Columbia Sportswear 2010 Annual Report Download - page 4

Our Mountain Hardwear brand is positioned to serve the
high-performance needs of alpinists, mountaineers and all who
aspire to find and test the edges of their human potential.
During the past year, we set in motion a series of strategic
changes designed to prepare Mountain Hardwear to test the
edges of its global potential. We installed new executive
leadership with extensive global experience growing outdoor
brands. We created an in-house product design and
development organization, implemented disciplined seasonal
go-to-market processes and fortified planning and inventory
management to improve delivery performance to wholesale
customers.
We also began to move beyond outdated licensed technologies,
introducing Dry.Q™, an innovative waterproof/breathable fabric
system with superior air-permeability compared to other
traditional waterproof/breathable systems.
Mountain Hardwear sales totaled $122 million in 2010, up 21
percent over 2009. Although Mountain Hardwear products are
sold in 58 countries, more than 70 percent of 2010 sales were
generated in North America. We will continue to maintain a very
disciplined wholesale distribution strategy for the brand,
aggressively presenting new and existing specialty customers
with Mountain Hardwear’s latest innovations. In addition, in
September 2010, we launched www.mountainhardwear.com to
fulfill the growing demand for Mountain Hardwear products in the
U.S. and to educate and inspire consumers around the world.
In September 2010, we acquired Italy-based OutDry™
Technologies S.r.l., securing the intellectual property rights
behind OutDry’s proprietary construction methods for producing
waterproof, breathable footwear and gloves. This acquisition
reinforces our strategy to build a portfolio of innovative technolo-
gies that deliver clear consumer benefits. Beginning in Fall 2011,
a select assortment of footwear and gloves within our Columbia,
Mountain Hardwear and Montrail brands will feature
OutDry™ technology.
Investing to fuel and
support profitable
growth across
our brand portfolio.
d www.outdry.com i
Montrail is focused solely on running. Our patent-pending
FluidPost™ midsole cushioning and stability system, together
with improved styling, is earning this brand increasing accolades
from the running community.
Montrail sales grew 5 percent in 2010, to $9 million, and the
brand is poised to increase penetration in leading specialty
retailers that cater to the unique performance needs of trail and
ultra-distance runners.
To educate more consumers and address unmet U.S. consumer
demand, we launched www.montrail.com in March 2011. The
site promotes a strong online running community with
information and news about Montrail athletes, upcoming events
and exciting new Montrail products and technologies.
This letter contains forward-looking statements. Actual results may differ materially from those projected in these forward-looking statements as a result of a number of risks and uncertainties, including those described in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2010, under the heading “Risk Factors.”
As we have been expanding our intellectual property portfolio
and positioning each of our brands for growth, we have also
made strategic operational investments to support that growth:
• Expanded our retail store base in North America and Europe,
• Launched e-commerce sites for each of our four
primary brands,
• Increased our annual marketing investments,
• Transitioned to predominantly in-house sales teams in
North America and Europe,
• Attracted experienced industry talent across all operational
areas of the business, and
• Invested in IT infrastructure and enterprise data management
systems in preparation for a multi-year implementation of a
new enterprise resource planning (ERP) platform.
Between 2007 and 2010, while our revenues increased
$128 million, or 9 percent, the above investments added
approximately $150 million, or 39 percent, to our annual
operating expenses, with $90 million of that increase occurring
in 2010 alone. As a result, 2010 operating margin was 7 percent,
virtually equal to 2009 despite a 19 percent increase in sales, and
well below the mid- to high-teen percentage operating margins
we generated from 2001 to 2007.
We can, and must, do better.
This management team is committed to achieving and sustaining
operating margins befitting our strong portfolio of global outdoor
brands. We intend to accomplish this through continuous innova-
tion and compelling marketing to drive demand, together with
operational excellence and disciplined expense management.
Each of these ingredients takes on even more significance as we
adapt to the new reality of inflationary manufacturing and trans-
portation costs, reversing the deflationary environment that this
industry and its consumers have grown comfortably accustomed
to over the past 20 years. Despite these uncertainties, we remain
committed to our core strategies and are staying focused on what
we can control. Strong brands that are synonymous with
innovation within their industry tend to outperform over time.
We believe our brands and our innovations are only now
beginning to achieve critical mass in the form of consumer
awareness and adoption. Consumers are beginning to feel
the warmth. And they like it.
We believe our competitors are beginning to feel the heat.
And we like that.
Sincerely,
Timothy P. Boyle
President and Chief Executive Officer