comparable period in 2023.

Interest income, net of $5.4 million, compared to $1.9 million for the comparable period in 2023, reflects higher yields on increased levels of cash, cash equivalents, and investments.

Income tax expense of $29.0 million resulted in an effective income tax rate of 24.4 percent, compared to income tax expense of $32.6 million, or an effective income tax rate of 24.0 percent, for the comparable period in 2023.

Net income was $90.2 million, or $1.56 per diluted share, compared to net income of $103.5 million, or $1.70 per diluted share, for the comparable period in 2023.

First Nine Months 2024 Financial Results

(All comparisons are between the first nine months 2024 and the first nine months 2023, unless otherwise noted.)

Net sales decreased 6 percent (6 percent constant-currency) to $2,272.0 million from $2,427.2 million for the comparable period in 2023.

Gross margin expanded 60 basis points to 49.8 percent of net sales from 49.2 percent of net sales for the comparable period in 2023.

SG&A expenses were $1,013.3 million, or 44.6 percent of net sales, compared to $1,011.5 million, or 41.7 percent of net sales, for the comparable period in 2023.

Operating income was $133.4 million, or 5.9 percent of net sales, compared to operating income of $197.2 million, or 8.1 percent of net sales, for the comparable period in 2023.

Interest income, net was $22.9 million, compared to $8.6 million for the comparable period in 2023.

Income tax expense of $37.6 million resulted in an effective income tax rate of 23.8 percent, compared to income tax expense of $48.1 million, or an effective income tax rate of 23.4 percent, for the comparable period in 2023.

Net income was $120.7 million, or $2.04 per diluted share, compared to net income of $158.1 million, or $2.56 per diluted share, for the comparable period in 2023.

Balance Sheet as of September 30, 2024

Cash, cash equivalents, and short-term investments totaled $373.9 million, compared to $214.8 million as of September 30, 2023.

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

Inventories decreased 10 percent to $798.2 million, compared to $885.2 million as of September 30, 2023.

Cash Flow for the Nine Months Ended September 30, 2024

Net cash used in operating activities was $76.6 million, compared to net cash provided from operating activities of $22.2 million for the same period in 2023.

Capital expenditures totaled $41.7 million, compared to $41.4 million for the same period in 2023.

Share Repurchases for the Nine Months Ended September 30, 2024

The Company repurchased 2,916,970 shares of common stock for an aggregate of $230.9 million, or an average price per share of $79.15.

At September 30, 2024, $114.5 million remained available under our stock repurchase authorization. On October 24, 2024, the Board of Directors authorized a $600 million increase to the Company's share 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 December 4, 2024 to shareholders of record on November 20, 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 and fourth quarter 2024 Financial Outlooks, as well as first half 2025 commentary, are each forward-looking in nature, and the following forward-looking statements reflect our expectations as of October 30, 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 5.0 to 3.0 percent (prior decrease of 4.0 to 2.0 percent), resulting in net sales of $3.31 to $3.38 billion (prior $3.35 to $3.42 billion), compared to $3.49 billion in 2023.

Gross margin is expected to expand 40 to 90 basis points (prior 40 to 60 basis points) to 50.0 to 50.5 percent of net sales (prior 50.0 to 50.2 percent) from 49.6 percent of net sales in 2023.

SG&A expenses, as a percent of net sales, are expected to be 42.8 to 43.0 percent (prior 42.4 to 43.0 percent), compared to SG&A expense as a percent of net sales of 40.6 percent in 2023.

Operating income is expected to be $257 to $284 million (prior $256 to $288 million), resulting in operating margin of 7.7 to 8.4 percent (unchanged), compared to operating margin of 8.9 percent in 2023.

Interest income, net is expected to be approximately $30 million (prior $28 million).

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

Net income is expected to be $217 to $238 million (prior $215 to $239 million), resulting in diluted earnings per share of $3.70 to $4.05 (prior $3.65 to $4.05). This diluted earnings per share range is based on estimated weighted average diluted shares outstanding of approximately 58.7 million (prior 59.3 million).

Foreign Currency

• Foreign currency translation is expected to have a modestly unfavorable impact on full year net sales.
• Foreign currency is expected to have an approximately $0.01 negative impact on diluted earnings per share (prior $0.07) due to negative foreign currency transactional effects from hedging of inventory production, partially offset by favorable foreign currency translation impacts.

Cash Flows

Operating cash flow is expected to be at least $300 million (prior $350 million).

Capital expenditures are planned to be in the range of $60 to $70 million (prior $60 to $80 million).

Fourth Quarter 2024 Financial Outlook

• Net sales are expected to be $1,040 to $1,110 million, representing a decline of 2 percent to growth of 5 percent from $1,060 million for the comparable period in 2023.
• Operating income is expected to be $123 to $151 million, resulting in operating margin of 11.8 to 13.6 percent, compared to operating margin of 10.7 percent in the comparable period in 2023.
• Diluted earnings per share is expected to be $1.68 to $2.03, compared to $1.55 for the comparable period in 2023.

Preliminary First Half 2025 Commentary

• Based on our Spring ‘25 orderbook, we are forecasting mid-single-digit percent growth in global wholesale net sales in first half 2025.
• This reflects growth across all regions, and in the Columbia, prAna and Mountain Hardwear brands.