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|Articles - February 2013|
|Monday, January 28, 2013|
Page 2 of 6
"We’ve been very conservative, some say too conservative.” It’s a rainy Tuesday morning and Boyle is in a conference room in the company’s Washington County headquarters, explaining what might be Columbia’s central duality: its tendency to proceed cautiously on the finance end while taking more risks on the product-development side. The path forward, he suggests, is about recalibrating that balance.
A multibrand company, Columbia has acquired several apparel and footwear companies over the past 15 years: Mountain Hardwear, Sorel and Montrail. But unlike competitors such as the VF Corporation, Columbia doesn’t seek to grow through acquisition, Boyle says. Instead, the focus has been on strengthening existing brands through innovation. In particular, Columbia develops proprietary technologies, then makes those innovations apparent to the consumer through creative product design.
The company’s Omni-Heat thermal reflective technology, thousands of metallic dots that reflect the wearer’s own body heat, is a case in point. The technology is visible as a kind of space-age silver jacket lining and thus is a constant reminder of the Columbia presence. “It’s very difficult to distinguish among apparel brands,” says Boyle. “We have determined the greatest impact occurs when consumers can see the differentiators.”
But lately, Boyle admits, Columbia consumers may be getting a little blurry eyed. It’s a problem with a history that dates back to 2008, when Columbia executives, concerned the company was losing its edge, began rebranding it as a company of innovation. Under the leadership of Nike alum Michael McCormick, then Columbia’s executive vice president for global sales, the team created a new product innovation lab and started churning out the kind of flashy technologies Boyle was describing: Omni-Heat Reflective, Omni-Wind Block, Omni-Dry Ultrabreathable Waterproof and so on.
Before the rebranding, Columbia was considered reliable but slightly frumpy midmarket outdoor wear. Post rebranding, the company elevated fashion alongside high-tech functionality, and prices rose correspondingly, with an Omni-Heat electric jacket commanding up to $1,200.
The new-and-improved Columbia has racked up accolades from the outdoor industry; in 2011 Outside magazine awarded the company a Gear of the Year award. But some financial analysts have been more skeptical, arguing that the brand suffers from a kind of identity crisis: no longer midrange but yet to prove its mettle against established premium labels such as market leader The North Face.
“The question is what it really takes for Columbia to be an aspirational brand so that people want it and desire it — and not just in the United States and Canada,” says Chris Svezia, an analyst with Susquehanna Financial Group. Columbia has come up with innovative ideas in the past couple of years, Svezia acknowledges. “But they have not been able to leverage growth in the Omni platform to more consistent global growth and margin improvements.”
In its fall 2010 launch season, Omni-Heat generated $75 million in global sales and was expected to grow to $170 million in 2012. In 2011 the industry average earnings before interest and taxes was 13%. Columbia’s was 8.1%.
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