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Columbia Sportswear Reveals Plan to Bolster China Business


Columbia Sportswear Company COLM revealed intentions to solidify operations in China by purchasing the remaining 40% stake of its joint venture business. The Columbia brand’s joint venture business in China, Columbia Sportswear Commercial, was established in 2014 in collaboration with Swire Resources Limited. The company expects to complete the buyout of the remaining stake in the venture by Jan 1, 2019, post clearances on several regulatory norms.

China Operations Bodes Well

The Columbia brand achieved significant growth in China, on the back of its strategic partnership with Swire Resources. In fact, the venture generated sales worth $168 million during 2017, while margins were in the low-teens. At the end of 2017, the venture operated 86 retail stores in China and had agreements with 50 wholesale dealers operating across 750 retail locations to support its e-commerce sales.

In fact, the company’s consistent success and well-spread operations in China propelled it to undertake measures to further solidify its footing in the nation. For 2019, management projects sales growth in the region in high single-digits. Notably, Columbia Sportswear is on track to expand its dealer-based and direct retail operations in China. Further, with continuous support from Swire Resources, Columbia Sportswear expects to bolster its business in Macau and Hong Kong.

Will Expansion in China Bear Fruit?

The ongoing tariff war with China has spurred a lot of worries for U.S. companies, who operate in the region. However, it’s not quite apparent if such headwinds will dent Columbia Sportswear’s operations in China.

Nevertheless, management is impressed with the sturdy business advancement in the region and expects continued growth in the forthcoming periods, driven by well-established distribution networks and partnerships. Further, management states that acquiring the remaining stake of the China joint venture is in sync with its strategy to continue investing in markets with high growth potency. Moreover, expanding in China provides Columbia Sportswear the advantage of utilizing the nation’s strength in digital wholesale and e-commerce channels.

Apart from China, Columbia Sportwear’s European business has been growing rapidly. Clearly, the company’s well-chalked strategic endeavors have enabled it to develop a robust international business. These efforts combined with benefits from Project CONNECT and unique marketing initiatives have bolstered Columbia Sportwear’s position in the active lifestyle apparel and accessories space, which continues to fuel investors’ optimism in the stock. Evidently, shares of this Zacks Rank #2 (Buy) company surged 33.6% in the past six months, outperforming the industry’s gain of 19.3%.

Greedy for Textile-Apparel Stocks? Check These

Investors interested in the same sector may consider investing in companies such as G-III Apparel Group, Ltd. GIII, Ralph Lauren Corp. RL and Tailored Brands, Inc. TLRD, all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

G-III Apparel came up with an average positive earnings surprise of 41.5% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

Ralph Lauren pulled off an average positive earnings surprise of 10.4% in the trailing four quarters. Also, it has a long-term earnings growth rate of 10.2%.

Tailored Brands delivered an average positive earnings surprise of 50.9% in the trailing four quarters. It has a long-term earnings growth rate of 16.5%.

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