Columbia Sportswear Gains On Project CONNECT And DTC Business

Columbia Sportswear Company (NASDAQ:COLM) is on track with Project CONNECT, an initiative to boost revenues as well as profitability. The company is also committed to expand and enhance the global direct-to-consumer (DTC) business through accelerated investments. That said, let’s delve deeper into factors that are driving the company amid cost-related hurdles.

In a year, this Zacks Rank #3 (Hold) stock has gained approximately 15%, outperforming the industry’s growth of 6.4%.

Project CONNECT

Columbia Sportswear is progressing well with the Project CONNECT program, which is likely to drive sales and earnings growth alongside strengthening the company’s financial position. The initiative focuses on connecting consumers, wholesale customers and international distributors with manufacturing partners and employees around the globe.

Markedly, the program is expected to deliver low-double-digit percentage growth in net income, enhance revenues, capture cost of sales efficiencies, improve gross margins and lower SG&A costs. Additionally, the company is optimistic about generating substantial financial value from the project in 2019 and beyond.

Direct-to-Consumer Business: A Major Driver

Apart from the Project CONNECT program, the company is focused on growing its DTC business. Notably, this constituted 40% of Columbia Sportswear’s total revenues in 2017, wherein DTC sales increased at a high-single-digit rate year over year. Encouragingly, management expects DTC revenue increase to outpace growth at wholesale channels in the forthcoming periods. Courtesy of strength in the DTC business and enhanced wholesale business, Columbia Sportswear’s U.S. business has witnessed growth of 11% year to date. Within the DTC business, brick-and-mortar and e-commerce businesses have been performing well.

Management is committed to boosting sales across channels through brand awareness and expansion of digital capabilities. Further, Columbia Sportswear’s brand-enhancing and marketing initiatives have been boosting revenues. Speaking of brands, the company’s prAna and SOREL brands are particularly doing well, backed by constant upgrades and effective management strategies.

Wrapping Up

We note that the company is battling higher SG&A expenses. In fact, management expects SG&A costs to continue to rise due to constant investments for capability development as well as informational technology costs associated with the company’s strategic initiatives. Also, the company is exposed to the threats emerging from higher tariffs, thanks to volatilities in trading policies with China. Nonetheless, we expect the company’s strategic initiatives like Project CONNECT program and solid DTC business to cushion the company significantly from cost woes.

Don’t Miss These Solid Textile-Apparel Picks

Some better-ranked stocks in the same industry are G-III Apparel Group, Ltd. (NASDAQ:GIII) , Crocs, Inc. (NASDAQ:CROX) and Lululemon Athletica Inc. (NASDAQ:LULU) .

G-III Apparel outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Presently, Crocs has a long-term earnings growth rate of 15% and a Zacks Rank #1.

Lululemon delivered average positive earnings surprise of 19.5% in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy).

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