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Columbia's Omni-Heat gear heats up sales

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Friday, October 22, 2010

By Jacq Lacy

Columbia Sportswear reported record sales numbers for quarter three (Q3) due to promising fall 2009 and spring 2010 backlog orders and strong sell-through for a new winter line, led by the innovative new Omni-Heat products. Sales for the eye-catching and heavily hyped Omni-Heat products have outsold non Omni-Heat products and have added to large Q3 revenues. 

“We achieved quarterly sales of over $500 million for the first time in the company’s 72-year history, highlighted by the global launch of our innovative Omni-Heat warmth technologies,” President and CEO Tim Boyle said in a statement.

Columbia, a Portland-based designer, manufacturer, and retailer of active outdoor apparel, footwear, accessories and equipment, began in 1938 as a family-owned hat distributor. Now the seventh-largest public company in Oregon, the company has approximately 340 stores around the globe. In addition to the Columbia brand, the company owns Mountain Hardwear, Sorel, Montrail and Pacific Trail.

And the company continues to grow. This year showed a 16% increase in sales from $434.5 million in Q3 of 2009 to $504 million in Q3 of 2010. Profits rose 11 percent to $52.2 million.


As of the end of Q3, global spring wholesale backlog valued $394.2 million, a jump of approximately 12 percent compared with last year’s Q3 numbers.

Aggressive marketing

Columbia used aggressive integrated global marketing strategies; provocative Omni-Heat advertisements continually aired across the globe to stir up interest in consumers, Boyle said. Also, the new Columbia e-commerce websites have aided in marketing and sales. The shift from a strictly marketing site to a commerce site has doubled site traffic in the past few years, says Boyle.

One element of the company's marketing strategy was a "freezer tour" that traveled the world allowing customers to try on apparel in a freezer to “feel” the products trap their own body heat, whether a jacket, pair of gloves, or a hat. In Columbia’s storefronts, cardboard cutout men and women stand naked in the snow protected by the Omni-Heat jackets in their hands.

Omni-Heat uses a reflective material similar to that of a Mylar blanket given to runners at the end of a race. The company claims that its heating technology is the best warmth innovation technology developed in recent decades. It is certainly one of the shiniest and eye-catching, resembling aluminum foil. 

The colder the weather, the more Columbia hopes to profit. The company chose to ship product early, resulting in large freight costs, inhibiting profits for this quarter, said CFO Tom Cusick.

“We needed to hit early demand and needed to airfreight,” said COO Bryan Timm, responding to a question from one Citigroup analyst. “The part we didn’t know about was when air carriers increased their rates and the mix of footwear that grew this year, it led to an increase in freight... Carriers were aggressive in their pricing. But ocean freight rates also increased in the late summer months of this year.”

Fear of a warm winter

Next quarter will see more expenses due to sales, general, and administrative expenses (SG&A) that are going to increase due to retail expansion, increased marketing instruments, global product launches, reinstatement of personnel and programs from 2009, and costs associated with IT infrastructure and enterprise resource planning.

There is also the question of the weather.

If temperatures remain high, the company fears that it might see a rise in cancellations by retailers and a drop in sales during the winter months. Sales numbers usually fluctuate due to seasonal trends, and the warm weather has not been a friend of Columbia over the last month, Cusick said.

“In a period of economic uncertainty and weather uncertainty, we’re unclear of how our retailers will react,” Boyle said.

In the meantime, Columbia plans to continue innovating, investing in lab technology to differentiate itself from competitors. Omni-Heat is the start of a long parade of innovative ventures. In the past three years, the company applied for more patents than in its entire history. It also bought OutDry, a weatherproof and breathable technology, in August.  

“We plan to introduce [OutDry] across our brand portfolio in fall 2011,” Boyle said. The company plans to use OutDry in its Columbia, Mountain Hardwear, Sorel and Montrail products and to market OutDry to other businesses in the outdoor industry, according to a August 4th press release. This technology will be one of the first sold to other companies, as Columbia does not usually share technologies.

Columbia expects Q4 sales to increase 20% to 23% compared to Q4 of 2009. 

Jacq Lacy is an associate writer for Oregon Business.

 

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