Foolish Forecast: Will Columbia Miss?

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Last quarter, we questioned whether Motley Fool Hidden Gems recommendation Columbia Sportswear (Nasdaq: COLM) could conquer its streak of never missing estimates. The company blew past Wall Street's fourth-quarter estimates as usual, making for seven straight years of beating expectations. Columbia will report its first-quarter 2008 numbers on Thursday. Shall we try for eight?

What analysts say:

• Buy, sell, or waffle? Unless our data provider has gone bonkers, Columbia has suffered a mass exodus of analysts over the past quarter. Only 14 of them still follow the company -- five fewer than at the tail end of last year. Even worse are the ratings they give: three buys, three sells, and eight holds.
• Revenues. On average, analysts expect to see sales slip 2% to $284.4 million.
• Earnings. Profits, in contrast, are predicted to collapse -- down 27% to $0.52 per share.

What management says:
When last we heard from Columbia, CEO Tim Boyle was telling us to expect pretty much the same numbers you see analysts cribbing up above: a 2% sales decline, and profits as low as $0.51 per share.

Since then, the biggest news at Columbia was -- take your pick -- either the opening of a retail store in Portland, Oregon, or the announcement in March that COO Patrick Anderson has resigned (or is about to resign).

What management does:
And yet, operationally, things appear to have picked up at Columbia lately. Rolling gross margins ticked up last quarter, as did the net, while operating margins were stable. In the margins race, Columbia maintains its historical lead over rivals Timberland (NYSE: TBL), Nike (NYSE: NKE), and Wolverine (NYSE: WWW) in footwear, and Quiksilver (NYSE: ZQK), VF (NYSE: VFC), and Under Armour (NYSE: UA) in apparel.

Margins	9/06	12/06	3/07	6/07	9/07	12/07
Gross	42.4%	42%	42.2%	42.7%	42.5%	42.8%
Operating	14.4%	14%	14.4%	14.8%	14.7%	14.7%
Net	9.8%	9.6%	9.8%	10.2%	10.2%	10.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Getting back to that Portland store opening, as you may recall, Columbia has plans to open five such retail outlets this year. Which suggests two items for us to look at on Thursday:

• First: How much capital expenditure was sunk into opening the Portland shop? That should give us a good idea of how much will be spent on the remaining four stores slated to open this year, and the dozens of additional stores that Columbia plans to build over the next few years. Invaluable information, since Columbia continues to decline to include cash flow statements in its earnings releases.
• Second: Inventories. Last quarter's 25% spike in inventories was almost certainly inspired in part by the need to stock up the new store(s). The question we'll want answered here is how much of the inventory buildup can be ascribed to this worthy cause, and how much to Columbia simply failing to sell its goods. We won't get the answer in a single quarter's news, but this is an issue to keep an eye on going forward.

Related Foolishness:

• Timberland Needs to Reboot
• Under Armour Smelling Ripe
• Nike Has the Power