Columbia Sportswear 2014 Annual Report Download - page 3

Global sales of our Mountain Hardwear brand declined 10 percent in 2014,
to $120 million, with the decline concentrated in the U.S. and Korea, its two
largest markets. Mountain Hardwear remains highly regarded and trusted by
some of the most accomplished alpinists in the world, and we are working
to reenergize the brand by leveraging that credibility to appeal to a broader
consumer base. We expect an improved product offering to drive renewed
moderate growth in the U.S. in 2015, while we continue to implement
strategies to drive renewed growth in Korea in subsequent years. Over the
longer-term, we expect Mountain Hardwear to be a meaningful engine of
global growth and protability.
During 2014, we expanded our U.S. brick & mortar eet while also improving
the productivity of our existing store base. In addition, sales through our
U.S. ecommerce sites grew 40 percent and surpassed $100 million, partially
enabled by a mid-year investment to upgrade our global ecommerce platform.
Direct-to-consumer sales accounted for slightly more than half of the $173
million of U.S. sales growth across all brands, excluding prAna.
Our stores and ecommerce sites serve as powerful marketing platforms
through which each of our brands can fully express itself and build strong
emotional connections with consumers to drive additional growth through our
wholesale channels.
Along with all of those favorable attributes, what most attracted us to prAna
was its talented management team that is acting thoughtfully and deliberately
to create an enduring brand.
prAna added $54 million of net sales in 2014 subsequent to the acquisition.
On a full year pro-forma basis, prAna grew to nearly $100 million in sales and
is poised to grow at a double-digit rate in 2015. We have identied many
opportunities where we can lend operational support and are committed
to providing the resources and expertise necessary to enable the brand’s
substantial long-term global potential.
We improved our operational execution during 2014 and laid the foundation
for further improvements with the smooth implementation of a new enterprise
resource planning (ERP) platform and numerous complementary hardware and
software systems in the U.S.
These new systems and related processes are enabling us to better plan
inventory to match demand and to utilize inventory more effectively across
our wholesale and direct-to-consumer channels. Our international distributor
businesses will migrate to the ERP platform in the rst half of 2015, as the next
phase of this global, multi-year project. In future years, we plan to migrate our
Japanese, Korean and European subsidiaries, as well as our China JV, onto
this global platform, with the objective of driving further improvements in
protability and cash ow.
Consolidated gross margins increased to 45.5 percent of net sales in 2014,
from 44.1 percent in 2013, representing our highest gross margins in a decade.
We invested a portion of these improved gross margins in additional demand-
creation activities in order to bring each brand’s story to life online, in-store
and in print. We plan to continue directing a portion of future gross margin
improvements into expanded demand-creation investments to drive growth.
In reecting back on our 2014 performance, we have many reasons to be
pleased with the momentum of our brands and our improved protability. The
new China JV and our acquisition of the prAna brand were important additions
to our business, however, what I am most proud of is that in 2014 our two
largest brands – Columbia and SOREL – combined to drive double-digit top-
line growth and accounted for virtually all of our improved protability.
The Columbia brand, at $1.8 billion in global sales in 2014, continues to hold
substantial unrealized growth potential in key markets and, for the foreseeable
future, will continue to generate the majority of our annual sales and prots.
However, we believe each of the brands in our portfolio holds substantial
global potential and our objective is to consistently grow sales and protability
of each.
With that objective in mind, in March 2015 we announced a realignment of our
merchandising and design organization to create distinct brand-centric teams
around the Columbia and SOREL brands. We believe this new alignment
will help us allocate and focus the human, operational and demand-creation
resources each brand requires to more aggressively pursue its global potential.
In addition, while I continue to lead Columbia Sportswear Company as chief
executive ofcer, in February, 2015 we elevated 17-year company veteran
Bryan Timm to president and chief operating ofcer. Bryan, who has served
as executive vice president and chief operating ofcer since October 2008,
retains his prior leadership role over our global sourcing, supply chain and
distribution operations and adds oversight of our wholesale sales function in
North America, as well as direct-to-consumer operations in North America and
Europe. He now also directs the brand leaders at our Mountain Hardwear®
brand, headquartered in Richmond, CA, and prAna® brand, headquartered in
Carlsbad, CA.
In summary, 2014 was a spectacular year and our momentum has extended
into 2015, which we expect to be another year of record sales and protability.
We are condent in our strategies to drive continued growth through our
outstanding portfolio of brands for active lives, and to continue to strive to
create value for you, our loyal shareholders.
Thank you for your continued condence and support.
Sincerely,
Timothy P. Boyle
Chief Executive Ofcer
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, 2014, under the heading “Risk Factors.”
MOUNTAIN HARDWEAR
REMAINS HIGHLY REGARDED
AND TRUSTED BY SOME OF
THE MOST ACCOMPLISHED
ALPINISTS IN THE WORLD
OPERATIONAL PLATFORMS
LOOKING FORWARD