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The Price Is Right for This Apparel Maker

Tuesday, 26 Oct 2010 | 6:37 PM ET

If you made the argument that Columbia Sportswear should be avoided after its most recent quarter, some people would fight it hard to disagree. What with earnings coming in below expectations, revenues merely in line and full-year guidance mixed.

Wear & Tear?
Cramer gives you a little pep in your step after today's market action.

Even Cramer would have to admit the company underperformed. Still, he doesn’t think the stock should be sold. No, at this level, hovering in the low $50s, he thinks Columbia , maker of the Columbia, Mountain Hardware, Sorel, Pacific Trail and Montrail brands, is a buy.

Finally the stock, trading under ticker symbol COLM, has pulled back after running as much as 50 percent this year, reaching into the high $50s. So that less-than-stellar-looking report, at least on the surface, did investors a favor. And because so much of the fundamental story behind this company is still in tact, they might want to jump on this opportunity.

Look, retail’s working right now. Coach and Phillips-Van Heusen are just two of the names that Cramer recently has recommended that are up double digits, 25 percent and 24 percent, respectively. He also talked up the sector just yesterday, during Monday’s “Mad Money,” citing it as one of many S&P 500 sectors that’s showing legitimate strength.

What’s more, though, is that hidden under Columbia’s disappointing headline numbers were a host of positives that show a company on the rise. The company’s Sorel footwear sales jumped 24 percent, while its Mountain Hardwear brand was up 8.5%. Overall outwear sales climbed 13 percent, sportswear increased 18 percent, footwear went up 18 percent, with accessories and equipment up 31 percent. The way Cramer sees it, where once Columbia management allowed this business to languish, it has since engineered quite the turnaround.

Plus, this is Columbia’s top season we’re going into here—winter. The company has a number of major product launches as well, not the least of which is its new Omni-Heat coats and jackets. They offer a reflective lining that keeps people warmer while also allowing excess heat and moisture to escape, and the Canadian Freestyle Ski team wore them during the 2010 Olympics. Cramer thinks the success of Omni-Heat could have a halo effect on the rest of Columbia’s brands.

Oh, and that mixed guidance I mentioned? That’s a product of higher shipping costs. But those costs are only a “problem” because demand for Columbia gear is so high the company is shelling out extra to pay for expedited deliveries. Can you say high-quality problem? Especially when you consider that sales are expected to rise 20 percent in Q4.

The hair cut COLM took following its quarter brought the price-to-earnings multiple to 19, though the company has a 13-percent growth rate. So you’re getting this one at a reasonable price. And with just three of the 13 analysts covering the stock rating it a “buy,” versus 10 “holds,” Cramer thinks Columbia is ripe for some upgrades, which would further boost the share price.

“I think Columbia Sportswear’s a terrific buy headed into the holidays,” Cramer said, “but only if the price is right. Thanks to the market’s ridiculous overreaction to the company’s results last week, the stock’s on sale, and you’re getting the right price, right now.”

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