Columbia Sportswear Company

Greetings. Welcome to the Columbia Sportswear Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Tucker. You may begin.

Good afternoon. and thanks for joining us to discuss Columbia Sportswear Company's second quarter results. In addition to the earnings release, we furnished an 8K containing a detailed CFO commentary and financial review presentation explaining our results. This document is also available on our investor relations website, investor.columbia.com. With me today on the call are Chairman and Chief Executive Officer Tim Boyle, Co-Presidents Joe Boyle and Peter Bragdon, Executive Vice President and Chief Financial Officer, Jim Swanson, and Executive Vice President, Chief Administrative Officer, and General Counsel, Richelle Luther. This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations, or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement is subject to many risks and uncertainties and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Columbia's SEC filings. We caution the forward-looking statements are inherently less reliable than historical information. We do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or to changes in our expectations. I'd also like to point out that during the call we may reference certain non-GAAP financial measures, including constant currency net sales. For further information about non-GAAP financial measures and results, including reconciliation of gap to non-gap measures and explanation of management's rationale for referencing these non-gap measures, please refer to the supplemental financial information section and financial tables included in our earnings release and the appendix of our CFO commentary and financial review. Following up prepared remarks, we will host a Q&A period during which we will limit each caller to two questions so we can get to everyone by the end of the hour. And now I'll turn the call over to Tim.

Thanks, Matt, and good afternoon. In the second quarter, we're pleased to have again delivered net sales growth exceeding our quarterly guidance, driven by strong growth in international markets, partly offset by continued headwinds in the U.S. Our reported earnings and profit margins include the impact of U.S. tariff refunds recognized during the quarter. Without this one-time item, our underlying performance was largely in line with our expectations, with sales beating the high end of our guidance and gross margins slightly below plan on higher promotional activity, while operating margins and loss per share landed roughly at the midpoints of our guidance range. International business, which represents over 40% of our sales, continues to lead our growth up 9% year over year. While our U.S. business remained challenged this quarter and declined 4%, we saw sequential improvement despite consumer discretionary spending coming in under mounting inflationary pressure. We saw this pressure translate into soft traffic in our USDTC brick and mortar business during the quarter, resulting in higher discounts and lower sales than planned. Despite these headwinds, we were pleased to see positive and better than expected growth in our USDTC e-com business, driven by our emerging brands. We're also encouraged by improving metrics in Columbia brand U.S. e-commerce, including new customer acquisition, which we view as indicators of progress on the Accelerate strategy. Additionally, we're seeing encouraging signs of the traction the Columbia brand is making with target consumers, including improvements in unaided awareness and purchase intent among professional elite and dynamic active consumers in North America. We're also realizing stronger growth rates with newer and more elevated products and collections aimed at these target consumer groups. That said, we know it will take more time and work to bring the newness, innovation, and elevated style to our product portfolio at the level we need in order to continue shifting consumers' perceptions of the brand in the U.S. and put us back on a path of sustainable long-term growth. As a reminder, Accelerate is a multi-year strategy that we launched into the marketplace nearly one year ago based on key shifts about consumer, brand, product, marketplace, and marketing. While the foundational shifts of Accelerate are starting to show tangible signs of paying off, we have continued to refine the strategy. The Columbia brand is now focused on five strategic pillars. One, own the trail with a focus on both hike and trail run. Two, dominate warmth, our on-mountain warmth and innovation story, including but not limited to ski and snowboard. Three, power PFG, expanding our leadership in both fishing performance and lifestyle. Four, Fuel Outdoor Lifestyle with product that has outdoor DNA but is designed for everyday wear with elevated style. And five, Accelerate Footwear, which is an opportunity embedded across each of the previous four pillars and a standalone growth priority in its own right. These five pillars are nested in the original shifts of the Accelerate strategy, providing a click down for more focused execution with our consumers. These pillars leverage our authenticity and heritage in the outdoors and a reputation for quality and durability that consumers have long known us for. They also incorporate many aspects of the playbooks that are already been driving the healthy and sustainable growth of our international businesses. but we also know that today's consumers are expecting even more in terms of credibility, style, and relevance. Performance credibility in their favorite outdoor activities, style in their everyday wear with an outdoor function and aesthetic, and relevance within the outdoor culture and communities to which they belong. In support of these five brand pillars, we're also sharpening our approach to segmenting our product construct with performance and innovation-led product designed for end-use activities, specifically hike, trail run, ski and snowboard, and fish and with style-led product designed for consumers looking to incorporate versatile outdoor function and elevated aesthetic into their everyday life. Executing across our five brand pillar means executing an offense that encompasses all seasons, climates, and geographies where Columbia is present and where people can enjoy the outdoors with footwear apparel that both fulfill their performance needs and make them look and feel great. I'm excited to see these strategies continue to come to life in the marketplace over the coming seasons as we execute against these strategic pillars and the broader Accelerate work. I can feel the energy and excitement from our teams to focus on these strategic priorities that are both clear and aligned across the Columbia brand organization, both here and around the world. I'm also excited to share that in addition to the positive consumer response to the engineered for whatever brand platform, our marketing team continues to gain recognition and accumulate awards for our Expedition Impossible campaign. Following the Gold Clio Award we highlighted last quarter, in late June, Expedition Impossible racked up an incredible 10 awards at the Con Lion Awards Festival, which is widely considered to be one of the most competitive and prestigious award events in the marketing and communications industry globally, with competition against some of the world's largest and most famous brands. Columbia's awards spanned across social media, public relations, brand strategy, and direct marketing, making us the single most awarded company at this year's event. Of particular note, Expedition Impossible won the Grand Prix Award in Brand Experience and Activation, and we also won the Dan Wyden Titanium Award. The culmination of the festival and its marquee award which has been compared to winning the best picture at the Oscars. I want to congratulate our team once again for this well-deserved recognition and for the continued impact this work is creating for our brand. Since launching late last year, Impossible has garnered an incredible amount of media coverage and thousands of creative submissions from consumers or flat earthers from around the globe. We're excited for the fun and adventure to continue through next week. On August the 4th, we will reveal who, if anyone, reached the edge of the earth. Another major marketing highlight for Columbia Brand in Q2 was our campaign that pitted Columbia Global Brand Ambassador Robin Irwin against 100 crocodiles. The Crocs proved to be no match for Robert thanks to the vastly superior traction, cushioning, and dryness provided by his footwear, the Columbia TellurX Titanium Outdry Terrain Shoe. The campaign was both authentic to the Columbia brand and resonated with Robert's large and loyal following, attracting more than 3.7 million views and over 300,000 likes across digital platforms. The TellurX One of our most technical and premium footwear offerings in the height category sold out during the quarter and is poised to scale in future seasons on strong consumer demand. We also saw strong sell-through of additional items featured on the Rob's Look page of Columbia.com during the quarter and look forward to more fun and creative moments from our partnership with Robert in the future. The success of TellurX was part of another key ingredient this quarter for the Columbia brand, which is the momentum we're seeing in footwear, including high single-digit percent growth globally in Q2. This growth was driven by several styles, with particular strength in more technical footwear, featuring our proprietary OmniMax technology, including the TellurX and Peak Freak franchises in Hike, The Conos in trail running and the Dry Tortuga in fish. The growing strength of our footwear business was also reflected in the media recognition that our products received this quarter. Among several product awards received by Columbia, some of the most notable including the TellurX being featured among the best lightweight hiking boots by Wired and among the best outdoor sneakers of 2026 by Women's Health Additionally, within PFG, the whip ray and castback TC shoes were included in best summer gear lists by Outdoor Life and Saltwater Sportsman, respectively. Columbia Footwear also recently took first place on a different type of podium. Earlier this month, Columbia's sponsored athlete, Gabriel Roada, took first place overall at the prestigious UTMB Val d'Aran Ultra Trail Race in Spain. besting an elite field of competitors over 163 kilometers and 10,000 meters of elevation gain. In a sport where elite runners often change shoes multiple times during an event, Gabriel not only started the race in a pair of Columbia Konos Speed Trail ATR, our highest performance trail running shoe, but he completed the entire race and crossed the finish line in exactly the same pair. Originally hailing from a small village in Argentina, Gabriel's path to becoming an elite trail runner is truly inspirational. And his success is equally inspiring to us as it validates Columbia as an emerging force on the trail running scene, including at the sport's highest levels. Big congrats to Gabriel and look forward to seeing him on many future podiums. Now I'll provide an update on our Spring 27 Wholesale Order Book, which provides encouraging indicators of the progress we're making under the Accelerate Strategy. Although we are still taking orders, the book is nearly complete, and current indications point to a low to mid-single-digit percent growth, with broad-based contributions to this growth across our brands, including the Columbia brand in the USA. Additionally, we're seeing growth across account types and tiers, including our higher priority brand enhancing partners. From a product perspective, we're pleased to see footwear growth outpacing apparel with solid growth in both categories. It's also particularly encouraging to see strong adoption of newer apparel and footwear styles including growth in key styles targeting younger dynamic active consumers consistent with our accelerate strategy. Turning back to the second quarter financial performance I'd like to remind everyone that the second quarter is our lowest volume sales quarter and small year-over-year changes in sales and expense timing can have a material impact on reported results. Net sales increased 2% versus the prior year to $614 million, driven by growth in international distributors and global e-commerce, partially offset by an expected decline in wholesale, primarily due to a lower U.S. 26 order book versus the prior year. During Q2, we began receiving refunds of the U.S. IEPA tariffs, with the majority of cash owed received in June. As such, during the quarter, we recognized approximately $78 million in refunds and interest in our financial statements based on IEPA tariffs previously paid. From an accounting perspective, we recognized $60 million in Q2 operating margin, primarily as a reduction to cost of sales and $2 million of interest income, with $15 million as a reduction to inventory. As a reminder, we absorbed the impact of IEPA tariffs on our gross margins last year. Including the impact of tariff refunds, second quarter gross margin expanded 920 basis points on a reported basis to 58.3%. Excluding tariff refunds, gross margin contracted by 50 basis points versus the prior year, driven by continued headwinds from incremental U.S. tariffs and increased discounting. SG&A expense increased 2% reflecting higher DTC expenses including some unplanned store impairment charges partly offset by lower personnel costs resulting from our prior year actions taken as a part of the profit improvement program. This overall performance resulted in EPS of 52 cents Excluding the impact of tariff refunds, our loss per share of 41 cents would have fallen roughly in line with the midpoint of our Q2 guidance range. Inventories remain healthy and are down 6% versus the prior year in dollar terms, with units down 7%. We continue to maintain our Fortress balance sheet, exiting the quarter with $625 million in cash and short-term investments and no debt. Looking at net sales by geography, U.S. net sales decreased 4%, declining slightly more than expected due to soft traffic within our DTC stores. Relative to the prior year, the lower sales were primarily driven by high single-digit percent decline in U.S. wholesale, resulting from a lower spring 26 wholesale order book. Olu's performance was slightly ahead of plan due to stronger-than-expected order conversions. USDPC net sales were down slightly in the quarter, primarily reflecting the impact of store closures as well as software traffic, which was largely offset by improved conversion. eCommerce grew low single digit percent and exceeded plan, driven by our emerging brands. While Columbia brand US eCommerce was down low single digit percent for the quarter, we're encouraged with improving underlying metrics as we reposition eCom as the pinnacle expression of the brand. For my review of second quarter year-over-year net sales growth in international geographies, I will reference constant currency growth to illustrate underlying performance in each market. LAP net sales increased 13%. China net sales increased mid-single-digit percent, driven by solid growth in DTC e-commerce. This was partly offset by single-digit percent declines in wholesale due to shipment timing and in DTC stores reflecting soft traffic amid a more challenging macro environment. A key highlight of the quarter was our strong performance during China's 6-1-8 shopping event, with robust growth versus the prior year, coupled with an improved markdown rate. Our China team executed a successful spring brand campaign titled It's Nature's Fault, which encouraged consumers to embrace nature and its imperfect perfection, creating significantly higher social media engagement and impressions versus the prior year. We also continue to create energy through grassroots events with our Hike Society, including events that combine the increasingly popular activities of hiking and fishing. which we believe only Columbia can authentically do. Japan net sales increased low double digit percent rebounding nicely from a challenging first quarter. This reflected growth in both wholesale and DTC despite weak outlet store traffic amid a softening macro environment. In addition to adverse weather in the month of June due to heavy rains. Key growth drivers included our Thrive Revive Shandle on the footwear side, which sold out in a quarter, as well as cooling apparel, including our OmniFreeze Zero technology. Koreanet sales increased low double-digit percent, reflecting double-digit percent growth in both wholesale and DTC e-com. DTC brick-and-mortar grew low single-digit percent and beat Plan, with higher promotional activity due to lower traffic and increased consumer price sensitivity amid rising inflation. Product highlights included robust growth in cooling apparel, channel footwear styles, and our PFG Bahama shirt, which was supported by a well-executed re-flexivation celebrating the style's 30th anniversary. Our LAP distributor markets delivered mid-20% growth, driven by the fall 26 order book and earlier fall shipments, reflecting continued momentum in these diverse global markets, driven by robust growth in Columbia brand apparel. EMEA net sales increased high single-digit percent overall. Europe direct net sales increased low double-digit percent overall. showing continued momentum in both wholesale and DTC, albeit with a higher promotional activity in DTC mid-weeker traffic. Due to macro headwinds and unfavorable weather, the Europe team drove energy for the Columbia brand through a successful spring marketing campaign, leveraging the engineered-for-whatever platform across digital, social, and out-of-home media, delivering more than 650 million impressions annually on digital and social channels alone. We also continue to build strong connections with local outdoor communities through our Hike Society. In Q2, we hosted Hike Fest, events in France and the UK that sold out within minutes, creating considerable buzz and user-generated content for our brand among target consumers. Our EMEA distributor business increased mid-single digit percent versus the prior year, driven by increased spring and fall 26 orders, partially offset by later fall shipments. Candidate net sales decreased high single digit percent in the quarter, primarily reflecting declines in wholesale. due to unfavorable shipment timing and lower spring 26 orders. This was partly offset by growth in DTC with higher e-commerce sales partly offset by lower brick-and-mortar results due to worker traffic and softening consumer environment. Looking at second quarter performance by brand, Columbia net sales increased 1% with international growth more than offsetting declines in the U.S. Turning now to our emerging brands, all of which are expected to grow in 26. As a reminder, each of these brands derive a significant majority of their revenue from the U.S. marketplace. Sorrel net sales decreased 14%, driven largely by later wholesale shipment timing versus the prior year, which was partly offset by growth in DTC e-com. As a reminder, Q2 typically represents less than 10% of Sorrel's annual business. We continue to anticipate a stronger fall 26 season for Sorel with growth expected in both wholesale and DTC for the second half. As announced last month, we're also thrilled to welcome Joe Bernacchio back to Columbia Sportswear's family as a president of Sorel brand. We know Joe well from his prior tenure as president of Mountain Hardware. He brings extensive industry experience as a proven consumer-focused and collaborative leader. I'm confident that Joe is the right leader at the right time to drive the next phase of Sorrell's growth and further unlock the brand's tremendous potential. Prana net sales increased 14% reflecting double-digit percent growth in wholesale and high single-digit percent growth in DTC e-commerce. with flattish growth in DTC brick and mortar on lower traffic, which was offset by better conversion. We remain encouraged by the momentum building in Prana brand with healthy growth in both new and retained customers, particularly among its target younger consumer. A key highlight during the quarter was the opening of Prana's third full price store in La Jolla, California, which has gotten off to a great start enhanced by a steady stream of elevated in-store experiences. Mountain Hardware net sales grew 6% year over year, driven by double-digit percent growth in DTC channels. This was partly offset by low double-digit percent decline in wholesale due to substantially lower closeout sales versus the prior year, which more than offset low single-digit percent full-price growth. A major highlight in the quarter was Mountain Hardware's fourth collaboration with Stussy, which surpassed each of the prior collections in sales with remarkably strong sell-through. We were also excited to see the new Kazam Ultralight Trail Backpack launch in Q2 and immediately become a top 10 style in terms of sell-through. We'll now discuss our financial outlook for the third quarter of 2026 and the full year. This outlook and commentary include forward-looking statements. Please see our CFO commentary and financial review presentation for additional details and disclosures relating to those statements. While we remain focused on execution and what we can control, the operating environment remains highly dynamic, particularly around the major external factors affecting our business that we spoke about three months ago, involving tariffs in the U.S., and the conflict in the Middle East. The outlook for U.S. tariffs policy remains highly uncertain. While the administration continues to signal its intention to bring tariffs back to rates similar to the IEPA levels, if and when that will happen remains unclear. As such, our financial outlook now assumes that the current 10 to 12.5% tariff rates remain in place through the end of this year. Additionally, our second half outlook contemplates a $15 million benefit to our cost of sales from the IEPA tariff refunds previously received. However, we expect this tailwind of gross margin will be largely offset by accommodations to our factory partners that have navigated this period of uncertainty with us. That said, from a timing perspective, we expect to incur a net headwind to our gross margins related to these accommodations in Q3 and Annette Tailwind to our gross margin in Q4 related to the remaining refunds. Turning now to the ongoing conflict in the Middle East, while the direct measurable impacts to our business have remained relatively contained, including the order cancellations from our distributor in that region that we spoke about last quarter, the macroeconomic headwinds and supply chain disruptions related to the conflict are of greater concern and have begun to materialize. The prolonged period of elevated global gasoline prices stemming from the conflict is putting pressure on discretionary spending and consumer sentiment, particularly among lower and middle-income consumers, which could impact consumer demand in the second half. Additionally, we now anticipate meaningful shifts in the timing of Fall 26 shipments from the third quarter to the fourth due to longer logistics lead time resulting from supply chain disruptions. as well as discrete delays stemming from capacity constraints within a node of our global supply chain. These delays are expected to shift all of our anticipated second half growth to the fourth quarter, creating greater risk to our outlook given the macroeconomic headwinds impacting operating environment. For the third quarter, we anticipate sales in the range of down 1.5% to flat versus the prior year. This will result in slight SG&AD leverage and when combined with our anticipated decline in gross margin results in earnings per share of $1.15 to $1.35. Now turning to our full year outlook, we are increasing our full year margin and earnings guidance ranges to pass through the impact of second quarter tariff refunds. We continue to expect underlying results to land within the ranges we previously provided including some benefit from our revised tariff rate assumptions. That said, our underlying sales and margin outlook for the second half has incrementally moderated versus 90 days ago based on the macroeconomic and supply chain headwinds we have discussed. For full year net sales, we're maintaining our prior guidance of 1% to 3% growth versus the prior year. We now expect reported gross margins of 52.1 to 52.3%, or up 160 to 180 basis points versus the prior year. We continue to expect that SG&A will represent 43.6% to 44.2% of net sales, increasing slightly year over year, but at a slower rate than the net sales growth. Based on these assumptions, We're raising our reported operating margin guidance to 8.5% to 9.3% for the year. We're also raising our reported diluted earnings per share guidance to the range of $4.45 to $4.90. In addition to the factors already discussed, this reflects an incrementally higher full-year tax rate assumption of approximately 25%. In closing, we're pleased to have delivered first half results that were in line to slightly better than our planned overall. Despite navigating external headwinds and other impacts to our business that were unforeseen when we started the year. While the operating environment has become more challenging since our last call, I remain encouraged by the strength and resilience of our international business. the signs of progress we are seeing with our accelerate strategy and the stability provided by our fortress balance sheet. Thank you again to our global workforce who are instrumental in the execution of our strategies and our business success. That concludes my prepared remarks. Operator, could you help us facilitate the questions?

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Bob Durbel with BTIG. Please proceed.

Thank you. Good afternoon, Tim. I was wondering if we could just unpack a little bit, you know, like the Commentary around the second half outlook, some of the supply chain disruptions and better clarity or visibility on your delivery schedules with the product. Can you just talk about, has there been any change around the order book with your better visibility? So when you look at the wholesale plans and the acceleration that you had talked about previously, Has that changed, you know, much? Could you quantify that a little bit, the North American piece specifically? I guess the second piece of this is, you know, the Spring 26 order book firmed up, you know, probably earlier than I can remember, right? And so that's pretty encouraging, you know, and the guidance that you gave or the expectations around the order book, is that primarily, I mean, is it broad-based? Is North America, you know, in... in that sort of mid-single digit range as well. If you could maybe give a little more color around that, that would be helpful. Thanks.

Sure, absolutely. So first of all, related to the change in the Q3, Q4 shipping numbers, we're basically talking about a percent one way or the other, and it's not a function of any cancellations or any adjustments. These are both known and expected logistic issues which are impacted both by the conflict in the Middle East and the disruption to shipping as well as a certain topic in our consolidation nodes as we discussed. So we're confident that the numbers are going to be coming through as we've got planned. and then you mentioned the Spring 26 order book, but you're talking about Spring 27, right?

Yeah, 27, sorry, yeah.

Yeah, no problem. And yes, basically it's growth across all the brands and all the geographies including the North American USA business. So we're starting to see the results of Accelerate and really exciting good stuff happening that week.

And Bob, given Tim's comments and that we've not seen any changes in our order book for Fall 26, We would still contemplate growth for U.S. and North America in the back half of the year for the wholesale business. Of course, with the shift that we're seeing, that's going to be much more back-end weighted where we'll probably see a decline in Q3 and an increase or growth in Q4. Okay, great.

And just, Jim, on the other, the second piece of the AEPA tariff refunds, How does that go into play, or sort of how and when will that play out in the gross margin line? Is that second half 26? Does that flow into 27?

Well, we received the refund as Tim touched on in the prepared remarks. Having said that, what we realized in the P&L was about a $60 million benefit operating margin. That left about $15 million of what we received in and refunds on the balance sheet as a credit to inventory. That will be realized over the balance of this year relatively ratably between Q3 and Q4. And of course, as we've indicated, there is an offset related to factory accommodations that will likely take place in Q3. So you'd expect a Q3 margin headwind and a Q4 margin tailwind related to all that. Great. Thank you very much.

The next question comes from Laurent Veselescu with BNP Paribas. Please proceed.

Good afternoon. Thank you very much for taking my question. I wanted to follow up on Bob's question about the shift. Is it fair to assume, should we assume like about last quarter you talked about a $10 million shift. This quarter should we assume it's a $30 million shift from 3Q into 4Q and and if that's the case, what region would be impacted? Is it Europe because of the Middle East? I'm just trying to better understand what's the supply chain bottleneck that is leading to this shift? Thanks so much.

Yeah, sure. Thanks for the question, Laurent. As it relates to the size of the shift, it's north of the 30 million you referred to. In fact, if we were to adjust for the timing shift that we're seeing, Q3 and Q4 in growth in terms of the relatively equivalent in the 4-5% range Q3 being a little bit slower growth than Q4 within that and then as it pertains to the regions this is a global impact but I would say that the predominant of it is more North America focused and certainly the Middle East is a contributing factor to this I think the other element of it is upon the invalidation of the The IEPA tariffs by the Supreme Court, we did see a bit of a rush on the supply chain and capacities. And so that's part of what's contributing this is importers are trying to get products into the U.S. at that lower 10% rate relative to the risk of a higher rate longer term. The other thing I might mention as it relates to just the timing and flow of wholesale shipments, We were a bit earlier in our shipment last year for Fall 25, way into the third quarter. Some of this is effective, you know, Fall 25 being early, Fall 26 certainly being later as we see it today. And then also keep in mind when you think about the higher rate of growth in the fourth quarter, we did have a shortage of inventory as we curtailed some production for Fall 25 last year. So that's going to provide a bit of a favorable comp as you think about the rate of growth in the fourth quarter.

Super helpful. Thank you very much. And then as a follow-up, my second question is on China. On a constant currency basis, you know, grew mid-single digits. I think in your CFO prepared commentary, it talks about 3Q driven by China, but also Europe Direct. Maybe can you, for the audience, can you share what you're seeing in China? I mean, I think it's been a little bit tougher for a lot of names out there. Curious to know, is it due to typhoons, warm weather? Just curious to know what you're seeing and how do we think about China overall growth rate for this fiscal year? Thank you so much.

Yeah, China for us, as you know, we've talked a lot about it being the biggest opportunity force of growth. We have the The typical weather and other disruptions that happen seemingly every year, we still think it's an enormous opportunity for us and we're still quite small there by comparison to others. So that's why we're so confident that our business is going to get bigger there, especially when you consider the growth rates in our e-com businesses across multiple platforms. So I'm still very bullish on China and looking forward to greater things there.

Yeah, I just add the 618 sales event that we just came through with Q2 that Tim touched on. We thought robust growth is a part of the selling in on that from a dot-com or online perspective. And as it relates to growth on the year, we still anticipate China being one of our fastest growing markets. And I think I commented on last quarter, we anticipated double-digit growth on the year. And I think we're more or less tracking to that same level. And obviously, some of that's the strength of the order book that we've got for the wholesale business in the back half.

Great. Thank you very much, Ambassador Walker.

The next question comes from Paul Lajuez with Citigroup. Please proceed, Paul.

Thank you. It's Tracy Cogan filling in for Paul. I was hoping you guys could talk about how your U.S. store business trended by months in 2Q and what you're seeing quarter to date, and then was wondering if your gross margin guidance for 3Q also assumes you're more promotional. Thanks.

As it relates to the store performance, I think the single biggest thing we would comment on, and some of this is covered in the remarks that Tim provided, but is the softness that we saw from a traffic standpoint. And that was most notable beginning in the mid to latter part of April, and I think largely coincided with the inflationary pressure that the consumers under from a fuel and food price standpoint. And that we really saw that decline in traffic happen and then hold relatively steady throughout the quarter, Tracy. So I wouldn't describe it as if there was increasing deterioration as we went through the quarter as much as it was a step function down at a point in time and kind of holding relatively constant from that point forward. And then as it relates to how we're thinking about gross margin in Q3 and frankly for the balance of the year, you'll note that we did pass through the benefit of the refund The other thing we've done in our outlook on the full year is we had reduced our assumptions in the latter part of the year. We had previously assumed that IEPA's equivalent tariffs would be in place. We're now assuming that the current tariffs as we know them, the 10 to 12.5% range would be there. So the offset to that is essentially an assumption around either the consumer environment, a bit more pressure, and the continuation of these promotions. Not to mention with fuel prices going up in the anticipation of some incremental freight charges from predominantly an outbound standpoint.

Got it. Thank you very much.

The next question comes from Mitch Kometz with Seaport Global. Please proceed.

Yes, thanks for taking my questions. Steve, can you talk a little bit about what DTC and AT1's assumptions are embedded in your back half, ALA?

Yeah, Mitch, I presume you're talking about the U.S. business. You know, by and large, I would describe, you know, we've cautioned a bit more risk here today with what we're seeing from a macro standpoint in addition to the supply side of things. For the most part, you know, they're consistent with the more recent trend that we've seen in the business. The cancellation side of things, like we've touched on, we've not seen anything meaningful in the form of cancellations, but, you know, we just note the risks. with what we're seeing with the consumer. That's the reason why we're a bit more cautionary today with regard to the range and where we might fall within that range.

And then, Tim, in your prepared remarks, you talked a little bit about new customer acquisition on the Columbia brand side. Could you just maybe elaborate on that? I think you said that you're picking up younger consumers, which I think is great. part of your strategy with Accelerate. Can you talk a little bit about maybe who you're bringing in? What are these new consumers buying? Are they buying the newer elevated products? What are you learning from this? And is this, you know, to some extent a proof point that the strategy is working?

Yeah, certainly. Well, we can see, you know, the age of these consumers and sort of in general. And it's really encouraging to see the results of their purchases as it relates to our more expensive product, especially as it relates to footwear. And we think this is a definite result of the promotional activities, not dollar promotional, but marketing promotional activities as it relates to the impact of the accelerated marketing efforts we've been focusing on, including the Expedition Impossible that's been so highly lauded by the the various groups that measure advertising as well as what we've done with Robert Irwin and so we just see some great results there and it's very encouraging in terms of how we're promoting the younger products that we're offering.

And then maybe lastly just on the strength of the spring order book I mean do you You at this point sort of anticipate that that will translate into kind of low to mid-single-digit sales growth in the first half of next year. I know you're not guiding the next year, but is that how we should think about it, that that should be driving that type of growth rate through the first half of next year?

Yeah, the audio is a little bit weak for us, Mitch, but I think your question was related to the Spring 27 order book and Based on the visibility we have today, we've got roughly 90% of the orders are in. That gives us the indication of the low single to mid-single digit rate of growth in the first half of next year from a wholesale standpoint. We're hopeful that we'll continue to take that order book over the course of the next couple months. and, you know, the potential to be on the upper end of that. So we'll look forward to providing an update in October.

Yeah, I guess I would also point out that the category that's most encouraging in our spring order book is footwear. We've been talking for a long time about the opportunities there. So it's great to see the business moving forward there, especially in more expensive products.

Great. Thanks very much. The next question comes from Jonathan Komp with Baird. Please proceed.

Yeah, hi, good afternoon. I wanted to ask about the percentage of newness for the Columbia brand. If you think about the D2C business and also your wholesale partners, how that might look into the fall and spring of next year, and maybe related to the spring commentary, have you shared what units and pricing look like within the order book that you referenced?

Well, as it relates to newness, probably the most exciting item that we have for all 26 is our Amaze Puff collection, which literally is not new. It was debuted last year, but it doubled in terms of revenue for fall 26. So that's just an example of how when we move forward with a really interesting product and market it properly, that we can be incredibly successful. You know, I guess it's also important to point out one of our very really basic items, the Bahama shirt, which celebrated its 30th anniversary this year, When we promoted it and told stories about its heritage, the volumes spiked and that's going to be a really big part of the future of our business is re-energizing some of our more important classic heritage items and that would include the Tamiami shirt which is a 20 year anniversary this year and we'll be promoting that as well. When we talk about the percentage of newness, we really talk about both reinvigorating established products as well as adding new. And the new, I would say, is going to be a smaller percentage of the total, but important.

And then, John, as it relates to the latter part of your question on dollars in units for the spring 27 order book, There are no meaningful changes that I would describe in terms of pricing, so that load of mid-single-digit percent, think about that both relatively on an equivalent basis, both in dollars and in units.

Okay, that's really helpful. And then maybe just a broader question, Jim, if you think about the multi-year Potential to build back to a double digit operating margin. There's obviously a lot of moving parts currently with the tariff uncertainty and then some of the accommodations to your factory partners. So I'm wondering, as you think about that multi-year build back or recovery, is that any more clear to you today or do you have any broader perspective on appropriate timelines to think about that? Thank you.

Well, there's nothing new to provide in terms of the timeline. I think the way we would describe this and the way I certainly think about it is there's been a lot of groundwork laid over the better part of the last few years. We've touched on The profit improvement program and some of the cost savings and efficiency that we're building in the business from that vantage point. And importantly, the accelerate strategy that we've been working on for quite some time as well. Our ability to get back to and achieve double digit and percent and above operating margins is really dependent upon getting that top line turning the right direction on a more consistent basis. Certainly we're encouraged with what we're seeing from an order book standpoint for both fall 26 and spring 27. And that gives us, you know, that confidence as we look forward. But I can't, you know, today pinpoint, you know, the timeline that we're necessarily seeking to get back to that. But just a lot of great work being done across the company.

Okay, great. I appreciate the color. Thanks.

Up next is Mauricio Cerna with UBS. Please proceed.

Great, good afternoon. Thanks for taking our questions. A couple questions on sales. Just to confirm, for U.S. wholesale, in the back half, is the expectation still to be low to mid-single digit growth? And how should we think about that in Q3 versus Q4? Maybe could you talk a little bit more about what you're seeing in sell-through of the core Columbia product, you know, over the last quarter? Thank you.

I can start out Maurizio and then I'll have Tim jump in here a bit as well. As it pertains to the fall 26 order book and last quarter we'd indicated directionally the order book both globally and in the U.S. and from a U.S. standpoint across the brand portfolio, this is old true for the Columbia brand as well, that we still contemplated low single digit to mid single digit percent growth. And as we sit here today, we've not taken anything different than we ordinarily would expect at this point in time of the season from a cancellation standpoint. Of course, this is all dependent upon our in-season execution, getting things into the marketplace, the consumer, and so forth. So that would be the overarching caveat. And as it pertains to the Q3, Q4 flow of that, We're going to anticipate Q3 is going to be down due to the later shipments, and then you'd expect growth in the fourth quarter. And then I'll shift it over to Tim as it relates to your question on, I think, sell-through that we're currently seeing in the marketplace.

Yeah, as you might remember, our spring 26 order book was disappointing. It was down from prior periods. and so we shipped in a smaller quantity of merchandise but as it relates to sell-through, I would say the newest products that we have were very high sell-through as well as I mentioned the Bahamas shirt which is a classic that we remarketed and reinvigorated as a is a great new product. Sales were terrific. And then our order book conversion actually was stronger than we had thought it was going to be. So that having been said, it's never as good as we'd like it to be, but we're pleased with the results. And it bodes well when you have a growing spring 27 order book after being down in 26.

Got it. Very helpful. Just a quick follow-up on gross margin. Trying to understand the commentary of slightly higher promotions. Is that across all regions or U.S. only? Just trying to understand that part both in stores and e-commerce, trying to figure out that part. And then just as you think about 27 order books and the spring order book, anything that you can tell us about the input cost just given the elevated oil prices? How are you thinking about that part of it all? put some takes for next year.

Yeah, it relates to gross margin and promotion discount activity in the third and fourth quarter. It's too difficult to probably parse that down by geography, Mauricio, but what I would say is I would anticipate to the degree we do have that, and of course we're trying to maximize the revenue and profitability, so we'll only do that which is needed to stimulate demand and velocity of sales. With that said, to the degree that occurs, it's more likely in the brick-and-mortar channel and within the outlet side of that, which is, for us, more of a U.S. concentration in terms of where the outlets are located. Certainly, we're continuing our efforts in terms of being less promotional and making sure that Columbia.com is the best representation of the brand and really elevating it through the Accelerate strategy. I think that answers the first part of your question. To come back to the second part, as it relates to input costs and what we've seen particularly from an oil standpoint. Looking out to next year as we've taken the vast majority of the spring 27 order book that we're discussing here today, most of the input cost to that had been staged or procured prior to oil price increases. And so only modestly would we expect to see input cost pressure. in spring 27. Of course, as we get into the fall 27 season and seeing oil prices continue to hover in the $90 to $100 range as of late, that's certainly going to be a headwind that we're going to need to address. We're still in the midst of finalizing the product line and going to market here for fall 27 in the next couple of months, so it would be premature for me to get ahead of that in terms of describing

Thank you so much.

Up next is Peter McGoldrick with Stifel. Please proceed.

Thanks for taking my question. Just there you mentioned promotions only to what is needed to stimulate demand. As we think of things becoming more promotional in DTC, should we Contemplate that as a reaction to in-season lower traffic. Is there any level of channel inventory imbalance or any pushback from the consumer representing some sensitivity to paying full price?

I think it's a combination of saying that the inventory side of it, I would not emphasize. I think inventory is generally speaking, at least for us and across the channel from everything we've seen, is pretty darn clean at this point in time. And so to the degree there's that need to stimulate the demand, I think it's a combination of what you saw in Q2 with traffic declines and making sure we're capitalizing on those consumers that are coming through the doors. And then to some degree, Peter, it is a We are seeing, you know, a lot more pressure on the consumer. And I don't think that's any surprise with just seeing where fuel and food prices and everything else are. And apparel and footwear is, you know, generally viewed as a discretionary good. And so it's going to be more elasticity with that. And so we're, you know, we're dynamically adjusting price to ensure that we keep the volume moving.

Yeah, Peter, I just would point out that the weather tends to be much more impactful than almost any economic indicator.

I guess following up on the pricing aspect and bigger picture, now that we have some better visibility to input costs on the tariff side, can you help us think about the go-forward philosophy on marching the price range higher as you balance Columbia's value proposition against the cost reality? Should we expect any change to how you're approaching price in future seasons?

Well, I would hope that we have more solid information on tariffs, but we're never really 100% sure how that will play out. The focus for us has been on markets where tariffs are less impactful, i.e. the international markets.

Yeah, and I think with that, Peter, certainly as we're developing product for the dynamic active consumer. You know, I think looking at opportunities where from an overall mix of product with good, better, and best, and particularly on the better, best side of the equation, and that's where we're looking to grow with a dynamic active and professional lead. But that, you know, those are areas where we think there's opportunity to take some price in the mix of our overall business over time.

All right. Thank you very much.

The next question comes from Tom Nickick with Needham. Please proceed, Tom.

Hey, guys. Thanks for taking my question. Just wanted to follow up on some of the questions around pricing and promos, etc. Have you seen any kind of downward pressure on pricing across the competitive landscape, like our You know, competitors kind of, you know, reinvesting tariff refunds back into pricing or anything like that? Or has, you know, some of your expectations around promo activity, you know, more just a function of what you're seeing in your own business?

No, I would say based on the seasonal nature of the products, we're really talking about... Natural, normal liquidation of spring product that happens at this time of the year and new product coming in which are seasonally correct outerwear, insulated products. There's been no activity that we've seen that would be outside of the normal. And again, the tariff rates are not that unusually low so we hope that they stay that way.

Understood. All right. Thanks very much and best of luck the rest of the year.

Thank you, Phil. We have reached the end of the question and answer session, and I will now turn the call over to Tim Boyle for closing remarks.

Thanks operator, and thanks everybody who joined the call today. While we're facing increasing external headwinds impacting the business, as we head into the second half, I really believe that Columbia Sportswear Company, like our products, are engineered for whatever. With the momentum and resilience we're seeing in our international businesses, and the signs of progress we're seeing with the Accelerate strategy combined with our Fortress balance sheet, I'm confident that we have the right strategies and competitive advantages to navigate these headwinds and continue on our path back to sustainable long-term growth. Look forward to updating you all on progress again in a few months.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.