Columbia Sportswear Traders Shrug Off Short Report

Short seller GlassHouse Research has a new report out making some bold claims about Columbia Sportswear Company COLM.

The Allegations: GlassHouse said it found “accounting red flags” in Columbia’s financials and compared the stock to Under Armour Inc UAUAA prior to its share price collapse.

“Contrary to sell-side analysts who follow COLM, our research reveals that COLM’s wholesale partners are currently stuffed with product and will be hesitant to purchase inventory going forward,” GlassHouse said in the report.

In fact, GlassHouse claims Columbia’s channel stuffing situation is far worse than Under Armour’s was back in 2017. GlassHouse believes Columbia management has delayed writing down $225 million in inventory, or about 28% of the company’s total inventory.

As a result of these delays, GlassHouse said the company’s margins will take a huge hit heading into 2021.

“On top of a gross margin decline, our prepaid expense analysis points to operating margin degradation over the next year as well,” GlassHouse wrote.

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Slow To Adapt: At the same time, GlassHouse said Columbia is falling even further behind market leaders Nike Inc NKE and Lululemon Athletica Inc LULU in pivoting to a direct-to-consumer online sales model.

Based on the firm’s concerns, GlassHouse set a price target for Columbia of $45.29, which represents more than 50% downside from current levels.

“As such, we believe Columbia’s stock price will decline precipitously over the next twelve months as these accounting gimmicks reverse violently,” the firm said.

A representative from Columbia was not immediately available for comment.

Benzinga’s Take: Columbia shares initially dipped, but traded higher by more than 5% on Thursday during a weak day for stocks following the release of the report. It seems investors are at least initially taking the GlassHouse claims with a grain of salt.