By  on October 25, 2010

Shares of Columbia Sportswear Co. fell 8.7 percent Friday after the company reported a smaller-than-expected profit and lower gross margins in the third quarter.

The shortfalls came despite a double-digit sales increase and coincided with an upward revision in fourth-quarter profit projections that were built on an increase in advance seasonal orders and stronger direct sales.

For the three months ended Sept. 30, the outerwear and sportswear vendor recorded net income of $52.2 million, or $1.53 cents a diluted share, compared with income of $46.9 million, or $1.38 a share, in the year-ago quarter. Excluding a tax benefit of 10 cents a share, earnings per share were $1.43, below the $1.47 expected by analysts polled by Yahoo Finance.

Net sales rose 16 percent to $504 million, from $434.5 million, driven by a 16.2 percent rise in Columbia-branded merchandise sales, amounting to $430.3 million, as well as a 12.5 percent increase in outerwear sales totaling $223.9 million. Gross margin contracted to 42.5 percent of sales from 43.4 percent in the year-ago quarter.

According to the company, the quarterly sales gain was driven by a 21.8 percent increase in U.S. sales to $325.6 million and a 33.2 percent sales jump to $59 million in Latin America and Asia Pacific. This was offset by a 2.1 percent dip in sales to $66.3 million in the company’s Europe, Middle East and Africa division, and a 3.6 percent decline to $53.1 million in Canada.

“The increase in 2010 net sales and much of the pressure on 2010 operating margins are the result of investments we have chosen to make to claim market share; to shift our business toward more innovative and premium products; to drive consumer demand for all of our major brands, particularly the Columbia brand, and to improve business systems and processes,” said president and chief executive officer Tim Boyle. “We believe we are achieving many of our goals in the marketplace and have therefore begun to invest more heavily in our infrastructure and systems.”

Net income for the nine months expanded 15.7 percent to $50.8 million, or $1.49 a diluted share, compared with income of $43.9 million, or $1.29 a share. Revenue increased 15.9 percent to $1.03 billion, from $885.7 million, a year earlier.

Columbia, reporting results after the markets closed Thursday, projected fourth-quarter earnings of between $430 million and $440.7 million, an increase of 20 to 23 percent versus last year.

Shares closed at $52.53, down $4.98.

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