Columbia Sportswear 2012 Annual Report Download - page 2

One year ago on these pages, following a
record-setting warm winter and with Europe in
economic quicksand, I wrote that 2012 would
be a difficult year for top-line growth.
That turned out to be an accurate prediction, as a second
consecutive mild winter in North America and continued macro-
economic struggles across Europe offset 11 percent growth in the
Latin America/Asia Pacific (LAAP) region and held our 2012 net sales
to $1.67 billion, down 1 percent from 2011’s record $1.69 billion.
Our Columbia, Mountain Hardwear and Montrail brands each
generated 2012 sales equal to 2011; only our Sorel footwear
brand was unable to fend off the harsh effects of two mild winters,
falling 16% after growing nearly 70 percent in 2011. Disciplined
discretionary spending throughout the year enabled us to achieve
operating margins of 8.0 percent and diluted earnings per share of
$2.93, down 3 percent from $3.03 in 2011.
Despite this pause in our growth, we remain resolved to use our
powerful portfolio of outdoor brands to drive top-line growth and
improved profitability over the long term. Our primary focus is on
building the right product, positioned to appeal to a broad range of
consumers.
Dear Fellow Shareholders:
we repositioned and elevated the SOREL brand, capturing fashion-
forward female consumers and garnering distribution in premium
footwear boutiques around the world, benefiting from the brand’s
growing appeal among film and entertainment icons.
Our pace of innovation and change has been very rapid during the
past four years. We succeeded in innovating our technologies and
designs, and creating competitive advantages in the battle to offer
products that keep consumers warm, dry, cool and protected in the
outdoors – any time of year, anywhere in the world.
We believe there remains significant opportunity for growth.
Consumer adoption of our new products and brand messaging
is beginning to take hold, despite unseasonable weather that
temporarily muted demand for cold weather apparel and footwear,
and input cost pressures that worked their way through the supply
chain into retail prices, revealing additional areas of inelastic
consumer demand.
We remain committed to our strategies and intend to focus our
efforts for 2013 and beyond on a few primary initiatives:
1. Consolidate and expand our existing
innovation platforms –
The innovation platforms we’ve established help differentiate
our products from competitors’ and represent valuable growth
opportunities. Our product teams and sourcing partners are working
to engineer products that make these innovations accessible
to a broader base of consumers, while maintaining disciplined
distribution in brand-enhancing retail channels. At the same time, we
are continually refining our marketing messages and the channels
through which we communicate with consumers in order to create
awareness, demand and, ultimately, desire for our brands.
1500
2011 2012
1000
$ MILLIONS
NET SALES
500
0
$1,392 $1,391
150
2011 2012
100
$ MILLIONS
NET SALES
50
0
$142 $142
150
2011 2012
100
$ MILLIONS
NET SALES
50
0
$150 $127
9
12
2011 2012
6
$ MILLIONS
NET SALES
3
0
$10 $10
Over the past four years we’ve focused on reinforcing the Columbia,
Mountain Hardwear and Montrail brands as leading innovators in
the outdoor, alpine and running segments, respectively. We’ve
introduced numerous innovations, along with significant updates to
styling, fit, construction and marketing. Our products increasingly
target young, active core outdoor consumers who shop in leading
sporting goods, specialty outdoor, fish/hunt/camp, alpine and
running shops, and corresponding online channels. At the same time,
2. Grow our warm-weather business –
We currently generate nearly two-thirds of our annual net sales
during the second half of the year, relying heavily on winter weather
to drive consumer demand. Consumers know and trust our brands
to keep them warm and dry in winter, but less so as brands that
can keep them cool, dry and protected during their spring and
summer outdoor activities. We’re working to change that. We offer
a full assortment of lightweight layering styles that address outdoor
consumers’ needs year-round, and we are working closely with
our wholesale customers to flow those styles more consistently
throughout the year, especially during the “shoulder seasons”
of early fall and early spring. In addition, we have extended the
SOREL brand’s seasonal selling window with a strong assortment of
lightweight, less-insulated styles that address the shoulder seasons
and, over time, should help reduce reliance on winter weather. For
the spring and summer seasons, our Performance Fishing Gear (PFG)
sub-brand is our fastest growing product segment. Consumers in the