Will Columbia Sportswear Stock Return To $100 Anytime Soon?

Columbia Sportswear’s (NASDAQ: COLM) stock has tanked from $100 at the beginning of the year to its current levels of below $70. While the stock has done well to recover from a low of almost $50 in late March to the current level, we believe that it is unlikely to recover to its pre-COVID peak of $100 over the coming quarters. Based on a comparison of the stock’s trajectory over recent months with that around the 2008 recession, we believe that the stock can potentially gain 10% to reach almost $77 once fears surrounding the coronavirus outbreak are put to rest. A detailed comparison of Columbia Sportswear’s performance vis-à-vis the S&P 500 is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Columbia Sportswear Stock Fare Compare With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19, with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. Columbia Sportswear stock lost 37% of its value (vs. about a 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 21% over recent weeks (vs. about 33% gain in the S&P 500) to its current level around $70. Despite the recovery, the stock is still down 30% since the beginning of the year.

Columbia Sportswear’s Stock Fell Because The Situation On The Ground Has Changed

The decline in Columbia Sportswear’s stock is understandable, considering the impact that the outbreak and a broader economic slowdown are having on total consumption/consumer spending, and the global apparel industry. Notably, the company derives nearly two-thirds of its revenues from the U.S., which has become the new epicenter of the outbreak- recording the largest number of COVID-19 cases across the globe. Moreover, people are just not going to shop for luxury or even basic apparel products. Columbia Sportswear has temporarily shuttered stores outside the Asia-Pacific region, which is further impacting the company’s performance.  The outbreak of the virus has led to a steep fall in demand for the company’s products, as evident from Columbia Sportswear’s Q1 2020 (ending March) results, which saw its revenues shrink by 13% y-oy. Although the company has reopened its stores in Korea and China, retail (store) traffic trends have remained well below pre-pandemic levels.

But Columbia Sportswear Stock Witnessed Something Similar During The 2008 Downturn

• We see Columbia Sportwear stock declined from levels of around $23 in October 2007 (the pre-crisis peak) to levels of around $11 in March 2009 (as the markets bottomed out)- implying the company’s stock lost as much as 51% from its approximate pre-crisis peak -similar to the broader S&P, which also fell by about 51%.
• However, Columbia Sportwear recovered strongly post the 2008 crisis to about $17 in early 2010 – rising by 46% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Columbia Sportwear’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that Columbia Sportwear stock fell 37% from the market peak on February 19 to the low on March 23 compared to the 51% decline during the 2008 recession, we believe it can potentially recover by 10% more to levels of $77 once economic conditions begin to show signs of improving. That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of Coronavirus impact on a diverse set of Columbia Sportwear’s multinational peers – from Coronavirus and GES to impact on competitor L Brands and Coronavirus on URBN stock. The complete set of coronavirus impact and timing analyses is available here.

While things are bad for companies across the apparel industry, the ongoing crisis has raised questions about the very survival of some companies due to their precarious financial position. We find out whether Gap Can Survive The COVID-19 Recession in a separate analysis.

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