Columbia Sportswear Company (COLM), Under Armour Inc (UA): What’s Driving Sales for This Retailer

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Last quarter, the extended cold weather, stronger DTC sales, and the Omni Freeze Zero launch helped Columbia Sportswear Company (NASDAQ:COLM) beat the estimates. The company has reported a 5% increase in sales, and its EPS of $0.35 significantly outpaced the consensus estimates of $0.14. Operating margin has improved and inventory is down by 11.3%. Extended duration of cold weather has helped the company clear excess inventory. The company is also investing in product innovation and expansion strategies. Lets take a closer look at these strategies the company is following to grow.

Columbia Sportswear Company (NASDAQ:COLM)

Product innovation: Omni Freeze Zero and Cool. Q Zero

After four years, Columbia Sportswear Company (NASDAQ:COLM) has developed the Omni Freeze Zero line of apparels. The company aims to provide products that consumers can use throughout the year in all seasons. Columbia Sportswear Company (NASDAQ:COLM) launched this line in April 2013. It targets athletes and outdoor enthusiasts. There are thousands of little blue rings embedded in the Omni Freeze Zero apparel, and when exposed to sweat, these rings swell to create a cooling sensation. The company has supported this launch with huge promotions and advertisements, which include multi-channel marketing campaigns on ESPN and the ‘Omni-Freeze Zero tour,’ where two converted ice cream trucks will put on product demonstrations at 100 different locations.

Joint venture in China with Swire Resources

Swire Resources, a subsidiary of Swire Pacific, has been the distributor of Columbia Sportswear Company (NASDAQ:COLM) products since 2004. The company has decided to leverage this relationship and extend it further by creating a joint venture with its largest distributor in China. This joint venture is expected to start in January 2014. It will have 60% interest of Columbia Sportswear Company (NASDAQ:COLM) and 40% interest of Swire Resources. Swire Resources has reported sales of Columbia Sportswear Company (NASDAQ:COLM)products of $150 million in 2012, which is 20% year-over-year growth from $123 million in 2011. With this partnership, the company is expected to increase its penetration in China.

Peer analysis

Comparing Columbia Sportswear’s two strongest competitors are Under Armour Inc (NYSE:UA) and Wolverine World Wide, Inc. (NYSE:WWW).

Under Armour Inc (NYSE:UA) reported 1Q13 EPS of $0.07 against consensus estimates of $ 0.03. The company reported 1Q13 results with apparel revenue increasing by 22%. Footwear net revenue increased 27% to $81 million, up from $64 million in the previous year, and generated the highest revenue growth in the company’s direct-to-consumer (DTC) business at 31%. The company stated that most of the DTC business growth came from e-commerce developments. Under Armour Inc (NYSE:UA) has brought the total number of Factory House stores to 102, up 21% in the first quarter of 2013. It has also opened an Under Armour Inc (NYSE:UA) Brand House store in Baltimore and launched its Alter Ego line of products. Under Armour Inc (NYSE:UA) is now the official supplier for the U.S. men’s and women’s gymnastics teams.

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