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Decline in wholesale backlog business of Columbia
24 Apr '09
6 min read
Consolidated wholesale backlog, which includes both global spring and fall orders at March 31, 2009, was $721.6 million, 15 percent lower than 2008 consolidated wholesale backlog of $849.8 million, including a 4 percent negative effect from changes in foreign currency exchange rates.
Mr. Boyle commented, “Our fall wholesale backlog reflects, in part, the weak global retail environment during the first quarter, coupled with the financial and credit market challenges that have led many of our customers to continue reducing their planned inventory levels for the remainder of 2009. Despite the challenging macro-economic environment, the company's strong balance sheet is allowing our Columbia, Mountain Hardwear, Sorel and Montrail brands to continue to invest in strategic initiatives intended to create profitable growth platforms,” Boyle concluded.
2009 Financial Outlook
The dynamic nature of the current global economic environment and its impact on consumers and the financial health of our customers has reduced the predictive quality of the company's wholesale backlog and other factors on which the company has historically based its estimates of net sales, gross margin and operating expenses as a percentage of net sales, thus limiting the company's ability to estimate future results. All projections related to anticipated future results are forward-looking in nature and are based, in part, on the economies in key markets stabilizing during the second half of 2009, as well as on a variety of estimates and assumptions, any of which may change independently or in combination, perhaps significantly.
The company expects full year 2009 wholesale net sales to decline in the mid-teens on a percentage basis compared with 2008, based primarily on the global wholesale backlog as of March 31, 2009 and the estimated effect of changes in foreign currency exchange rates. Including expected incremental sales from the company's direct-to-consumer business, the company expects total 2009 net sales to decline in the low double-digits on a percentage basis compared with 2008.
Full year 2009 operating margin is expected to decline approximately 300 to 350 basis points from 2008, which included a $24.7 million impairment charge. This expected decline is primarily due to fixed cost de-leverage caused by lower net sales, coupled with planned investments in our direct-to-consumer initiatives. Gross margins are expected to decline primarily due to a higher volume of close-out product sales, a more promotional retail environment, and unfavorable foreign currency hedge rates. The company currently expects a full-year tax rate of approximately 30 percent.
The company expects a low- to mid-twenty percent decline in second quarter 2009 net sales compared with the second quarter of 2008. Contributing to this decline is an anticipated shift into the third quarter of a larger portion of fall 2009 shipments to international distributors compared to fall 2008 orders, of which a larger portion were shipped in last year's second quarter.
The second quarter is the company's lowest volume quarter of the year, which amplifies the effect on income of changes in the timing of shipments, the fixed costs associated with sourcing, merchandising, distribution and administrative functions, and the incremental fixed costs associated with the company's expanded retail operations. Consequently, the company expects to incur a significantly higher operating loss in the second quarter of 2009 compared to last year's second quarter.
Mr. Boyle commented, “Our fall wholesale backlog reflects, in part, the weak global retail environment during the first quarter, coupled with the financial and credit market challenges that have led many of our customers to continue reducing their planned inventory levels for the remainder of 2009. Despite the challenging macro-economic environment, the company's strong balance sheet is allowing our Columbia, Mountain Hardwear, Sorel and Montrail brands to continue to invest in strategic initiatives intended to create profitable growth platforms,” Boyle concluded.
2009 Financial Outlook
The dynamic nature of the current global economic environment and its impact on consumers and the financial health of our customers has reduced the predictive quality of the company's wholesale backlog and other factors on which the company has historically based its estimates of net sales, gross margin and operating expenses as a percentage of net sales, thus limiting the company's ability to estimate future results. All projections related to anticipated future results are forward-looking in nature and are based, in part, on the economies in key markets stabilizing during the second half of 2009, as well as on a variety of estimates and assumptions, any of which may change independently or in combination, perhaps significantly.
The company expects full year 2009 wholesale net sales to decline in the mid-teens on a percentage basis compared with 2008, based primarily on the global wholesale backlog as of March 31, 2009 and the estimated effect of changes in foreign currency exchange rates. Including expected incremental sales from the company's direct-to-consumer business, the company expects total 2009 net sales to decline in the low double-digits on a percentage basis compared with 2008.
Full year 2009 operating margin is expected to decline approximately 300 to 350 basis points from 2008, which included a $24.7 million impairment charge. This expected decline is primarily due to fixed cost de-leverage caused by lower net sales, coupled with planned investments in our direct-to-consumer initiatives. Gross margins are expected to decline primarily due to a higher volume of close-out product sales, a more promotional retail environment, and unfavorable foreign currency hedge rates. The company currently expects a full-year tax rate of approximately 30 percent.
The company expects a low- to mid-twenty percent decline in second quarter 2009 net sales compared with the second quarter of 2008. Contributing to this decline is an anticipated shift into the third quarter of a larger portion of fall 2009 shipments to international distributors compared to fall 2008 orders, of which a larger portion were shipped in last year's second quarter.
The second quarter is the company's lowest volume quarter of the year, which amplifies the effect on income of changes in the timing of shipments, the fixed costs associated with sourcing, merchandising, distribution and administrative functions, and the incremental fixed costs associated with the company's expanded retail operations. Consequently, the company expects to incur a significantly higher operating loss in the second quarter of 2009 compared to last year's second quarter.
Columbia Sportswear Company
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