Columbia Sportswear Company (COLM) delivered better-than-expected third-quarter 2010 results. The quarterly earnings of $1.53 per share beat the Zacks Consensus Estimate of $1.47, and jumped 10.9% from $1.38 posted in the prior-year quarter.

Columbia registered a 16% increase in total sales to $504.0 million over $434.5 million in the prior-year quarter driven by a shift in business to more innovative and premium products and a continuous effort to increase consumer demand for brands.

Geographically, almost all regions reported an increase in sales with a 22% growth in the U.S. to $325.6 million and a 33% growth in the Latin America/Asia-Pacific (LAAP) region to $59.0 million. However, Canada lagged with a 4% decline to $53.1 million and Europe, Middle East and Africa (EMEA) region revenues tumbled 2% to $66.3 million.

Categorically, outerwear sales increased 12% to $223.9 million, sportswear sales jumped 18% to $168.2 million, footwear sales improved 18% to $168.2 million and accessories and equipment recorded a sales growth of 31% to $29.1 million.

As per brands, the Columbia brand registered an increase of 16% to $430.3 million in revenue, Mountain Hardwear sales jumped 9% to $38.2 million and Sorel footwear emerged as the strongest brand with a total sales growth of 24% to $33.4 million.

Cost of sales increased 18% in the quarter to $289.7 million, offset by sales increase that helped grow gross profit in the quarter. Gross profit improved 14% to $214.3 million compared with $188.6 million in the prior-year quarter.

Cash and cash equivalents at the end of the quarter came in at $236.3 million while stockholders’ equity was $1,029.4 million. Columbia declared a dividend of 20 cents per share payable on November 24, 2010 to shareholders of record as on November 10, 2010. Columbia also repurchased approximately 203,000 shares of common stock for a total price of $10.0 million in the quarter under review.

Outlook

For the fourth quarter of fiscal 2010, Columbia expects sales to increase by 20%-23% compared with the fourth quarter of fiscal 2009, resulting mostly from higher advance seasonal orders and strong direct-to-consumer sales. Operating margin is expected to decrease approximately 65-205 basis points year over year.  Gross margin came in at 42.5% versus 43.4% in the prior-year quarter.

Columbia expects net sales to increase 17%-18% in fiscal 2010 over the prior-year. A higher portion of full price sales in the wholesale business, more direct-to-consumer sales, better foreign currency hedge rates and increased costs to expedite production and delivery of fall orders to customers should expand fiscal 2010 gross margins by 20 basis points. Operating margin for the year is expected in the range of 6.2%-6.6% in fiscal 2010 compared with the fiscal 2009 margin of approximately 7%.

The company expects to earn $2.00-$2.15 per share in fiscal 2010. The Zacks Consensus Estimate for the year is currently pegged at $2.24.

Columbia’s shares maintain a Zacks #1 Rank, which translates into a short-term Strong Buy recommendation. Our long-term recommendation for the stock remains Outperform.

 
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