Columbia Sportswear Company

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Columbia Sportswear Company

founded: 1938

Contact Information:

headquarters: 6600 n. baltimore
portland, or 97203 phone: (503)286-3676 fax: (503)289-6602 toll free: (800)ma-boyle email: [email protected] url: http://www.columbia.com

OVERVIEW

Columbia Sportswear, a major marketer of outer-wear and sportswear, does everything from designing and manufacturing to marketing and distribution. From a small regional hat distributor, the company has grown to become one of the world's largest outerwear brands and the leading seller of skiwear in the United States. A family-owned business in existence for 60 years, Columbia Sportswear distributes products to more than 10,000 retailers in 30 countries.

Formerly focusing on durable outdoor hunting and fishing gear, Columbia Sportswear's new product development efforts in the 1990s resulted in its expansion into additional merchandise categories and, ultimately, the development of its "head-to-toe" outfitting approach.

Columbia Sportswear's merchandise can be broken down into four main product lines: sportswear, rugged footwear, accessories, and outerwear—all suitable for either casual wear or various outdoor activities, including snowboarding, golf, hunting, and fishing. Specific items include rainwear, T-shirts, sleeveless shirts, hiking shorts, and polo shirts. Some of the company's trademarks include Columbia Sportswear Company, Columbia, Bugaboo, and Bugabootoo. The company plans to continue growth by distributing to a wider international market and expanding categories of merchandise.

COMPANY FINANCES

In the 10-year period between 1987 and 1997, Columbia Sportswear's sales went from $18.8 to $353.5 million, an increase of 30.6 percent; operating income increased from $1.6 to $44.3 million in that same time period, representing a 35.1-percent increase. In 1997, Columbia Sportswear's sales outside of North America comprised 10 percent of total net sales, increasing from $9 million to over $35 million in the four-year period between 1993 and 1997. In that same time frame, sportswear sales went up by 221.5 percent, while outerwear sales increased by 43.7 percent. Rugged footwear, a new product in 1993, went from $1.2 million in sales that year to $24.3 million in 1997.

In the spring of 1998, Columbia Sportswear, a privately held company throughout its 60-year history, offered 5.6 million shares of stock to the public at an initial offering of $18.00 per share. After the offering, senior management owned nearly 77 percent of the outstanding common stock of the company.

ANALYSTS' OPINIONS

At the time of the stock offering in March 1998, analysts were uncertain whether an active trading market would result. Columbia Sportswear acknowledges that price fluctuations could occur as a result of competitive pressures, either through product development or financial strategies. In addition, its products are largely seasonal- and weather-based, causing fluctuations in sales and operations. Consequently, the financial data for any given quarter does not necessarily indicate a trend for future quarters. For example, Columbia Sportswear's ski-wear line obviously suffers a decline in summer months or during unseasonably warm winter weather. Additionally, the 1997 upset in the Asian market could have an effect on the company's success in that part of the world.

HISTORY

In 1937 Paul and Marie Lamfrom left their native Germany for the United States. They settled in Portland, Oregon, and bought a small hat distributorship. But after a few years, the Lamfroms were having difficulty getting products from suppliers and made the decision to manufacture the products themselves.

The Lamfroms' daughter, Gertrude, best known to all as Gert, got married in 1948 to Neal Boyle, who ultimately became president of Columbia Sportswear. When Neal died unexpectedly in 1970, Gert found herself at the head of a company that was "near bankruptcy." In the decade that followed, the company continued to struggle. Son Tim, who was about to finish his studies at the University of Oregon, left college to join his mother in the management of the company. Together they led the company out of its financial morass and put it on the road to profitability. As of 1998, the 74 year-old Gert remained chairman of the board, while son Tim served as president and chief executive officer.

In 1984 Columbia Sportswear developed an advertising campaign, which has endured through the 1990s. The ads portray Columbia Sportswear's infamous matriarch, Gert Boyle (or "Ma Boyle"), as a stern taskmaster who is tyrannizing her son, Tim. In the ads, Gert is having Tim test Columbia Sportswear products in ways that are dangerous or risky. For instance, in an ad from the mid-1990s, Gert is shown driving a 4 x 4 through rough terrain while son Tim is strapped to the roof—wearing Columbia Sportswear outerwear.

FAST FACTS: About Columbia Sportswear Company

Ownership: Columbia Sportswear became a publicly traded company in the spring of 1998 with its stock traded on NASDAQ.

Ticker symbol: COLM

Officers: Gertrude Boyle, Chmn., 74, 1997 base salary $153,920; Timothy P. Boyle, Pres., CEO, Treasurer, & Secretary, 48, 1997 base salary $323,733; Don Richard Santorufo, Exec. VP & COO, 51, 1997 base salary $286,946

Employees: 1,234

Principal Subsidiary Companies: Columbia Sportswear owns subsidiaries in Japan and Canada; a Canadian holding company called Columbia Sportswear Holdings Limited (CSHL); and GTS, Inc., a holding company in the United States. All of the subsidiaries are wholly owned by Columbia Sportswear.

Chief Competitors: Columbia Sportswear's major competitors include: Nike; L.L. Bean; Timberland; Patagonia; Marmot; Nikwax; Royal Robbins; and Woolrich.

Columbia Sportswear's diverse outerwear and sportswear product lines evolved from a focus on producing durable hunting and fishing gear. In the 1990s, Columbia Sportswear aggressively pursued the diversification of product lines; this is also when Columbia Sportswear developed the concept of "head-to-toe" outfitting so that consumers could rely on Columbia Sportswear to supply them with a coordinated and complete line of apparel and footwear.

The 1990s also marked the opening of Columbia Sportswear's flagship store in Portland, Oregon, as well as the success of the store-within-a-store concept. These "concept shops" are areas within a retail store that are dedicated to Columbia Sportswear merchandise. By the end of 1997, Columbia Sportswear had 164 concept shops; plans called for doubling the number of these shops by the end of 1998.

STRATEGY

The company's strategy focuses on increasing sales to distributors and increasing concept shops located in larger retail outlets, such as department stores. Columbia Sportswear also initiated an inventory management system in the mid-1990s to reduce excess inventory. The strategy involved limiting the time between a customer order and the production cycle. The 1996 budget reflected Columbia Sportswear's cost-containment strategy by reducing the spending for advertising and discretionary projects and enacting a temporary hiring freeze.

Future strategies involve an aggressive focus on developing specific high-opportunity markets. Columbia Sportswear will target sales increases in its footwear and sportswear lines. For instance, MTV's popular "Road Rules" features a cast entirely outfitted by Columbia Sportswear. "Road Rules 5," which premiered in January 1998, featured the five participants involved in cattle driving, ski jumping, and caddying at a golf tournament. Columbia Sportswear has been supplying "Road Rules" with apparel since 1995.

Another strategic idea was to sign professional golfer Steve Jones to a three-year endorsement contract, beginning in 1998. Jones was named the PGA "Comeback Player of the Year" when he won the U.S. Open at Oakland Hills Country Club after recovering from a near-disastrous off-road motorcycle accident. As of January 1998, Jones began wearing Columbia brand sportswear and rainwear on professional golf tournaments. Tim Boyle, Columbia Sportswear's president, explained the rationale behind the company's agreement with Jones. "Golf has become a staple of today's active outdoor lifestyle, which also may include activities like hiking, fishing, and skiing. Steve Jones is an avid outdoorsman, which makes him the perfect representative for our company." Columbia Sportswear launched a line of golfwear in 1996 and is hoping the affiliation with Jones will boost its sales along with other merchandise lines.

However, Columbia Sportswear has no plans to change its ongoing award-winning advertising strategy featuring a cranky Chairman of the Board Ma Boyle putting son Tim through the mill.

INFLUENCES

Columbia Sportswear strives to create merchandise that is both functional and durable. By emphasizing these classic traits over faddish looks, Columbia Sportswear minimizes dated clothing that can occur from varying consumer tastes in fashion trends. Many products are actually a variation on existing designs.

Columbia Sportswear avoids high production costs by having independent manufacturers produce merchandise. These manufacturers are, however, under the control of Columbia Sportswear employees, who have authority over the selection process. This combination of independent manufacturers and Columbia Sportswear employees helps the company exercise flexibility and reduce expenditures. In fact, more than 85 manufacturers in 12 countries provide manufacturing for Columbia Sportswear, resulting in a total of over 85 percent of the company's products being produced outside the United States.

CHRONOLOGY: Key Dates for Columbia SportswearCompany

1938:: Founded by Paul Lamfrom
1948:: Gert Lamfrom, Paul Lamfrom's daughter, marries Neal Boyle
1964:: Neal Boyle takes over the company after Paul Lamfrom dies
1970:: Neal Boyle dies unexpectedly and his wife Gert Boyle—Paul Lamfrom's daughter—takes over
1982:: Interchange System is created; Bugaboo parka is introduced
1984:: Launches "Mother Boyle" ad campaign
1994:: Gert Boyle's son, Tim, takes over the CEO position
1996:: Launches golfwear line; opens flagship retail store in Portland, Oregon
1997:: Begins participating in Start Making a Reader Today
1998:: First public offering of stock

In the 1990s, Columbia Sportswear experienced an increase in expenses as a result of increased personnel costs. More staff was needed to handle the company's steady growth in the domestic market and its expansion in foreign markets.

In addition, this growth prompted the company to build a new distribution center in Portland, Oregon. Inventory had been previously handled by paper, through accounting ledgers. Technologically state-of-the-art, the new distribution center was 99 percent accurate in inventory and shipping. Within three weeks after becoming operational, shipping increased by 50 percent.

CURRENT TRENDS

Columbia Sportswear continues to build its hold on the domestic market, particularly in the area of outer-wear. Future commitments include expanding international markets and diversifying product lines with particular emphasis on rugged footwear and sportswear. Columbia Sportswear believes the existing trend to dress casually and for an active outdoor-oriented lifestyle will continue to benefit sales.

Columbia Sportswear's management information system is scheduled to be phased out and was expected to be totally replaced by 1999 with a more technologically advanced system that is more focused on inventory control.

Columbia Sportswear intends to capitalize on specific regions of foreign markets where the popularity of outdoor activities should boost sales, in particular France, Spain, Italy, Sweden, Germany, the Netherlands, and the United Kingdom. In addition, sales counters were established in 15 stores in South Korea and the company will have full control of its product distribution in Japan by the end of 1998.

PRODUCTS

Some of Columbia Sportswear's products include Interchange System outerwear, Radial Sleeve designs, and high-performance Omni-Tech waterproof/breathable fabrics. All of these products are worn by professional golfer Steve Jones under his agreement to endorse Columbia Sportswear products on professional golf tours.

Hunters provided Columbia Sportswear with an interesting problem: When going outdoors in the very early hours of the morning on a hunt, temperatures would be low, but would increase significantly through the day making their traditional hunting garb impractical. They needed clothing that could be adapted to temperature fluctuations and would, at the same time, provide camouflage. In response, Columbia Sportswear created the Interchange System. The Interchange System, originally designed in 1982, has a waterproof outer shell with a warm zip-out lining. Hunting garments containing the Interchange System are camouflage, and in some products a reversible liner is offered. For skiers, these innovations were incorporated into the Bugaboo Parka, which has outsold all other ski jackets on the market.

The company's Omni-Tech waterproof/breathable fabrics, which rival Gore-Tex in their effectiveness, are treated with a water-repellent finish and can be found in a wide range of Columbia Sportswear merchandise, including footwear.

CORPORATE CITIZENSHIP

Columbia Sportswear began participating in Start Making A Reader Today (SMART) in 1997. Contributing $60,000 to the SMART program, which helps teach children to read and guides them from kindergarten through second grade, the company also provides volunteers from different departments. The program helps about 5,000 children in Oregon and was used as a prototype for national reading programs.

In 1996 Gertrude Boyle, chairman of Columbia Sportswear, was a recipient of the Astra Award, granted by Gateway to the Women's Market, which is a resource and support organization for businesswomen. The Astra Awards were given to 15 outstanding women achievers in Oregon. Also, the company is involved in local fund-raisers and contributes to nonprofit organizations and local schools.

GLOBAL PRESENCE

Columbia Sportswear markets to more than 10,000 retailers in 30 countries and plans to aggressively market products to those that exist in Europe and Asia. The company opened an office in Tokyo in the late 1990s and expanded existing markets in Russia and South Korea, including a 1,600-square foot retail store in Seoul. Columbia Sportswear also plans to seek expansion in Italy, Spain, France, and Germany. Outside of North America, sales rose from $9 million in 1993 to over $35 million in 1997, but as of 1997 those sales were only 10 percent of total net sales. Of the 5.6 million shares of common stock offered in 1998, 1.12 million shares were offered in a concurrent international offering.

EMPLOYMENT

As of December 31, 1997 Columbia Sportswear, employed 1,234 total full time employees, 863 of whom were located in the United States, 62 in Canada, 23 in Europe, and 286 in Asia.

SOURCES OF INFORMATION

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