Columbia Sportswear (COLM Get Columbia Sportswear Company Report shares slumped lower Tuesday after Bank of America downgraded the outdoor apparel company and cut their price target to over concerns about the global supply chain and other issues
Bank of America analyst Alexander Perry cut his price target on the group by $29, to $137 per share, and lowered his rating on the group by one notch, to neutral, citing risks in wholesale shipments in the first half of 2022.
Perry said global supply chain constraints, such as continued shipping delays and the impact of Vietnam factory closures, which he thinks could have an outsized impact on the company's footwear business. Factories have been closing in Vietnam due to a second wave of COVID-19.
"We believe Vietnam represents a fairly significant portion of COLM’s contract manufacturing and while we see some potential disruption to Holiday," he said, "we believe factory closures are more likely to impact 1H22 shipments as 70% of Holiday product was already in transit or DCs (distribution centers (although late season reorders could be impacted)."
Columbia Sportswear shares were marked 2.35% lower in mid-morning trading Tuesday, against a 1.14% gain for the Nasdaq, to change hands at $95.81 each.
Importantly, Perry added, "we expect COLM’s faster growing footwear segment to have an outsized impact from factory closures, especially as COLM was already limited by production capacity constraints."
The analyst said that he believed shipping delays have increased since Columbia reported second-quarter earnings on August 2, since vessels anchored in the Port of Los Angeles have continued to increase and peaked on Sept. 20 at 37.
He added that the average days at anchor + berth peaked on Sept. 28th at 18.35 days.
"While we see a longer term benefit from potential market share gains from larger athletic brands such as Nike (NKE Get NIKE, Inc. (NKE) Report and Under Armour (UA Get Under Armour, Inc. Class C Report consolidating wholesale distribution," Perry said, "we now see more limited opportunity in 2022 given supply chain constraints."
Last week, Nike cut its full year sales forecast after missing Wall Street forecasts for first quarter revenue owing to the impact of supply chain disruptions.
Over the summer, two Nike suppliers in Vietnam -- Eclat and Quang Viet -- planned production cuts to meet COVID requirements amid a surge in Delta infections in the south Asia region.
Bank of America analysts last week cut their rating on Kohl's (KSS Get Kohl's Corporation (KSS) Report two notches to underperform due to concerns over supply chain disruptions heading into the holiday shopping season.
