Columbia Sportswear CEO: There are better 'sourcing countries' than China

KEY POINTS

• "We've, over the last several years, been moving product out of China, not because we don't like China, but frankly because there's been better opportunities in other sourcing countries," Columbia CEO Tim Boyle tells CNBC.
• "We're paying additional tariffs on [Sorel brands], which we've been very clear it's bad for consumers globally, bad specifically for consumers in the United States," he says in a "Mad Money" interview with Jim Cramer.
• "We're free traders. We like the opportunity to sell more merchandise at better prices to consumers," he says.

Columbia Sportswear beat sales and profit estimates in its third-quarter report and raised its earnings guidance for the current quarter, but shares failed to rally in Thursday's session.

The stock was weighed down by doubts that Chinese officials reportedly have about the prospects of reaching a trade deal with U.S. negotiators. Longtime CEO Tim Boyle on Thursday told CNBC's Jim Cramer that the apparel company has been shifting sourcing away from China.

"We've, over the last several years, been moving product out of China, not because we don't like China, but frankly because there's been better opportunities in other sourcing countries," he said in a "Mad Money" interview.

Boyle did not elaborate on the better sourcing countries, though the company includes Vietnam among its top sites.

The stock price dropped more than 3% to $90.45 per share during the trading day, the same day that Bloomberg News reported that Chinese officials worried about the chances of striking a long-term U.S.-China trade deal because of President Donald Trump's "impulsive nature," which contributed to the stock market's negative trading day.

Columbia, whose brands include Mountain Hardwear, Sorel and OutDry among others, makes accessories and equipment in more than a dozen countries. More than 60% of its products, particularly footwear, in 2018 were manufactured in Vietnam and China.

Management has warned in the past that tariffs on Chinese imports would force the company to raise prices on affected merchandise if they were to go into effect. Beyond manufacturing, Columbia also sells a lot of products in China, where the firm has been doing business for almost two decades, Boyle said.

Sorel, a subsidiary that makes and distributes shoes and boots, brought in $116 million of sales versus the $103.7 million that Wall Street estimated in the quarter. However, Columbia is unable to move the "highly technical" production out of China fast enough, Boyle said.

Sorel's sales did improve by 27% from the year-ago quarter, which beat out the nearly 14% growth in the Columbia brand, according to FactSet.

"We're paying additional tariffs on that merchandise, which we've been very clear it's bad for consumers globally, bad specifically for consumers in the United States," Boyle said. "We're free traders. We like the opportunity to sell more merchandise at better prices to consumers."

Columbia shares are up 7.56% year to date. That's down from the nearly 28% gains the equity made through late July, FactSet said.

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