What Does the Future Hold for Columbia Sportswear Investors?

Columbia Sportswear Company COLM is making a major strategic shift, aiming to attract a younger, more active consumer base while enhancing its brand image. With its new "ACCELERATE" strategy, the company is focusing on refining its product offerings, improving consumer experiences and increasing brand visibility. Management is on track to enhance operational efficiency and protect profits through its multi-year Profit Improvement Program.Despite these efforts, the company is facing persistent challenges such as sluggish consumer demand and higher costs, which may dampen its growth prospects.COLM Targeting Growth Through ACCELERATEColumbia Sportswear has launched a new growth strategy called ACCELERATE, designed to elevate the brand and attract younger, more active consumers. This strategy focuses on several consumer-centric shifts, including refining its segmentation framework to better identify growth opportunities. While continuing to serve its loyal customer base with outdoor essentials, management aims to target the fastest-growing segment of the outdoor market: younger, active consumers.The company is enhancing consumers' perception of the brand through a refreshed creative strategy that brings its unique brand personality to life. In the upcoming seasons, management will prioritize introducing new innovative products. The brand is also streamlining its offerings, concentrating on fewer, more impactful collections. Management plans to enhance in-store experiences with strategic retail partners, evolve its e-commerce site, and improve product assortments and storytelling in brick-and-mortar stores to drive sales and brand engagement.COLM Price PerformanceImage Source: Zacks Investment ResearchCOLM’s Profit Improvement Efforts on TrackWhile Columbia Sportswear is investing heavily in its growth strategy, the company is also focusing on improving its operational efficiency through its multi-year Profit Improvement Program. The company expects to realize cost savings of nearly $90 million in 2024 through the program.The program is structured around four key areas of focus, each designed to optimize resources and streamline operations. Firstly, management aims at generating operational cost savings, with a sharp focus on eliminating expenses associated with excess inventory, as well as enhancing efficiency across the supply chain and distribution network. Secondly, it targets organizational cost savings through a workforce reduction plan. Thirdly, management is committed to operating model improvements, focusing on streamlining decision-making processes and enhancing operating efficiency to drive strategic priorities. Finally, the cost-saving initiative encompasses efforts to cut indirect or non-inventory spending through strategic sourcing and vendor rationalization.Cost Challenges Weigh on Columbia SportswearColumbia Sportswear has been battling rising SG&A expenses for a while now. In the third quarter of 2024, the company’s SG&A expenses were up 2.7% to $361.2 million. As a percentage of sales, the same increased 310 basis points (bps) to 38.8%. The most significant changes in SG&A expenses were increased DTC and incentive compensation costs. For 2024, SG&A expenses, as a percentage of net sales, are anticipated to be in the range of 42.8-43%, up from the 40.6% reported in 2023. Our model suggests a 1.8% rise in SG&A costs in 2024, with the rate likely to expand 240 bps to 43%.Weak Demand Hinders COLM’s GrowthColumbia Sportswear faces challenging market conditions, with weak consumer demand impacting its third-quarter 2024 results. The decline in sales was driven by lower wholesale net sales and soft demand in the U.S. market. Despite efforts to boost demand through various strategies, such as enhancing product lines and marketing initiatives, the persistent low consumer spending continues to pose hurdles for the company’s growth trajectory.The company is cautious regarding several external risks, including the outdoor industry and U.S. consumer headwinds, geopolitical conflicts and weather, and supply-chain issues, which could affect its operations and consumer demand. For 2024, Columbia Sportswear expects net sales to drop 5-3% to the $3.31-$3.38 billion band, down from the $3.49 billion recorded in 2023. Management envisions 2024 earnings per share (EPS) in the range of $3.70-$4.05 in 2024, reflecting a year-over-year decline. For the fourth quarter, COLM anticipates a net sales decline of 2% to the $1,040-$1,110 million range compared with $1,060 million recorded last year.What’s Next for COLM Investors?While Columbia Sportswear's ACCELERATE strategy and Profit Improvement Program show long-term potential, short-term challenges such as weak consumer demand, rising costs and external risks could impact growth. Investors should monitor the company's progress in managing costs and its ability to drive demand through innovative products and marketing. At present, COLM carries a Zacks Rank #3 (Hold).The company’s shares have gained 8.1% in the past three months compared with the industry’s 20.5% growth.Stocks to ConsiderG-III Apparel Group GIII is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.GIII Apparel has a trailing four-quarter earnings surprise of 113.4%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 1.7% from the year-ago figure.Gildan Activewear GIL, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average. The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 15.6% from the year-ago figure.Ralph Lauren Corporation RL, which designs, markets and distributes lifestyle products, currently carries a Zacks Rank #2. RL has a trailing four-quarter earnings surprise of 9.1%, on average.The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and earnings indicates growth of 3.5% and 13.6%, respectively, from the prior-year reported levels.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Columbia Sportswear Company (COLM): Free Stock Analysis Report Ralph Lauren Corporation (RL): Free Stock Analysis Report G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report Gildan Activewear, Inc. (GIL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks