Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Columbia Sportswear Climbs Higher

We ran through the numbers from Motley Fool Hidden Gems selection Columbia Sportswear (Nasdaq: COLM  ) in last week's Fool by Numbers. Now we'll take a deeper look at the company's direction and some of the items covered on its conference call.

The overall 13.6% sales increase for the company was above what was expected and was largely driven by mountain hardware sales (up 26.4%), footwear (25.9% increase), outerwear (8% increase), and sportswear (9.6% increase). The increase in outerwear was the smallest, but it's still very important to track, as it's the company's highest margin product group. The increase in footwear sales is also impressive, given the competition from Nike (NYSE: NKE  ) and Timberland (NYSE: TBL  ) . In particular, Timberland has had its struggles in the last year.

From a balance sheet perspective, Columbia Sportswear remains quite healthy. Inventory growth relative to sales is a concern, but this is the company's normal ramp-up period for fall sales. As accounts payable growth was in line with inventory growth (about 30%), the total change in working capital isn't terribly important. However, working capital management is something to keep an eye on, as the company has been acquiring a number of small brands.

Going forward, I think investors will want to monitor margins most closely -- with a focus on gross margins. With the acquisitions the company has made and through some merchandising mistakes of its own, the company's margins are 2%-3% below what's historically normal. On the conference call, management talked up the steps it's taking to get margins back on track, but the improvements won't really be seen until fiscal 2007.

It's hard to read too much into one quarter for a company, and it's a mistake to read too much into this company's second-quarter results, as it's the lowest volume quarter for the company. That said, I'll reiterate by paying close attention to the company's gross margins in the coming quarters. The gross margin level is below normal for the company, and I expect that its actions to increase prices on certain items and realign its products will bear fruit.

I also like how the company is positioning its Pacific Trail acquisition to fulfill the product range below its current Columbia Sportswear products. Potential long-term sales growth in the neighborhood of 10% and the potential for expanding margins are a fairly attractive combination and a scenario to consider carefully when valuing the company and where it might go from here.

Columbia Sportswear is a Hidden Gems recommendation. You can view the entire Hidden Gems scorecard with yourfree trial.

At the time of publication Nathan
Parmelee had no interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 515023, ~/Articles/ArticleHandler.aspx, 10/27/2016 9:14:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,199.33 30.06 0.00%
S&P 500 2,139.43 -3.73 0.00%
NASD 5,250.27 -33.13 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
COLM $57.55 Down -0.53 +0.00%
Columbia Sportswea… CAPS Rating: *****
NKE $51.97 Up +0.92 +0.00%
Nike CAPS Rating: *****
TBL.DL $0.00 Down +0.00 +0.00%
The Timberland Co. CAPS Rating: ***