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Columbia Sportswear’s Margins and Profitability: Ahead of the 4Q17 Results

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Discussing COLM’s 4Q17 bottom line

Columbia Sportswear (COLM) will report results for 4Q17 on February 8, 2018. Wall Street has projected a 5% YoY (year-over-year) decline in the company’s EPS (earnings per share) to $1.14.

Notably, COLM’s earnings rose 5.3% YoY to $1.59 per share in the first nine months of 2017, and the athletic wear manufacturer outperformed the analysts’ expectations in all three quarters of the year.

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Behind COLM’s margins

COLM’s gross profit improved 2% to $788.3 million in the first nine months of 2017. Its gross margin stood at 46.7% during the period, which was up ten basis points from the same period one year previously. The management has projected a 20-basis-point improvement in its fiscal 2017 gross margin to 46.9% of sales.

If we look at the company’s SG&A expenses, we can see that it has been struggling with rising costs related to marketing spending and initiatives like Project Connect. YTD (year-to-date), the company has spent $8.6 million on Project Connect.

Its operating profits, as a result, slid 1.6% YoY to $153.6 million during the first nine months of 2017, while its operating margin stood 30 basis points lower than it was during the same period one year previously.

COLM’s management expects its SG&A expenses to rise 5.4% for fiscal 2017, while its operating margin is projected to represent ~10.3% of its sales for the year. These operating profit calculations include $15 million in costs related to Project Connect.

COLM’s net income and ETF availability

Columbia Sportswear’s net income is expected to come in between $183 million and $190 million, or $2.60 to $2.70 per diluted share for fiscal 2017.

Notably, ETF investors seeking to add exposure to COLM can consider the First Trust SMID Cap Rising Dividend Achievers ETF (SDVY), which invests 1% of its total portfolio in the company.

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