Columbia Sportswear Company Reports Fourth Quarter & Full Year 2023 Financial Results; Provides Full Year 2024 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 fourth quarter 2023 financial results for the period ended December 31, 2023.

• Net sales decreased 9 percent (10 percent constant-currency) to $1,060.0 million, compared to fourth quarter 2022.
• Operating income decreased 27 percent to $113.1 million, or 10.7 percent of net sales, compared to fourth quarter 2022 operating income of $155.4 million, or 13.3 percent of net sales. Fourth quarter 2023 operating income includes a $25.0 million impairment charge related to prAna, compared to $35.6 million in the comparable period in 2022.
• Diluted earnings per share decreased 23 percent to $1.55, compared to fourth quarter 2022 diluted earnings per share of $2.02. The impairment charge related to prAna negatively impacted diluted earnings per share by $0.31, compared to a negative impact of $0.43 in the comparable period in 2022.
• Exited the quarter with $764.5 million of cash, cash equivalents and short-term investments and no borrowings.
• Exited the quarter with $746.3 million of inventories, a decrease of 27 percent compared to December 31, 2022.

Full Year 2023 Highlights

• Net sales increased 1 percent to $3,487.2 million, compared to 2022.
• Operating income decreased 21 percent to $310.3 million, or 8.9 percent of net sales, compared to 2022 operating income of $393.1 million, or 11.3 percent of net sales.
• Diluted earnings per share decreased 17 percent to $4.09, compared to 2022 diluted earnings per share of $4.95.
• The Company repurchased $184.0 million of common stock during the year.

Full Year 2024 Financial Outlook

The following forward-looking statements reflect our expectations as of February 1, 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, representing a net sales decline of 4.0 to 2.0 percent compared to 2023.
• Operating income of $256 to $288 million, representing operating margin of 7.6 to 8.4 percent.
• Diluted earnings per share of $3.45 to $3.85.

Chairman, President and Chief Executive Officer Tim Boyle commented, “I’m proud of what our global workforce was able to achieve in 2023. We successfully executed our inventory reduction plan, which contributed to operating cash flow generation of over $600 million for the year. The Columbia brand generated healthy growth outside of the U.S., led by China and Europe-direct markets. In the U.S., we navigated a difficult U.S. marketplace and a warm winter, both of which impacted our fourth quarter performance.

“Looking ahead, we expect 2024 to be a challenging year. Retailers are placing orders cautiously, and economic and geopolitical uncertainty remains high. We are working diligently to maximize sales in this environment, while optimizing our product, brand marketing and marketplace strategies to accelerate growth in 2025 and beyond. To mitigate erosion in profitability and to improve the efficiency of our operations, we are implementing a multi-year profit improvement program targeting $125 to $150 million in annual savings by 2026.

“Our balance sheet remains strong, with cash and short-term investments totaling $765 million with no borrowings at year end. I’m confident in our team, our strategies, and our ability to unlock the significant long-term growth opportunities we see across the business. 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 fourth 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/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.

Fourth Quarter 2023 Financial Results
(All comparisons are between fourth quarter 2023 and fourth quarter 2022, unless otherwise noted.)

Net sales decreased 9 percent (10 percent constant-currency) to $1,060.0 million from $1,169.6 million for the comparable period in 2022. The decline in net sales primarily reflects earlier shipment of Fall 2023 wholesale orders in third quarter 2023 compared to late shipment of Fall 2022 wholesale orders in fourth quarter 2022, as well as lower U.S. direct-to-consumer (DTC) net sales.

Gross margin expanded 20 basis points to 50.6 percent of net sales from 50.4 percent of net sales for the comparable period in 2022. Gross margin expansion primarily reflects lower inbound freight costs and favorable channel mix, which more than offset the impact of inventory reduction efforts across our DTC and wholesale businesses.

SG&A expenses were $404.8 million, or 38.2 percent of net sales, compared to $405.1 million, or 34.6 percent of net sales, for the comparable period in 2022. The largest changes in SG&A expenses primarily reflect higher DTC expenses, partially offset by lower variable demand creation and incentive compensation expenses.

Impairment of goodwill and intangible assets included a $25.0 million charge related to prAna, compared to $35.6 million of charges related to prAna for the comparable period in 2022.

Operating income decreased 27 percent to $113.1 million, or 10.7 percent of net sales, compared to $155.4 million, or 13.3 percent of net sales, for the comparable period in 2022.

Interest income, net of $5.0 million, compared to $1.1 million for the comparable period in 2022, reflects higher yields on increased levels of cash, cash equivalents, and investments.

Income tax expense of $26.6 million resulted in an effective income tax rate of 22.2 percent, compared to income tax expense of $34.0 million, or an effective income tax rate of 21.3 percent, for the comparable period in 2022.

Net income decreased 26 percent to $93.3 million, or $1.55 per diluted share, compared to net income of $125.7 million, or $2.02 per diluted share, for the comparable period in 2022.

Full Year 2023 Financial Results
(All comparisons are between the full year 2023 and the full year 2022, unless otherwise noted.)

Net sales increased 1 percent (1 percent constant-currency) to $3,487.2 million from $3,464.2 million for the comparable period in 2022.

Gross margin expanded 20 basis points to 49.6 percent of sales compared to 49.4 percent of net sales for the comparable period in 2022.

SG&A expenses increased 9 percent to $1,416.3 million, or 40.6 percent of net sales, from $1,304.4 million, or 37.7 percent of net sales, for the comparable period in 2022.

Impairment of goodwill and intangible assets included a $25.0 million charge related to prAna, compared to $35.6 million of charges related to prAna for the comparable period in 2022.

Operating income decreased 21 percent to $310.3 million, or 8.9 percent of net sales, compared to operating income of $393.1 million, or 11.3 percent of net sales, for the comparable period in 2022.

Interest income, net was $13.7 million, compared to $2.7 million for the comparable period in 2022.

Income tax expense of $74.8 million resulted in an effective income tax rate of 22.9 percent, compared to income tax expense of $86.0 million, or an effective income tax rate of 21.6 percent, for the comparable period in 2022.

Net income decreased 19 percent to $251.4 million, or $4.09 per diluted share, compared to net income of $311.4 million, or $4.95 per diluted share, for the comparable period in 2022.

Balance Sheet as of December 31, 2023

Cash, cash equivalents, and short-term investments totaled $764.5 million, compared to $431.0 million as of December 31, 2022.

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

Inventories decreased 27 percent to $746.3 million, compared to $1,028.5 million as of December 31, 2022.

Cash Flow for the Twelve Months Ended December 31, 2023

Net cash provided by operating activities was $636.3 million, compared to net cash used in operating activities of $25.2 million for the same period in 2022.

Capital expenditures totaled $54.6 million, compared to $58.5 million for the same period in 2022.

Share Repurchases for the Twelve Months Ended December 31, 2023

The Company repurchased 2,377,962 shares of common stock for an aggregate of $184.0 million, or an average price per share of $77.39.

At December 31, 2023, $345.3 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 March 22, 2024 to shareholders of record on March 8, 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, First Half 2024, and First Quarter 2024 Financial Outlook are each forward-looking in nature, and the following forward-looking statements reflect our expectations as of February 1, 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. The following forward-looking statements include certain aspects of the profit improvement program planned for execution in 2024.

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

Gross margin is expected to expand 100 to 150 basis points to 50.6 to 51.1 percent of net sales from 49.6 percent of net sales in 2023.

SG&A expenses, as a percent of net sales, are expected to be 43.2 to 43.5 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, resulting in operating margin of 7.6 to 8.4 percent, compared to operating margin of 8.9 percent in 2023.

Interest income, net is expected to be approximately $19 million.

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

Net income is expected to be $207 to $231 million, resulting in diluted earnings per share of $3.45 to $3.85. This diluted earnings per share range is based on estimated weighted average diluted shares outstanding of 60.1 million.

Foreign Currency

• Foreign currency translation is anticipated to increase 2024 net sales growth by approximately 60 basis points.
• Foreign currency is expected to have an approximately $0.03 positive impact on diluted earnings per share due primarily to favorable foreign currency translational impacts to net sales growth, partially offset by negative foreign currency transactional effects from hedging of inventory production.

Cash Flows

Operating cash flow is expected to be at least $300 million.

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

First Half 2024 Financial Outlook

• Net sales are expected to be $1,310 to $1,352 million, representing a decline of 9 to 6 percent from $1,442 million for the comparable period in 2023.
• Operating income is expected to be ($12) to $8 million, resulting in operating margin of -0.9 to +0.6 percent, compared to operating margin of 4.3 percent in the comparable period in 2023.
• Diluted earnings per share is expected to be $0.01 to $0.26, compared to $0.88 for the comparable period in 2023.

First Quarter 2024 Financial Outlook

• Net sales are expected to be $730 to $753 million, representing a decline of 11 to 8 percent from $820.6 million for the comparable period in 2023.
• Operating income is expected to be $16 to $28 million, resulting in operating margin of 2.2 to 3.8 percent, compared to operating margin of 6.9 percent in the comparable period in 2023.
• Diluted earnings per share is expected to be $0.30 to $0.45, compared to $0.74 for the comparable period in 2023.