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Bull of the Day: Columbia Sportswear (COLM)

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Columbia Sportswear’s (COLM - Free Report) outlook appears strong heading into the holiday shopping season and its stock price is up big over the past two years. The outdoor apparel firm, which owns multiple brands, is committed to compete and stand out against rivals such as The North Face (VFC - Free Report) through new lines and more.

COLM’s Pitch

Columbia was founded in the late 1930s and has remained at the forefront of outdoor clothing, apparel, and footwear ever since. Today, the Portland, Oregon-headquarter firm owns four total brands: Mountain Hardwear, Sorel, prAna, and, of course, its namesake brand.

Columbia is the largest brand, accounting for approximately 85% of total sales in the first half of 2019, with sales up 9%. Meanwhile, its boot-heavy Sorel brand saw its first-half revenue soar roughly 30% to make up around 5% of company revenue.

Mountain Hardwear, which is essentially a more expensive Columbia, slipped 3%. Sustainable-focused and yoga-inspired prAna also dipped slightly. Still, both brands remain key in order to compete more broadly in a market that includes Canada Goose (GOOS - Free Report) , the previously mentioned The North Face, Lululemon (LULU - Free Report) , and many others. More recently, Columbia rolled out a new footwear line called the SH/FT Collection. This new offering aims to bring “street-ready style and summit level skills” into one footwear collection.

Columbia’s U.S. business, which accounts for around 60% of sales, soared 13% during the first six months of 2019, with the next biggest climb coming from Europe, the Middle East and Africa, up 4%. Like all retailers, COLM has tried to expand its direct-to-consumer business recently. DTC sales are up 9% so far this year, pulling in 44% of revenue. Last year, DTC sales surged 22% to account for 42% of total sales.

The company’s wholesales unit also popped 8% in the first half of 2019. Colombia and its various brands can be found everywhere from Dick’s Sporting Goods (DKS - Free Report) and Macy’s (M - Free Report) to outdoor-specific retailers such as REI and Moosejaw—now owned by Walmart (WMT - Free Report) . COLM’s wholesale division also jumped 8% in 2018.

 

 

 

 

 

Price Movement

Moving on, we can see that shares of COLM have been a on tear over the last five years, up 162%, against its industry’s 25% climb and the S&P 500’s 50% move. Columbia stock is also up 65% in the last 24 months, compared to the Apparel Market’s 37%. COLM stock has come back to earth in 2019, up 16%, against the S&P’s 17% and its industry’s 13%.

Some investors might also be glad to see that shares of Columbia have slipped nearly 1% in the last three months. The stock closed regular trading Wednesday at $97.31 per share, down roughly 11% from its 52-week highs of $109.74. This could give COLM stock room to run heading into the release of its Q3 financial results in late October and the vital holiday shopping season.  

More Fundamentals

Despite Columbia’s impressive run, its valuation picture hardly appears stretch. COLM is trading at 19.1X forward 12-month Zacks Consensus Earnings Estimates. This roughly matches its industry’s average and comes in well below its own three-year high of 26.8X and 21.1X median during this stretch.

Columbia also pays an annualized dividend of $0.96 per share for a 1.00% yield at the moment. The yield on the 10-year U.S. Treasury currently rests at 1.72%. Meanwhile, the Textile – Apparel market that Columbia is a part of ranks in the top 25% of our 255 Zacks Industries. The company has also returned value to shareholders through stock buybacks.

 

 

 

 

Q3 Outlook & Beyond

Looking ahead, our Zacks Consensus Estimates call for Columbia’s third-quarter fiscal 2019 revenue to jump 10.8% to reach $881.48 million. This would top last quarter’s 9.3% top-line expansion and Q1 2019’s 7.8% growth. The company’s Q4 revenue is then projected to pop 8.2%, which would come on top of the year-ago period’s 18% sales growth.

COLM’s fiscal 2019 revenue is projected to jump roughly 8.9%, with fiscal 2020 projected to come in 6.3% above our current-year estimate. Both of these would mark the continuation of strong sales growth, after 2018 revenue jumped 13.6%.

At the bottom-end of the income statement, Columbia’s adjusted quarterly earnings are expected to jump 9.2%. Peeking ahead, Q4 earnings are projected to pop 7.7%, with fiscal 2019 expected to surge 18.7%. The company’s 2020 EPS figure is then expected to climb another 9.3%.

The company’s longer-term earnings estimate revision activity has also trended upward, to boost its fiscal 2019 and 2020 consensus estimates by 5% and 3%, respectively, in the last 90 days.

Bottom Line

Columbia is currently a Zacks Rank #1 (Strong Buy). The firm is also prepared to expand and drive growth through innovation, which will be much easier considering that the firm has over $500 in cash and short-term investments and zero long-term debt.

Columbia and others have benefited from increased enthusiasm for the outdoors. For example, millions of more people visited the U.S. National Parks System recently, with the past three years marking record numbers. The outdoor apparel firm has also been part of the larger retro clothing wave that Adidas (ADDYY - Free Report) and others have embraced, reimagining iconic ‘80s looks that have helped Columbia land on the shelves of youth-focused stores like Urban Outfitters (URBN - Free Report) .

Plus, Nike’s (NKE - Free Report) recent blowout quarterly earnings could help spur a larger industry-wide push as Wall Street seems confident enough in consumer spending.

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