Columbia Sportswear Co (COLM) 2009 Q4 法說會逐字稿

Good afternoon.

I will be your conference operator today.

At this time I would like to welcome everyone to the Columbia Sportswear fourth quarter and fiscal year 2009 conference call.

All lines have been placed on mute to prevent ny background noise.

After the speakers remarks there will be a question and answer session.

(Operator Instructions) Thank you.

I will talk the call over to Ron Parham, Senior Director of Investor Relations.

Thanks, Chanel, good afternoon, and thanks for joining us on today's call.

Earlier this afternoon we issued a press release announcing our fourth quarter and full-year 2009 financial results and our outlook for the first quarter of 2010.

With me today to discuss those results and answer your questions are Columbia's Chairman Gert Boyle, President and CEO Tim Boyle, Senior Vice President of Finance and Chief Financial Officer and Treasurer Tom Cusick, Executive Vice President and Chief Operating Officer, Brian Timm and Senior Vice President of Legal and Corporate Affairs and General Counsel, Peter Bragdon.

Before we begin, our Chairman, Gert Boyle has a reminder.

Good afternoon.

I would like to remind everyone that this conference call will contain forward-looking statements regarding Columbia's business opportunities and anticipated results of operation.

Please bear in mind that forward-looking information subject to many risks and uncertainties and actual results may differ materially from what is projected.

Many of these risks and uncertainties are described in Columbia's annual report on Form 10-K for the year ending December 31, 2008.

And its most recently filed quarterly report on Form 10-Q as well as subsequent filings with the SEC.

Forward-looking statements in this conference call are are based on our current expectation and beliefs.

We do not undertake any duty to update any of the forward-looking statements after the date of this conference call, to conform the forward-looking statement to actual results or to report changes in our expectation.

Thank you, Gert.

I'll hand the call over to Tim.

Thanks, Ron.

Welcome, everyone, and thank you for joining us this afternoon.

I want to touch quickly on a couple of highlights from the fourth quarter and full year and let Tom cover the financials and our outlook for Q1 2010 in more detail.

2009 was a challenging year.

As our fourth quarter illustrates we finished on the an upswing in consumer and retailer demand.

(Inaudible) global sales grew 1% over last year's fourth quarter representing the first quarterly sales upgrade in the last seven quarters.

We exceeded our fourth quarter sales outlook thanks to great reorders and a return to more normal cancel rates in our wholesale business after a difficult spring 2009 along with growth in our expanded direct to consumer operations.

Our balance sheet got even stronger during 2009 (inaudible - background noise) strategic initiatives.

I want to focus my remarks today on a few that we believe will have the biggest impact on our performance during the next couple of years.

First, we continue to invest in innovative technologies and compelling designs within each of our major brands.

Within the Columbia brand we are focused on the upcoming launch of Omni-Heat, our newest suite of warmth technologies that we believe are the most innovative to hit the outdoor industry in decades.

This fall, consumers will be able to find Omni-Heat in over 100 product styles spanning each of our product categories -- outer wear, sportswear, footwear, accessories and equipment.

Spot Hardware continues to address the needs of serious outdoor enthusiast with high performance (inaudible) growing beyond the $100 million mark for the first time in 2009.

Our Sorel brand outerwear has evolved to offer a more style-driven approach to winter boots merging reliable outdoor function with fun and fashion and a new focus on female consumers.

Sorel sales expanded by 26% in 2009 to more than $60 million.

Second, with our expanded family of innovative products serving as ammunition, in 2009, we began taking aim at future -- excuse me -- driving future growth using thoughtful, brand enhancement segmented distribution strategies.

Columbia are focused on growing in specialty outdoor and sporting goods channels in order to ensure our best innovations are appropriately represented.

In addition, Columbia's award-winning line began to penetrate key running store that had never been carried the brand.

Sorel has earned its way into several of the finest footwear retailers in the US and Canada including Bergdorf Goodman, The Tannery, Holt Renfrue, Gore-stretch, and Nordstroms.

Third, we continue to invest in our direct to consumer operations, opening three branded stores in Europe and a total of 16 outlet stores in the US, Europe, and Canada.

We ended the year with 45 stores in the US, 10 in Europe, two in Canada.

We also launched US e-Commerce sites for the Columbia and Sorel brands, and in addition for many years we have maintained direct to consumer operations in Japan and Korea, which represent a significant portion of their revenues.

Clearly 2009 presented a challenging economic environment.

While our wholesale partners were recalibrated at inventory levels, our direct to consumer operations allowed us to develop more intimate relationships with consumers from which we are gleaning new insights to drive future product design and development.

I will turn the call over to Tom for a review of our financial results.

Thank you, Tim, and good afternoon, everyone.

I will begin with a brief overview of our Q4 and full year operating results and provide our outlook for Q1 2010.

Please recall that regional net sales comparisons often produce large percentage variances due to shifts and timing of shipments to international distributors that may occur late in the fourth quarter or early in the first quarter of the ensuing year.

Our fourth quarter came in better than the outlook we provided in October.

Primarily due to greater-than-expected demand for fall products in the US.

As Tim commented on earlier.

Fourth quarter sales increased 1% to $358.3 million including a 3 percentage point currency benefit.

Looking at Q4, 2009 sales on a regional basis compare with Q4, 2008.

US sales increased 5% to $215.5 million driven by the addition of 11 outlet stores and eCommerce sites for both our Columbia and Sorel brands as well as the anniversary effect of the stores opening in 2008.

That increase was partially offset by midsingle-digit decline in our US wholesale business, which was a better result than our provisional outlook as reorders accelerated and cancellation rates moderated to last year's fourth quarter.

Overall, EMEA sales declined 23% to $46.2 million including 5 percentage point currency benefit.

Our EMEA distributor business declined by approximately 60%, reflecting difficult macroeconomic conditions in our largest distributor regions, further amplified by a shift in the timing of shipments of spring `10 advance orders from the fourth quarter of 2009 into the first quarter of 2010.

Sales in our EMEA direct business increased midsingle digits aided by a 9 percentage point currency benefit and healthy reorders during the fourth quarter.

Sales in our LAEP region increased 16% to $72.9 million including an 11 percentage point currency benefit.

By country, Japan grew high teens and Korea grew high 40s on a percentage basis, both aided by mid-teen currency benefits.

Sales to our LAEP distributors showed a 22% decline resulting primarily from a shift in timing of shipments a spring 2010 product to our Latin America distributors coupled with lower orders for spring 2010 product.

Sales of Canada declined 12% to $23.7 million including a 5 percentage point currency benefit.

A higher proportion of fall 2009 advance order shipments occurred in the third quarter of 2009 as compared to the same period last year.

The fourth quarter sales comparison in Canada was also impacted by soft fall 2009 order book including planned reductions in some channels of distribution which we have discussed previously.

Looking at fourth quarter sales by product category, compared with Q4, 2008, outer wear sales were essentially flat at $171.5 million in the fourth quarter.

Sales increases in the US retail, Korea, and Japan businesses were offset by sales declines in North American and European wholesale businesses and our independent distributor businesses.

Sportswear sales declined $13.8 million or 13% to $93 million, mostly related to Columbia brands and declines in our US wholesale and EMEA distributor businesses.

Footwear sales increased $11.1 million or 19% to $70.9 million, mostly related to increased Sorel and Columbia brand footwear sales in our US and European-direct businesses, partially offset by sales decline in our EMEA distributor business.

Excess equipment sales increased $6.3 million, 38% to $22.9 million.

A brand perspective, the 1% increase in fourth quarter sales is mostly attributable to sales increases in the Sorel Mountain handwear brands offset by a sales decline in the Columbia brand.

Sorel sales increased $6.2 million or 27% to $29 million.

Mountain hardware sales increased $4.7 million to $28.9 million or 19%.

Columbia brand sales decreased $7 million or 2% to $298.6 million.

Gross margins were essentially flat at 42.1% when compared to the fourth quarter of 2008.

Lower gross margins in our North American wholesale and European direct businesses were offset by improved gross margins in our direct-to-consumer business.

SG&A expense increased 10% to $126.3 million, representing 35.2% of fourth quarter sales compared to 32.2% in last year's fourth quarter.

The increase in absolute dollar terms was almost entirely related to our direct to consumer initiatives.

As a percentage of sales the SG&A deleverage is the result of the combined effect of the revenue contraction and our wholesale business in North American and distributor businesses globally.

Coupled with an increased fix cost base resulting from our larger North American and European retail businesses.

Operating income for the fourth quarter of 2009 was $27.5 million, or 7.7% of sales.

Operating income for the fourth quarter of 2008, which included $24.7 million noncash impairment charge, was $12.4 million or 3.5% of net sales.

Our income tax expense for the fourth quarter was $4.7 million, according to a 17% tax rate compared to an income tax benefit of $5 million recorded in the fourth quarter 2008.

Our income tax rate for the fourth quarter of 2009 was favorably affected by foreign tax credits and the resolution of various uncertain tax positions, which brought our full-year tax rate down to 25.4%.

Net income for the fourth quarter of 2009 was $23.1 million.

Or $0.68 per diluted share compared to net income of $18.6 million or $0.55 per diluted share for the fourth quarter of 2008.

Including an after tax impairment charge of $0.46 per diluted share.

For full year 2009 net sales decrease 6% to $1.24 billion including 1 percentage point negative currency effect.

Gross margins subtracted by approximately 100 basis points to 42.1%, primarily due to a higher volume of close out product sales at lower gross margins, the bulk of which occurred in the first quarter 2009 as the industry was in the midst of reducing inventory levels.

Full-year gross margins were also reduced by unfavorable hedge rates, particularly in Canada.

SG&A expense increased 300 basis points to 35.7% of net sales compared to 32.7% of net sales in 2008.

This SG&A deleverage is primarily due to revenue contraction and our wholesale business in the US and Europe.

And international distributor businesses along with an increase in fixed cost base resulting from the expansion of our direct-to-consumer business.

Our marking and advertising spend was 5.2% of sales for 2009 as compared to 5.5% for 2008.

Operating income for full-year 2009 was $87.8 million, or 7.1% of sales as compared to $118.7 million or 9% of sales in 2008.

Including the impairment charge.

Net income for full-year 2009 was $67 million or $1.97 per diluted share as compared to $95 million or $2.74 per diluted share last year including the aftertax impairment charge of $0.46 per diluted share.

Now, turning to the balanced sheet and comparing December 31, 2009, amounts to December 31, 2008, the balance sheet is stronger than ever with cash and short-term investments totaling $409.4 million.

Consolidated accounts receivable at December 31, 2009, declined 24% to $226.5 million versus $299.6 million a year ago.

Consolidated DSO decrease to 57 days from 76 days ended December 31, 2008, reflecting significantly improved cash collections, continued efforts to actively manage our credit risks and related shipments as well as a higher proportion of direct-to-consumer sales.

Consolidated inventories decreased 13% to $222.2 million versus $256.3 million last year.

Inventory levels in the US declined approximately 24% year over year.

Capital expenditures were $11 million for the fourth quarter and $41 million for the year, consisting of approximately $26 million in CapEx related to retail expansion including e-commerce and modest investments in Korea and Japan and approximately $15 million in maintenance and infrastructure projects.

Depreciation and amortization expense was $10.1 million for the fourth quarter and $35.5 million for the year.

For full year 2009, we generated a record $214 million in cash flow from operations, paid $22 million in dividends, and repurchased approximately $8 million in Columbia stock.

Since the beginning of the share repurchase program in 2004, we have repurchased a total of approximately 8.9 million shares or $407 million of Columbia stock and have $93 million available under the current authorization.

Today we announced that Columbia's Board of Director's approved a first quarter dividend of $0.18 per share.

Now let's turn our attention to our outlook for Q1 2010.

Please keep in mind that this information is forward-looking in nature and is therefore subject to certain risk factors.

The economic environment globally has created a high degree of uncertainty around consumer demand, currency exchange rates, retailer stability and other factors that affect our business.

Which has limited predictability of financial outlook.

The spring season has historically accounted for a minority of the Company's full year business making it premature to provide a full year revenue and profitability outlook until April when we have greater visibility from our fall backlog and more solidified marketing and capital plans.

Based on our previously reported spring backlog and our current view of retail activity, we currently expect Q1, 2010, consolidated net sales to increase approximately 4% to 5% including approximately 4 percentage points of favorable, foreign currency impact compared with the first quarter of 2009.

We estimate approximately 1 to 2 percentage points of first quarter operating margin contraction consisting of approximately 2 points of gross margin expansion and 3 to 4 points of SG&A expansion.

The expected gross margin expansion is largely the result of a lower volume of close out product sales in our wholesale business and a higher volume of Company owned retail sales at higher gross margins.

Partially offset by unfavorable hedged currency rates for spring 2010.

The expected SG&A increase is due to a combination of factors including currency exchange rates, the anniversary effect of the Company's retail expansion, transitional costs associated with internalizing our sales organization, in North America and Europe and reinstatement of personnel and benefit programs that were curtailed or postponed in 2009 as part of our cost containment efforts.

We expect the upward pressure in SG&A to continue through the third quarter of 2010.

At this point, we are modeling a 28% income tax rate for 2010.

We are still early in our process of taking orders for the fall 2010 season so consistent with our prior practice we will wait to comment on the factors that we believe will influence full-year 2010 sales and profits on our first quarter conference call in April when we substantially completed our fall booking.

That concludes my remarks.

I will hand the call to Tim for some final comments.

Thanks, Tom.

As I said at the beginning of today's call, the upswing in consumer and retailer demand in the fourth quarter, coupled with the launch of what we believe is breakthrough technology in Omni-Heat, gives us a sense of guarded optimism entering 2010.

We'll get a better sense of whether or not that optimism is warranted in April when we tabulate and announce our fall 2010 backlog.

We're working closely with our wholesale partners to plan their fall '10 orders, coordinating sourcing and manufacturing of the fall line to ensure timely delivery and formulating compelling marketing plans designed to create consumer demand and drive sell through and profitability for our wholesale partners.

But none of these efforts is assured, nor can we be sure about consumer spending or the continued financial health of each of our customers.

We believe that the changes we've made in the last 24 months in our products and our organization have put us in a better competitive position.

We will still need to demonstrate a revenue upswing to confirm that.

We will have more visibility in April when we share our fall 2010 bookings with you.

Thank you and now we would like to open the call to any questions.

Operator, can you help us with that?

(Operator Instructions) Your first question is from the line of Bob Drbul with Barclays Capital.

Good afternoon.

Hi, Bob.

A couple questions.

First, when you look at the -- where you are for 2010 -- I know you don't want to comment on the backlog specifically but I was wondering if you might be able to provide any color sort of where you are on the order book versus the same time last year and sort of any initial feedback that you've gotten in terms of are you happy with what you've seen so far versus a year ago versus your expectations as you proceed through the order period?

Well, yes, you're right.

We really want to be careful about being fastidious about our backlog date where we announce but I can tell you that with Omni-Heat, which is -- that label is a three-part suite of warmth technologies including an insulation factor, an electric factor which is present in our boots, but more importantly, this reflective technology, which interestingly is the first time we've had one of the sciences that we so strongly promote with all of our brands being visible to the consumer.

So when we've shown it to our customers, the initial reaction is frankly that they get it immediately.

So it's not like having to try and distill these scientific components down to a specific story.

And we actually liken it to a similar time when nike first exposed the air bladders to the consumers that making the visible air so important in their growth.

So the reaction has been quite strong.

And we just want to make sure that translates into orders that we can ship.

Got it.

And just a philosophical question or -- as you look at the outlook for the business, with the first quarter operating margin guidance that you've given, when you look at sort of 2010 versus 2009, and you see the gross margin versus the SG&A is it possible that as the year progresses we should see that gross margin continue and do you think operating margin is it a goal for you in 2010 or how should we think about that?

qualitatively?

Absolutely we're not comfortable being below or even our peers in terms of profitability.

We expect and challenge ourselves to be among the best in the business and that is in every measure including profitability.

The Company has been fairly disciplined about managing the SG&A line to comport to our best ability to revenues that we have.

We're committed to making sure that the Company is as profitable as it possibly can be, based on the revenue numbers we see and again, we'll know more about that specific number in the back half when we announce our backlog in April.

And just be mindful of the fact by far the largest component of the Company's revenues are in the back half of the year.

Great.

Thank you very much, Tim.

Good luck.

Thanks, Bob.

Our next question is from the line of Michelle Tan with Goldman Sachs.

Great, thanks.

I had a couple of questionings.

First on the SG&A front -- I guess without projecting the level for the full year, can you give us some sense of those pressure points you're seeing in Q1, whether -- which ones continue through the balance of the year so if you look at the year-over-year retail expansion, the benefits, is that a Q1 event or does that kind of remain a pressure point for the balance of the year?

And then the sales -- internalizing the sales operations?

Sure, Michelle, this is Tom.

As it relates to the currency element, we would expect that to be present through the middle part of the year and about a third of our SG&A lift in absolute dollars in Q1.

And then the retail component we would expect to be present through probably the first three quarters of the year.

And then the sales organization and reinstatement of benefit programs in a combined fashion, those dissipate somewhat in the second half of the year.

Okay.

And looking at the actual deleverage as opposed to the dollar growth, the currency shouldn't be a factor, right, in terms of rate?

Yes.

As it is dollar growth, right?

That's correct.

So if we look at the currency impact on the operating -- at the operating income level, in percentage terms, it's fairly neutral.

Okay.

At least through the first half.

Okay.

Okay.

And then those other three pieces -- the retail, the benefits, and sales -- the sales operations, if you look at the 3 to 4 points of deleverage that you're looking at in the first quarter, how do you split those 3 to 4 points up across those factors?

So the currency and the retail are kind of one-third each and then the sales organization and the benefit piece is combined to make up the final third.

Okay.

And then maybe you could give us some sense of the marketing plan as you make the bigger push into Omni-Heat in the second half of the year.

How we should think about the marketing budget for the year?

Well, Michelle, right now our plans are to be -- have the expenses about the same percentage level as in prior periods.

We're waiting, as you know, to collect all the orders and do an analysis to see where our customers have settled on specific products.

And then we'll be able to be much more specific about the marketing plans at that time.

Okay.

That's great.

Thanks very much for the help.

Thank you.

Thanks.

Your next question is from the line of Reed Anderson with D.A.

Davidson.

Good afternoon.

Hey, Reed.

Hi.

Get back to the first question on orders -- I know you don't give the order book at this point.

But I was curious -- if you look at where the product line is today versus where it was a year ago, curious -- what is the pricing trend inside of there at the list price level?

Is it -- I'm assuming it's up on average.

I'm just curious order of magnitude?

Yes, it is up on average.

And again, without having full visibility to the order book, it's difficult to tell you today the kind of scale magnitude.

But I know with this Omni-Heat suite of products, which rang across every product category we have, we're able to gather some additional pricing and hopefully some gross margin for the Company.

And then I know when you were coming into the fourth quarter, you were managing inventories very conservatively and, there was a limited amount of ability -- if we got a big surge in demand, et cetera, whether it's weather or economy to gauge that -- I'm curious if given the experience of the fourth quarter you felt like you either missed some sales and, do you feel like you want to step a little further out on that risk curve now or do you feel like the inventory is -- you've got that really where you want it?

Just as a reminder we have two different seasons of inventories we work with.

One is the spring merchandise.

Other is the fall.

I think when we analyze our fall inventory, we really manage that quite well.

For 2009.

So we ended the year nice and clean and really the best approach for us.

As we began spring 2010 shipments, which occur in the fourth quarter to a certain extent, we probably were a little too conservative so there could have been some modest increase in inventories, which will gradually grow in the first quarter to satisfy the spring deliveries.

So as it relates to our plans for speculative inventory for 2010 fall, we really want to wait until we have a very complete order book and it will include the comments regarding our speculative position in our first quarter conference call in April.

Good.

Understood.

And then shifting gears a little bit, what is the plan, Tom, for direct-to-consumer -- where are you going to be investing, number of stores or eCommerce or just a number, dollar number you might be spending on that business this year?

We currently -- we'll open two branded stores this spring.

Chicago and Minneapolis.

And I believe we have three commitments for three additional outlets in 2010 in the US.

So the spending would probably be quite a bit less on the stores at least versus what it was a year ago -- is that what you're thinking?

Likely, yes.

As it relates to retail, specifically retail.

Specifically to retail, more of a shift to eCommerce, perhaps?

Well, yes.

This is Tim.

We are going to launch our Mountain Hardware eCommerce site at the middle of 2010.

And then tax rate, even with the change in Oregon here you're able to keep that under 30%?

Yes.

The Oregon tax rate change ironically has a very normal impact on our overall effect.

We won't tell the voters that though.

They already know.

Congratulations.

Thank you.

That's all I have.

Thanks.

Your next question is from the line of Kate McShane with Citi Investment Research.

Hi, thank you.

With your new hire for the global head of apparel Susan Parham, can you give us a little bit more detail on what her strategy is going to be going forward, the reason for the hire, and how her hiring is going to impact Omni-Heat?

Certainly.

Well, Susan operated as a consultant for about a year so she is not new to our Company.

With her background, really stretching from consumer goods and a significant apparel background, starting Liz Claiborne and Nike and other companies, the expectation is that we'll have a continuing increase in the amount of innovation that comes out of our groups and frankly a continuing focus on efficient line planning and just a much better business.

The Omni-Heat initiative, as I mentioned earlier, we consider to be really game-changing for the Company, is going to be followed up in subsequent seasons by other kinds of breakthrough technologies that really are going to be put together by the team here including Sue and really to be directed in a very efficient way to keep those products top of mind and focused on really growing our top line -- in our wholesale and retail businesses.

Okay, great.

Thank very helpful.

Thank you.

And then my second question is on the spring backlog.

In your guidance you said based on the decline in spring -- the 5% decline in spring backlogs is leading you to the guidance that you're giving for Q1.

I was a little surprised that that number didn't change from what you announced back in October.

Is it still possible that this backlog number can change for better or for worse up to this point?

Well, Tom, you'll have to sort of tell everybody again what our backlog number was we announced in October.

Down 5% and our business is generally net cancel business.

So if history has anything to say about it, generally, we don't ship more than the backlog number in terms of growth rate or decline rate.

So the opportunity for upside I would say with the spring business is fairly limited other than any change we experience between September 30 when we announced that backlog and currently rates and obviously there's been some movement there.

Okay.

Thank you.

Your next question is from the line of Mitch Kummetz with Robert W.

Baird.

Yes, thank you.

Let me follow upon that last question about the Q1 sales outlook because again, I think your spending backlog was down 5% at the end of Q3 and now your sales guidance is up 4 to 5 and I think currency has moved a little bit but actually it's kind of against you of late.

I can't imagine that the difference between your backlog versus your sales outlook is all direct to consumer so is the other delta just that you're expecting -- you had fewer cancellations than a year ago just like you talked about in the fourth quarter?

I think, frankly, the biggest shift is how the distributor business ships.

Because please recall the business ships before the wholesale business.

We ship generally the lion's share of our distributor business between mid-December and mid-January.

Okay.

When we think about your Q1 outlook in terms of product categories and geographic regions, how should we think about that?

The quarter that you just reported, the EMEA distributors were down 60%, you had a shift in your LLAP distributors, how should we think about those two components?

And then just sort of the overall buckets in terms of how you break out your sales?

Where would we expect growth and where would we expect still some continued decline?

So as it relates to the distributor business, I think we talked about the EMEA distributor business, it was the biggest driver and the decline of our spring backlog and it was down in the low 40s year-over-year.

So we would expect that business to be more flattish in the first quarter of '10 versus first quarter of '09 given that.

And LLAP distributor number variances are less significant.

Then on gross margin you talked about what you expect the impacts to be for the first quarter.

When you think about things like FX and input costs how do you think those will play out over the course of the year?

It sounds like your FX hedging is still a negative on gross margin in the first quarter.

Does that turn into a positive at some point as we go through the year?

Yes.

Yes.

So we expect FX head winds in the first half of the year and certainly based on the where we're hedged expect to see some tail winds in the back half.

Okay.

We should get some help there.

Okay.

And how about on the cost side of things?

I would say things are fairly neutral from an input cost standpoint but we are anticipating incremental increased freight costs as we renew our ocean contracts.

That will be in the back half, then?

That's kind of mid Q2.

Okay.

Okay.

One last question -- just to clarify on your own retail stores -- I think you said 57 at year end and in response to Reed's question, a total of five new store in 2010?

Is that correct?

Yes.

Great.

Thanks, good luck.

Thank you.

Your next question is from the line of Howard Tubin with RBC Capital.

This is [Jason Schmidt] calling in for Howard.

It's great to see some of the new product innovations you've introduced with the Omni-Tech family.

Especially the new Omni-Heat product.

We're curious how these new products are going to impact the Titanium line?

Will the Titanium line continue to be your premier brand or do you expect to begin putting more emphasis on innovation in your core line?

Thank you.

Thanks, Jason.

No, the Titanium line will include the Omni-Heat products, certainly, and that will continue -- Titanium will continue to be premium products, the best stuff we make.

There may be some slight migration out of Titanium with some of these new technologies but for the most part they are going to be concentrated in our titanium products to continue the halo effect and to keep our brand growing and becoming more in demand.

Okay, great, thank you.

Your next question is from the line of Jim Duffy with Thomas Weisel Partners.

Hey, Jim.

So recognizing it's early to comment on your own backlog, in the early conversations you're having with retailers, what's their commentary about their open to buy budget as a whole for the fall for all brands?

Hopefully they're talking about a lift and hoping to buy dollars over 2009.

Yes, I guess -- in talking about North American customers now -- because I haven't been really privy personally to any conversations with customers in Europe, although we go to Europe for the ISPO show in the next few weeks -- I think retailers will continue to approach and the open to buy with caution and my expectation is they're fairly clean right now but their open to buys, my guess, overall, are not going to expand and they will be more cautious in terms of how they approach their spending.

I would be surprised if that weren't the case in Europe.

Tim, do you think it will be flattish on a year-to-year basis?

Their open to buy?

Yes.

Yes.

I'm guessing that their open to buys will be for all brand flattish.

Our hope is obviously that we're making a compelling argument with our new products and the new technologies and we'll get a bigger share.

Okay, understood.

And then on the backside of an outer wear season, what are some of the key learnings you take away from your own retail efforts, whether it's the specific to those efforts or things you may translate into interpretation of consumer's perception of the brand, products, et cetera?

The overall learnings for us is just every time we make it simpler, the simpler, the better.

And it just -- it just continues to reinforce itself.

Even though we have very knowledgeable sales associates, when we start talking about complex physiological properties of the products, it just becomes very, very difficult.

So the simpler we can make the products and the stories, the better we are and frankly, that's what is so exciting about Omni-Heat, it's visible and there's not a lot of description required.

Those are the kinds of things that we have learned.

I think we know based on discussions internally and with our sales associates on the floor we can do a better job with fit on women specifically.

Those are things we are working on diligently.

Interesting.

Thanks so much.

Thanks, Jim.

Your next question is from the line of Chris Svezia with Susquehanna Financial.

Good afternoon, everyone.

I might have missed this, but Tom, what was the growth in your direct consumer business for the quarter or for the year, if maybe you can talk about that?

And/or maybe just mention comp trend at all during the quarter in your Company-owned stores, if you could?

Chris, historically we've chosen not to disclose our direct-to-consumer sales comps or any of the metrics as it represents a minority of the business.

Okay.

I thought I'd try.

The sportswear business, for a second -- you guys have done a lot on the outer wear side in terms of product.

Obviously Omni-Heat and some of what you're doing there, sportswear certainly important to you guys in the first half of the year.

I'm just curious your thoughts how we should think about the sportswear business relative to the first quarter given how important it is in your first quarter?

In terms of what you're seeing out there and any color in terms of guidance?

No, I think, the guidance -- as Tom mentioned, significant -- a certain portion of our Q1 volume is our independent international distributors.

And that's coloring some of the changes.

Our expectations are, frankly, for our business in sportswear, which has been very, very strong in our PFE products and spring-related merchandise in the southern part of the United States, that we'll continue to have solid growth there.

And I just might mention that we've done a really good job of differentiating ourselves and those technological products like sportswear from other more generic products but it is more difficult in that merchandise category to make it simple and easy for people to understand what the difference between our products and others is.

And as it relates specifically to the first quarter, we would expect the sportswear business to grow at a rate fairly close to the total business.

When you think about sportswear growth, is that in US wholesale as well, never mind the shift in distributorships?

Yes.

Okay.

Okay.

When you guys think about distribution and your focus on kind of continuing to look at that sporting goods and specialty channels, as you think about your backlog and as you talk to retail, can you talk a little bit about the shifts in terms of what you're seeing between sort of the midtier value channels and as you get to sporting goods and specialty channels in terms of what you're seeing and sort of the response when you speak to those channels of distribution in terms of what they're saying?

We want to make sure we're cautious about our backlog announcements.

Our focus on these technologies has been to really focus in having them available strictly at specialty and better sporting goods stores so that we can continue to work on elevating the brand.

Showing these products to those consumers -- to those buyers have really been -- the stories and the technologies have resonated.

So again, it's too early to talk about the relative changes in the distribution of the Company's products by segment but I think our goal certainly is to get specialty stores and sporting good to accept these newer technologies and our goal is to hopefully make that happen soon.

Okay.

And the last question I have was just on the Columbia footwear component to the business.

I know you have seen strength in Sorel and what you're doing there but just your thoughts on what's going on on the Columbia-branded footwear side of the business.

Sort of how we should think about that for spring.

I know you won't talk second half but in terms of what is going on there?

Certainly.

Well, as you know, we have talked about footwear being really the -- should be the Company's largest product category.

We have been talking about that for a long time and I really believe we have the right team in place today to get us there.

So we won a number of award with new product category.

A trail running shoe called Ravenous, which has been just now delivering to retail.

We're very excited about the potential there.

And my guess is that we now have the kinds of visible technology with whether it's Omni-Heat in our winter boots or whether it's these new tech lite products and expansion of tech lite into our spring product that we now have the platform that we can really grow well on the Columbia brand.

And then again as you mentioned, the Sorel product has been really exciting to see the kind of pick up there.

It's always a good harbinger of what's going to happen for fall when we have females who work at the Company wearing lots of Sorel product around and we have been looking at that stuff far number of months now here.

We're excited.

Okay.

Thank you very much.

Good luck.

Thanks.

(Operator Instructions) One moment please for your next question.

Your next question is from the line of Sam Poser with Sterne Agee.

Good afternoon.

A question, you mentioned that some of the distributor products shipped in Q4, spring products shipped in Q4, versus Q1 -- was that heavier on a relative basis than last year?

Just the inverse, Sam.

So we would have shipped a higher proportion a year ago.

Okay.

Okay.

So apples to apples basis, your numbers are -- the flat sales of the flat sales.

Correct.

Can take a little bit.

Correct.

Okay.

There was no difference there.

Just to be clear here.

The EMEA business was down significantly for the spring season.

Less of that shipped in Q4 than will ship in Q1.

Causing a flat year over-year-year Q1 but down significantly in Q4.

So more of the goods are shipping in the first half of the year than they did a year ago.

In Q1 than they did a year ago on a relative basis?

Yes.

Okay.

As far as -- one more hit on your stores -- just -- you have 57 outlets, is that correct?

Or is it 57 total?

So we've got -- exiting the year, some of the numbers that Tim had quoted combined North American and Europe stores.

Right.

I understand that.

One more time.

Yes.

So in the US, we exit the year with 45 stores including six branded.

In Europe, ten stores, three branded.

In Canada, two outlets.

Okay.

And then you're going to open five stores, which will be outlets in 2010, correct?

Three outlets, two branded stores.

Okay.

And then in the long term is your objective with retail?

Sam, this is Tim.

We believe that the retail division of the Company can do a number of things for us on the brand and e come site, we can raise the brand's, first of all awareness but more importantly its cachet and its desirability.

By displaying the products the way we want to.

The outlets give us an opportunity to right-size our inventories in season, mid-season, and to take care of other issues that we want to be able to control with our own initiatives.

I would like to see us opening some more stores on a measured basis but frankly for us the future of our business is the wholesale trade and that's where we're concentrating enormous efforts and you'll see continued efforts to make sure that our retail partners can display our products as well as we think we can internally.

Okay.

And then one other thing -- you mentioned there's some difficulty recognizing the properties of some of the products and that was one good thing about the Omni-Heat.

One of the things that -- the Omni-Heat has very visible technology in it.

If I'm getting that correct?

Yes.

That's true.

But at the same time, even given that and I have opportunities to see the product at OR, you decide to spread this around, you're not going to sell to it the modern department store channel -- but you are going to -- you want to go into sporting goods and the better specialty -- outdoor specialty; is that correct.

That's the target?

Yes, that's correct.

In a lot of the stores, especially in a lot of the sporting goods stores, it's really a self service environment and with such a premium new idea that you're launching, I'm just wondering from a brand imaging perspective and everything else, to really set it up and make sure everything's perfect, might it not have been better to go to the best of the best and roll it down once it really gets recognized -- where the audio -- go to a source where people are really there to tell people about the product, as you were talking about it about the proper training and so on?

We think, frankly, this is such a compelling and game-changing technology for us that we wanted to make sure that we got maximum exposure at the appropriate locations.

So our marketing efforts will be a combination of direct-to-consumer to our eCommerce and educating people that way.

We'll have TV.

We'll have in-store presentations that would also utilize vertical publications so we think people are going to know about this and we think this is going to be an enormous opportunity and we want to make sure that we put the most significant efforts towards it and frankly so we have enough merchandise around that people can react to it and buy it

One last question.

With the marketing spend, you mentioned it was going to be in the same range but as a percent as it was a year ago but how about as pure dollars?

How are you thinking about the marketing spend, given you have this new technology which is compelling to launch as well as I guess the serial boot business you're going to go after fairly aggressively as well?

The actual numerical dollar spent will be a percentage of our fall backlog and are not really ready to talk about that one yet but I can tell you that it's going to -- Omni-Heat will get by far the largest percentage of marketing spend by far and a more significant effort, probably the most significant effort we ever put on any particular initiative ever.

Thank you very much.

Good luck.

Thanks, Sam.

Your final question is from the line of [Barry Osternak] with Ramsey Asset Management.

Good afternoon.

Can you provide the total dollar amount of currency benefit to revenue in the quarter?

If you have that?

Let me see if I have that.

So roughly $10 million.

Okay.

And was the currency impact positive to gross profit dollars and operating income dollars or was it neutral or a drag?

From an operating income standpoint?

Yes.

From an operating income standpoint it was beneficial.

Okay.

Marginally, would you say?

Yes.

A couple of pennies per share.

And that was that benefit more reflected in gross margin or in SG&A?

Sales and SG&A as we hedged the gross margin.

Okay.

Okay.

Great, that's all I had.

Thank you very much.

Okay.

Thank you very much for listening in.

We're looking forward to talk to you at length at our next Q1 conference call.

Thank you.

Thank you for joining today's conference.

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