Columbia Sportswear (COLM)

Outerwear manufacturer Columbia Sportswear (NASDAQ:COLM) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 1.3% year on year to $943.4 million. On the other hand, next quarter’s revenue guidance of $1.02 billion was less impressive, coming in 4.1% below analysts’ estimates. Its GAAP profit of $0.95 per share was 19.5% below analysts’ consensus estimates.

Company Overview

Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ:COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Columbia Sportswear's primary competitors include The North Face (owned by VF Corporation NYSE:VFC), Jack Wolfskin (owned by Callaway Golf Company NYSE:ELY), Arc'teryx (owned by Amer Sports OTC:AGPDY), and private companies REI Co-op and Patagonia.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Columbia Sportswear grew its sales at a sluggish 6.1% compounded annual growth rate. This fell short of our benchmark for the consumer discretionary sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Columbia Sportswear’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.4% annually.

This quarter, Columbia Sportswear reported modest year-on-year revenue growth of 1.3% but beat Wall Street’s estimates by 2.7%. Company management is currently guiding for a 6.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Columbia Sportswear’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 7% over the last two years. This profitability was paltry for a consumer discretionary business and caused by its suboptimal cost structure.

In Q3, Columbia Sportswear generated an operating margin profit margin of 7.1%, down 4.9 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Columbia Sportswear’s EPS grew at a decent 12.4% compounded annual growth rate over the last five years, higher than its 6.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q3, Columbia Sportswear reported EPS of $0.95, down from $1.56 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Columbia Sportswear’s full-year EPS of $3.31 to shrink by 16.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Columbia Sportswear has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.2%, subpar for a consumer discretionary business.

Columbia Sportswear burned through $317.2 million of cash in Q3, equivalent to a negative 33.6% margin. The company’s cash burn increased from $199.4 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

Over the next year, analysts’ consensus estimates show they’re expecting Columbia Sportswear’s free cash flow margin of 4.1% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Columbia Sportswear hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 17.5%, higher than most consumer discretionary businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Columbia Sportswear’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Columbia Sportswear reported $236 million of cash and $480.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $319.2 million of EBITDA over the last 12 months, we view Columbia Sportswear’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $19.32 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Columbia Sportswear beat analysts’ revenue expectations this quarter. On the other hand, its full-year EPS guidance missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 5.7% to $48.54 immediately following the results.

Updated: December 4, 2025 at 9:51 PM EST

Are you wondering whether to buy Columbia Sportswear or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Columbia Sportswear doesn’t pass our quality test. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Columbia Sportswear’s Forecasted free cash flow margin for next year suggests the company will fail to improve its cash conversion, and its constant currency sales performance has disappointed.

Columbia Sportswear’s P/E ratio based on the next 12 months is 19.3x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $57.57 on the company (compared to the current share price of $54.45).