Columbia, The North Face bank on direct-to-consumer business to save winter sales

Learn why The North Face and Columbia had to rely on direct-to-consumer sales to save the balance sheet and why the wholesale business is lagging.

It’s year-end and fourth-quarter earnings season on Wall Street where we get to see how companies, including several big-name outdoor brands, closed out 2013.

You might think with early snow hitting at the peak holiday period, it would be a blockbuster season for the outdoor industry, and for most specialty retailers (besides those on the dry West Coast) it was.

But for outdoor manufacturers, the financial puzzle is a bit more complex, and it tends to confuse even the most seasoned investors — many who expected stronger results across the board due to the cold winter. Some brands like The North Face and Columbia did well this season, but others like Jarden’s outdoor group (Marmot, K2, Coleman, and more) lagged behind.

What gives? We’ve talked about it before on SNEWS, but there’s a bit of a delayed effect with outdoor financials, largely due to the early lead times with wholesale (retail) ordering. Because outdoor retailers are forced to do a bulk of their ordering about a year in advance, their mindset is much more last winter than this winter. And since last winter (2012/13) wasn’t a particularly cold and snowy one (at least early on), retailers held back, ordered less, and instead, worked on selling leftover inventory.

Those smaller “sell in” orders are what manufacturers are reporting now. Even The North Face and Columbia saw tepid wholesale ordering in the fourth quarter, despite reporting healthy overall sales, during the same period, up a 12 percent and 6 percent, respectively. So what made up the difference? Sure, there is some ASAP business (those last-minute refill orders to retailers), but that isn’t enough to make up the gap.

The saving budget line item for the big boys in outdoor was direct-to-consumer sales.

As brands like The North Face and Columbia increase their share of sales directly to the consumer — sidestepping the retailer — they’re gaining the advantages (or disadvantages, if it doesn’t snow) of the current-season weather.

Direct-to-consumer sales at Columbia (Nasdaq: COLM) increased 20 percent in 2013, more than offsetting a 7 percent decline in the company’s global wholesale and distributor sales, officials said. The direct-to-consumer channel accounted for more than a third (34 percent) of Columbia’s business last year.

“2013 concluded with strong sales momentum. Increased consumer demand that became evident across our U.S. direct-to-consumer platform during the third quarter, well before seasonal weather arrived, has sustained through the fourth quarter of 2013 and into the first quarter of 2014,” Columbia CEO Tim Boyle said.

At The North Face, part of VF Corp. (NYSE: VFC), direct-to-consumer sales jumped 32 percent in the fourth quarter, compared to a mid single-digit increase in the brand’s wholesale business. TNF’s undisclosed share of direct-to-consumer sales likely matches or is beyond that of Columbia’s.

On the flip side, Jarden’s outdoor group (Marmot, K2, Coleman and others) has been slower to adopt direct-to-consumer sales. Readers can decide whether that’s more due to a dedication to specialty retail or a lapse in technology adoption, but the end result is lagging outdoor sales — which slipped less than a percent in the fourth quarter — and a year delay to reap the benefits of good snow.

“While [the good winter] did not add significant incremental revenue for 2013 it did clear the decks for seasonal products at retail which should be a positive opportunity as we enter the 2014/15 winter season,” Jarden CEO Jim Lillie told investors.

Sure enough, expect to see Jarden, Columbia and The North Face all report a stronger winter wholesale business next season, even if the snow dries up. That is, if they haven’t turned away retailers with those direct-to-consumer sales.

–David Clucas