Columbia Sportswear 2001 Annual Report Download - page 24

We Are AÅected by the Financial Health of Retailers
We extend credit to our customers based on an assessment of a customer's Ñnancial circumstances,
generally without requiring collateral. To assist in the scheduling of production and the shipping of seasonal
products, we oÅer customers discounts for placing pre-season orders and extended payment terms for taking
delivery before the peak shipping season. These extended payment terms increase our exposure to the risk of
uncollectible receivables. In addition, we face increased risk of order reduction or cancellation when dealing
with Ñnancially ailing retailers or retailers struggling with economic uncertainty. Some of our signiÑcant
customers have experienced Ñnancial diÇculties in the past, which in turn have had an adverse aÅect on our
business, and in 2001 and 2002 we believe retailers have been more cautious than usual with orders as a result
of weakness in the retail economy. A slowing economy in our key markets could have an adverse aÅect on the
Ñnancial health of our customers, and therefore create additional risks for our business.
We Operate in Very Competitive Markets
The markets for outerwear, sportswear and rugged footwear are highly competitive, as are the markets for
our licensees' products. In each of our geographic markets, we face signiÑcant competition from global and
regional branded apparel and footwear companies. In many instances, retailers who are our customers pose a
signiÑcant competitive threat by marketing apparel and footwear under their own labels. We also compete
with other apparel and footwear companies for the production capacity of independent manufacturers that
produce our apparel and for import quota capacity. Many of our competitors are signiÑcantly larger and have
substantially greater Ñnancial, distribution, marketing and other resources and have achieved greater
recognition for their products than we have. Increased competition could result in reductions in display areas
in retail locations, reductions in sales or reductions in prices of our products, any of which could have a
material adverse aÅect on our business.
We Face Risks Associated with Consumer Preferences and Fashion Trends
We believe we have beneÑted from changing consumer preferences, including increased consumer
interest in outdoor activities and lifestyle changes that emphasize apparel designed for these activities.
Changes in consumer preferences or consumer interest in outdoor activities could have a material adverse
aÅect on our business. In addition, although we believe our products have not been signiÑcantly aÅected by
past fashion trends, changes in fashion trends could have a greater impact as we expand our oÅerings to
include more product categories. Also, we face risks because our business requires us to anticipate consumer
preferences. Our decisions about product designs often are made far in advance of consumer acceptance.
Although we try to manage our inventory risk through early order commitments by retailers, we must
generally place production orders with manufacturers before we have received all of a season's orders. If we
fail to anticipate accurately and respond to consumer preferences, this could lead to, among other things, lower
sales, excess inventories and lower margins.
Our Business is AÅected by Weather Conditions
Sales of our outerwear are dependent in part on the weather and may decline in years in which weather
conditions do not favor the use of our outerwear or cold weather footwear. For example, we believe
unseasonably warm weather in the United States in 1998 and 1999 caused customers to delay, and in some
cases reduce or cancel, orders for our outerwear, which had an adverse eÅect on the our net sales and
proÑtability. Similarly, unseasonably warm weather in 2001 made it more diÇcult for retailers to sell
outerwear and we believe resulted in retailer caution when placing orders for fall 2002. Periods of unseasonably
warm weather could have a material adverse eÅect on our business. In addition, unseasonably cold or wet
weather in the spring can have a materially adverse aÅect on sales of our sportswear and warm weather
footwear.
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