Stock Story -
Outerwear manufacturer Columbia Sportswear (NASDAQ:COLM) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 8.2% year on year to $570.2 million. On the other hand, next quarter's revenue guidance of $943 million was less impressive, coming in 2.4% below analysts' estimates. It made a GAAP loss of $0.20 per share, down from its profit of $0.14 per share in the same quarter last year.
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Columbia Sportswear (COLM) Q2 CY2024 Highlights:
- Revenue: $570.2 million vs analyst estimates of $569.3 million (small beat)
- EPS: -$0.20 vs analyst estimates of -$0.34 (41.3% beat)
- Revenue Guidance for Q3 CY2024 is $943 million at the midpoint, below analyst estimates of $966.4 million
- The company reconfirmed its revenue guidance for the full year of $3.39 billion at the midpoint
- Gross Margin (GAAP): 47.9%, down from 50.6% in the same quarter last year
- Free Cash Flow of $44.7 million, down 51.4% from the previous quarter
- Constant Currency Revenue rose 7% year on year(compared to 12% in the same quarter last year)
- Market Capitalization: $4.63 billion
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ:COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Apparel, Accessories and Luxury GoodsWithin apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Columbia Sportswear grew its sales at a weak 3.2% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Columbia Sportswear's recent history shows its demand slowed as its annualized revenue growth of 1.7% over the last two years is below its five-year trend.
Columbia Sportswear also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 7.3% year-on-year growth. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for Columbia Sportswear.
This quarter, Columbia Sportswear reported a rather uninspiring 8.2% year-on-year revenue decline to $570.2 million of revenue, in line with Wall Street's estimates. The company is guiding for a 4.3% year-on-year revenue decline next quarter to $943 million, a reversal from the 3.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 2% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Columbia Sportswear has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company's free cash flow margin averaged 11.2% over the last two years, slightly better than the broader consumer discretionary sector.
Columbia Sportswear's free cash flow clocked in at $44.7 million in Q2, equivalent to a 7.8% margin. This quarter's result was nice as its cash flow turned positive after being negative in the same quarter last year, but we wouldn't put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Over the next year, analysts predict Columbia Sportswear's cash conversion will fall. Their consensus estimates imply its free cash flow margin of 21.6% for the last 12 months will decrease to 6%.
Key Takeaways from Columbia Sportswear's Q2 Results We were excited its EPS outperformed Wall Street's estimates. On the other hand, its revenue guidance for the next quarter came in slightly below estimates. Overall, this quarter could have been better for Columbia Sportswear. The stock traded down 2.4% to $75.40 immediately following the results.
