Columbia Sportswear, the Portland-based designer, developer, marketer, and distributor of outdoor, active, and everyday lifestyle apparel and footwear, has a storied history dating back to its founding in 1938. Despite being lesser-known in some parts of the world, this mature company with a market cap just shy of $5 billion and annual sales of approximately $3.6 billion has much to offer for investors seeking stability and modest growth.
Here’s a closer look at what makes Columbia Sportswear a notable player in the sportswear industry:
Strengths and Performance
Columbia Sportswear is known for its predictable profitability, modest growth, and debt-free balance sheet. It operates under four primary brands: Columbia Sportswear, Sorel, Prana, and Mountain Hardwear. Among these, Columbia and Sorel stand out as top performers, with consistent growth rates.
Columbia Sportswear has grown at a rate of about 7% annually since 2007 and has been consistently profitable. It even offers a dividend with a 1.55% yield and a 5-year dividend growth rate of approximately 8.2%. For conservative investors, an investment at the current share price may offer an internal rate of return (IRR) close to 10%.
Areas of Improvement
While Columbia and Sorel demonstrate strong growth, Prana and Mountain Hardwear have shown limited potential. Prana, acquired in 2014, has experienced minimal growth, with only a 1.9% annual increase. Mountain Hardwear, acquired for $36 million in 2003, has exhibited a 1% compound annual growth rate since 2008.
The notable difference lies in e-commerce, with Columbia Sportswear significantly lagging behind its competitors. In 2022, e-commerce accounted for 18% of its sales, while Lululemon’s online business represented an impressive 45.6% of its revenue. The company needs to enhance its online presence and rethink its distribution strategy.
Investment Outlook
Columbia Sportswear is a well-run company with consistent profitability, making it an attractive investment option for those seeking stability. Its current free cash flow yield is around 5.5%, and with inflation at 3.7% and the 10-year treasury at 4.6%, it presents a compelling investment opportunity.
However, while there is potential for growth, it’s important to note that the company’s future success hinges on its ability to revitalize its underperforming brands and strengthen its e-commerce presence. For conservative investors, there’s a solid case for investing in the company based on its stable performance.
In summary, Columbia Sportswear is a trusted brand in the outdoor apparel industry, with significant potential if it can implement strategies to reinvigorate its underperforming brands and enhance its online presence. It’s a stock that may not offer explosive growth but presents an appealing opportunity for investors looking for a stable and reliable addition to their portfolio.