It's official. They did it.

Reporting its fourth-quarter and full-year earnings last week, Columbia Sportswear (Nasdaq: COLM) put the cap on seven straight years of never missing an earnings estimate. It grew sales 4% year over year. It held firm at a 14.7% operating profit margin on those sales (maintaining its lead over rivals that include VF Corp. (NYSE: VFC), Under Armour (NYSE: UA), and Nike (NYSE: NKE), in that order). And it earned $1.26 per share while Wall Street was predicting an even buck.

And yet, the stock opened 10% lower following the news. Hmm.

Guidance
So what was it in the above performance that spooked Wall Street? My guess: Nothing. It was the guidance. Peering into a future marked by "economic uncertainties," CEO Tim Boyle warned that the first quarter is looking pretty weak. Several weeks into the quarter already, Columbia's boss predicted we'll see sales slump about 2% in Q1 2008, and profit could nosedive to $0.51 per share, from $0.71 last year.

But check out the balance sheet
How likely is it that this bad news will come to pass? My guess: Pretty likely. While I've got no more insight than the next Fool into consumers' willingness to spend, I do know how to read a balance sheet. And what I see in Columbia's should give pause to Motley Fool Hidden Gems members considering doubling down on this one.

You see, inventories spiked 25% year over year at Columbia -- five times the rate of sales growth. While management once again failed to provide us a cash flow statement with its report (tsk, tsk), the rise in inventories suggests that free cash flow probably didn't improve much from its "awful" state last quarter. When you see that much unsold inventory tied up on the balance sheet, it almost always clogs up the cash flow statement.

What's more, in order for Columbia to get things moving again, it's probably going to have to "incent" consumers to buy its goods. This usually means cutting prices -- and profit margins. Considering that Columbia thinks a 2% decline in sales will turn into a profits decline 14 times as large, I suspect management is thinking much the same thing.

Long story short, last week's earnings warning was for real.

What did we expect out of Columbia last quarter, and what did we get? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. Columbia is a Hidden Gems recommendation. Under Armour has been selected by Rule Breakers. VF Corp. is an Income Investor pick. The Motley Fool has a disclosure policy.