Columbia Sportswear Company

Good day everyone, and welcome to the Columbia Sportswear 3rd Quarter 2026 Financial Results. At this time, all participants are placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Matt Tucker. Sir, the floor is yours.

Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's third 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 a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures, please refer to the supplemental financial information section and financial table included in our earnings release and the appendix of our CFO commentary and financial review. Following our 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. Now, I'll turn the call over to Tim.

Thanks, Matt. Good evening. Good afternoon. For the third quarter, we're pleased to report results that exceeded our quarterly revenue and earnings guidance. Our better-than-expected revenue growth primarily reflected a portion of delayed Fall 26 wholesale orders shipping earlier than expected, coupled with improved underlying business trends in the U.S. Our operating margin also exceeded expectations. Gross margin upside was driven by higher full price realization and favorable U.S. DTC freight costs, despite elevated fuel prices. SG&A expenses were lower than planned, declining year over year, and demonstrating healthy operating leverage on disciplined spend management. Our business outside the U.S. and Canada, which represents roughly 35% of global net sales, continues to lead our growth and maintained its strong momentum with sales up 9% versus the prior year. Our U.S. business declined 1% but would have grown if not for the supply chain related delays impacting the timing of wholesale shipments. We're particularly pleased with the momentum we saw in DTC e-commerce which provides the pinnacle expression of our brands. U.S. e-com grew mid single digit percent and a quarter including high single digit for the Columbia brand. This momentum accelerated through the quarter, including strong early sell-through of Fall 26 products. Importantly, it also came with reduced promotions, consistent with our strategy of repositioning e-com as a more full-price channel. Our U.S. brick-and-mortar sales grew modestly, stronger productivity, more than offset continued traffic headwinds, and our outlet doors amid a challenging macro environment. Overall, we're highly encouraged by our third quarter performance in the U.S. Trends for the Columbia brand are stabilizing and we're seeing continued tangible signs of progress with the accelerate growth strategy. We are seeing this progress not only in the quality of our U.S. econ business, but also the consumers we are attracting. Over the past two quarters, Growth of new consumers has accelerated, and the third quarter represented the strongest growth in new consumers since 2023. An increased share of our e-comm sales can be attributed to purchases by our target, dynamic, active, and professional lead consumer groups. This momentum in e-comm reflects the combined progress we're making in elevating our brand, product, marketing, and marketplace through Accelerate. Not any single factor product or marketing campaign. We have been building that foundation since launching our Engineered for Whatever marketing platform last August and relaunching Columbia.com last September. Earlier this year, we began amplifying our mid-funnel marketing engine with more targeted marketing, increased influencer partnerships, and creative activations. Our full funnel marketing strategy is reaching our target consumers and materially improving the sell-through of our featured products. Together these efforts provide strong indications that the strategy is gaining traction and increases our confidence that we're on the right track. A key theme underlying our third quarter performance is the momentum we're building in police. We're thrilled with the sell-through we're seeing across multiple franchises. A major highlight within this category has been our Helvetia fleece, a style that first launched in 1991. This fall, we offered the Helvetia in several new bold colorways and prints, bringing new energy to an iconic legacy product, which appealed to younger, targeted consumers. Additionally, to celebrate Helvetia's heritage and lean into the current 90s nostalgia, we launched our Facts for a fleece campaign in early September. Featuring a 1991 era fax machine, we challenged consumers through social media channels to be among the first 91 people to send us a fax if they could actually find a fax machine in order to receive a free fleece. The energy and engagement created by this campaign for both the Helvetia and the Columbia brand was incredible. To our surprise, we received over 8,000 faxes. far exceeding our expectations. This energy has extended beyond the Facts for Fleece campaign. Our new MTR Fleece, a more premium style launched this fall, has seen strong early demand. Columbia Fleece has even been positively trending on TikTok as of late. Earlier this month, we launched a special edition of our Helvetia featuring the iconic PDX airport colored carpet. It sold out within minutes online and consumers lined up around the block at our Portland flagship store. Earlier this week, we launched our latest campaign with our Don't Panic Room contest. Similar to our highly successful Expedition Impossible campaign, we are challenging consumers to submit videos, this time highlighting their survival skills. The winner will receive the actual Don't Panic Room bunker, It's been modified as a shipping container and it's filled with essentials needed to survive anything that Mother Nature throws at you. The Don't Panic Room includes spacious living quarters, non-perishable supplies, and most importantly, plenty of Columbia gear. We are seeing the momentum created by our innovative products and marketing translate into stronger marketplace positioning. The Amaze Puff launched in fall 25, continues to resonate with our target female consumers and retail partners alike. After largely selling out last fall, it's among our top sellers and biggest growth drivers for fall 26 with an expanded variety of styles and colorways. That product story will have prominent visibility within elevated retail spaces. For example, in Q4, Sporting Goods, House of Sport Doors, and in Macy's flagship Herald Square door in New York City. Beyond the Amaze Pop, we're highly encouraged by the momentum in products primarily designed for and marketed to our younger target consumers, and especially women. Among newer products, Amaze Sweats, introduced this year, are already among our top-selling women's pants. We are seeing momentum in established and refreshed styles as well. This includes the men's rock pant, a legacy style that we redesigned and relaunched last year, targeting the dynamic active consumer. The Sienna Hill jacket, a legacy women's style, also sold through exceptionally well in Q3, supported by strong mid-funnel marketing. We're also excited by the momentum we see We have renewed our focus on brand enhancing specialty accounts and engaged in over 40 events and activations year-to-date with several more planned throughout year-end. In Q3 We continue bringing energy to the 30th anniversary of our iconic Bahamas shirt, including a collaboration with country music superstar Luke Combs that drove strong engagement for the brand. In June, we launched the Terminal Tech performance apparel line. It features our proprietary OmniShade and OmniWick innovations, providing all-day sun protection, breathability, and comfort on the water. Terminal Tech largely sold out during Q3, and it's a key driver of our growth in PFG's Spring 27 order book. Another key growth driver for PFG in Q3 and Spring 27 is the dry Tortuga boot. It contributed to another solid quarter of growth for Columbia brand footwear, which was up mid single digits percent in Q3 overall. Importantly, this growth was led by more premium styles featuring our proprietary OmniMax technology such as the Peak Freak and the Teliorex families in hike and the Konos in trail running. A major highlight for our footboard business in Q3 was the continued success of our sponsored athletes on the trail, further demonstrating that our trail running product is capable of performing at the highest levels of the sport. In August, Columbia athlete Gabriel Rolanda placed 20th at the UTMB Finals in Chamonix, France. The 108-mile race around Mont Blanc is considered to be the world's most prestigious and competitive trail running event. And last month, longtime athlete Yassine Douboun claimed a spot on the podium in the Mammoth 200 in California, where he took third place in his first career 200-miler. Competing for over 60 hours, his Columbia Conos Trillium Footwear propelled him through the rugged terrain while his Columbia apparel kept him protected and comfortable through a wide variety of challenging conditions. Big congrats to our athletes and product teams who continue to demonstrate that Columbia truly owns the trail. Turning back to third quarter financial performance. Net sales increased 2% to $963 million, driven by growth in international markets, partially offset by a modest decline in the U.S. From a channel perspective, our DTC business grew 5% globally, including 9% growth in e-com and 4% growth in brick and mortar. Our wholesale business was relatively flat versus the prior year. This primarily reflected double-digit percent growth in Asian direct wholesale and EMEA region distributors, offset by unfavorable shipment timing from supply chain delays impacting the US and Europe direct wholesale. That said, these delays had less impact on Q3 net sales than we anticipated when we provided guidance three months ago. Wholesale delivery timing was the primary driver of upside versus our Q3 revenue guidance, followed by stronger than expected U.S. DTC performance. Third quarter gross margin declined 20 basis points to 49.8 on a reported basis. This includes a 50 basis point headwind from accommodations to our factory partners' net of tariff refunds recognized in the quarter. Excluding this impact, underlying gross margins declined expanded 30 basis points, primarily due to lower DTC freight costs. SG&A expenses declined 1%, primarily reflecting lower corporate overhead costs on disciplined expense management and some shift of planned marketing spend to the fourth quarter. This was partly offset by higher incentive compensation accruals and DTC expenses. The result was SG&A leverage of 140 basis points compared to the prior year, leading to the operating margins of 11.4%. As a reminder, our Q3 25 operating income included $29 million in one-time impairment charges. Excluding this prior year impact, our underlying operating margin expanded by 120 basis points. This overall performance resulted in reported EPS of $1.66 compared to $0.95 in the prior year. Inventory has increased 11% versus the prior year in dollar terms with units up 10%. This growth primarily reflects higher in-transit inventory from delayed fall 26 receipts. Overall inventory composition remains healthy. We continue to maintain our fortress balance sheet exiting the quarter with $230 million in cash and short-term investments and no debt. Looking at net sales by geography, U.S. net sales decreased 1%, reflecting later wholesale shipment timing, partially offset by growth in DTC. Wholesale net sales declined low single-digit percent. DTC net sales grew low single-digit percent, with brick-and-mortar up low single digits and e-com growing mid-single digits. For my review of third quarter year-over-year net sales growth in international geographies, I will reference constant currency growth rates to illustrate underlying performance in each market. EMEA net sales increased 7% overall. Europe Direct net sales increased low single-digit percent, driven by strong double-digit percent growth in DTC, despite unfavorable weather and a challenging macro environment. This was partially offset by decline in wholesale, reflecting fall 26 supply chain delays. The Europe team continues doing an incredible job of connecting with our target consumers, particularly on the trail. Our Hike Society events in Q3 remain highly popular and continue to sell out, driving energy and awareness for our brand. Key highlights in the quarter included Full funnel marketing campaign around the launches of our Peak Freak 3 hiking shoe and our Street Tech apparel line. Street Tech is an exciting new collection representing the evolution of outdoor sportswear, remixing technical outdoor function into streetwear-led styles for a youth audience. Street Tech launched recently and was sold into some of our leading partners such as J.D. Sports, Zalando, and ASOS. Early indications show high consumer engagement and strong sell-through with the target demographic. Our EMEA distributor business grew in the high 30% range, primarily reflecting Fall 26 shipment timing versus the prior year, which more heavily weighted Q2. Key growth drivers included Hike, supported by Columbia Hike Society events, sponsored in several countries. We also saw strong growth and sell-through in outdoor lifestyle, driven by fleece and the rock path, as well as in PFG. LAAP net sales increased 10%. China net sales grew low teens percent, reflecting growth across channels amid a challenging macro and competitive environment. The China team continues to do a great job of increasing its share of business with younger consumers, connecting with local communities through Columbia Hike Society and outdoor club events. A key highlight included our Hike Party 3.0, a first-of-its-kind activation for the launch of our new Railway Rambler interchange jacket. The event combined hiking, fishing, and kayaking and attracted millions of impressions on social channels with hundreds of thousands of viewers tuning in to the live stream. We were also pleased with successful campaigns featuring our peak-free hiking footwear and our China-exclusive transit apparel line. Japan net sales increased low double-digit percent with growth across channels reflecting healthy demand for fall season products. Key product drivers included women's pants, Kodos footwear, and rainwear, which was helped by unusual rainy and cool conditions during September. Korea net sales increased high teens per cent driven by strong wholesale growth reflecting a higher fall 26 order book. Key drivers in the quarter included the Alvecia Fleece, Trending Lightweight Down Styles, and Boa Footwear Styles. These were supported by elevated in-store presentations and a successful fall campaign. Leveraging the engineered for whatever global Our LAP distributor markets declined low single-digit percent, primarily reflecting earlier fall shipment timing that landed in Q2 versus the prior year. Canada net sales were relatively flat overall. This primarily reflected a decline in wholesale sales due to supply chain delays leading to later shipments versus the prior year. This was offset by growth in DTC. particularly Econ. Key growth drivers in the quarter include the Amaze collection, hiking footwear, and police. Our Canada team also continues to find unique ways to engage new, younger consumers. For example, we sponsored a hike in Q3 to the top of Mount Tremblant capped off with a yoga class on the summit. We also held an event at the Toronto International Film Festival connecting and introducing our brand and products to numerous influencers and cultural tastemakers. Looking at third quarter performance by brand, Columbia net sales increased 3%, reflecting high single digit percent growth in DTC and relatively flat wholesale sales. Turning now to our emerging brands, as a reminder, each of these brands derive a significant majority of their revenue from the U.S. marketplace. Sorrell net sales increased 2%, primarily driven by growth in wholesale on stronger Fall 26 orders. A key highlight for Sorrell in the quarter was the launch of the Ambler, a new franchise rooted in the iconic style of the caribou boot. The Ambler has seen encouraging sell-through in DTC e-com to date, supported by creative, full-fledged marketing, activations, collaborations, and influencer partnerships. Prana net sales declined 1%, primarily reflecting lower DTC e-com sales, largely due to the late arrival of Fall 26 inventory. This was partially offset by growth in wholesale and DTC brick and mortar. A key highlight was the opening earlier this month of its fourth branded store in Burlingame, California. With Fall 26 products now fully in stock, we expect Prana to rebound with a stronger Q4. Mountain Hardware net sales declined 17% year-over-year, primarily reflecting lower Fall 26 wholesale orders and closeout sales. While it was a challenging quarter overall for Mountain Hardware, a bright spot was the strong U.S. wholesale growth in full-price outerwear. This was driven by our new patent-pending stretch-down innovation, Doppelweave, which provides both flexible warmth and unrestricted movement. Additionally, Mountain Hardware's new lifestyle line Hardware Supply launched in Fall 26 in DTC Ecom and REI doors. It contributed to growth in Ecom for the quarter with strong sell-through to date. We were thrilled to announce last month that Peter Rausch has assumed a role as President of Mountain Hardware. Peter is a highly experienced and respected leader who has been with the Columbia family for nearly 20 years in different leadership roles. Most recently, Peter was the GM of the Columbia Brands North America region, leading the business through the initial phase of Accelerate Growth Strategy. Peter also previously spent several years leading our Asia Direct businesses. He brings deep knowledge of our industry and consumers, a track record of delivering business results, and a genuine passion for the outdoors. Mount Hardware continues to have tremendous growth potential, and we're confident Peter is the right leader to guide Mountain Hardware into its next chapter. We're also pleased that Troy Sycott, Mountain Hardware's president for the past five years, will remain with the brand as global vice president of sales. Troy played a pivotal role in strengthening the brand and building a strong foundation for future success. His deep industry expertise and strong retailer partnerships position him well to help drive the brand's next phase of growth and success. With Peter moving to Mountain Hardware, Columbia Brand President Joe Boyle is being supported by a strong match of leaders within our North America DPC and wholesale businesses. We now discuss our financial outlook for the fourth quarter of 26 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 related to those statements. For the fourth quarter, we anticipate sales growth of 3.5 to 7%. We expect fourth quarter EPS to be in the range of $1.85 to $2.10. This brings our full year sales outlook to a revised range of up 2 to 3% versus the prior year and brings our full year EPS guidance to a range of $4.65 to $4.90 on a reported basis. We continue to expect full-year reported gross margins of 52.1 to 52.3% on a reported basis, or up 160 to 180 basis points versus the prior year. As a reminder, this includes a roughly 180 basis point benefit from tariff refunds, net of accommodations to factory partners. We now expect that SG&A will represent 43.8 to 44% of net sales, increasing slightly year over year, but at a slower rate than the net sales growth. Based on these assumptions, we anticipate reported operating margins in the range of 8.7 to 9.1 for the year. Now I'll provide an early update on our 2027 outlook. While we intend to provide full-year 2027 guidance on our Q4 call, we're currently forecasting wholesale growth in the mid-single-digit percent range, both in the U.S. and globally, for the first half of 2027. This is supported by our wholesale spring order book, which improved from low to mid-single-digit growth since our last call. In closing, I'm highly encouraged by our Q3 results, amid dynamic and challenging market conditions. From a consumer standpoint, it's been just over 13 months since we launched our accelerated growth strategy into the marketplace. This quarter's performance provides us with further proof points and greater confidence that our strategy is gaining traction. At the same time, I'm even more excited about the opportunity that we have ahead of us and that we will continue to work to elevate the Columbia brand and improve consumers' perceptions in the U.S. There is still significant room for improvement. I'm confident that we have the strategies in place combined with our talented and energized global workforce to return our business to a path of long-term sustainable growth. That concludes my prepared remarks. Operator, can you help us with the questions?