Columbia Sportswear Q1 2025 Earnings Report

Columbia Sportswear EPS Results

• Actual EPS: $0.75
• Consensus EPS: $0.68
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.71

Columbia Sportswear Revenue Results

• Actual Revenue: $778.45 million
• Expected Revenue: $763.50 million
• Beat/Miss: Beat by +$14.95 million
• YoY Revenue Growth: +1.10%

Columbia Sportswear Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 5:00PM ET

Columbia Sportswear (NASDAQ:COLM), together with its subsidiaries, designs, develops, markets, and distributes outdoor, active, and everyday lifestyle apparel, footwear, accessories, and equipment in the United States, Latin America, the Asia Pacific, Europe, the Middle East, Africa, and Canada. The company provides apparel, accessories, and equipment for hiking, trail running, snow, fishing, hunting, mountaineering, climbing, skiing and snowboarding, trail, and outdoor activities. It offers footwear products that include lightweight hiking boot; trail running shoes; rugged cold weather boots; sandals and shoes for use in water activities; and footwear for lifestyle wear. In addition, it owned network of branded and outlet retail stores; brand-specific e-commerce sites; and concession or franchise-based arrangements with third parties at branded outlet and shop-in-shop retail locations, as well as through independently operated specialty outdoor and sporting goods stores, sporting goods chains, department store chains, internet retailers, and international distributors. The company sells its products under the Columbia, Mountain Hard Wear, SOREL, and prAna brand names. Columbia Sportswear Company was founded in 1938 and is headquartered in Portland, Oregon.

Columbia Sportswear Q1 2025 Earnings Call Transcript

Key Takeaways

• Q1 results: Net sales rose 1% to $778 million, gross margin expanded 30 basis points to 50.9%, and diluted EPS of $0.75 (+6%) beat guidance.
• Tariff uncertainty: A 10% US “universal” tariff could add $40–45 million in 2H 2025 costs, leading Columbia to accelerate inventory receipts, leverage foreign‐trade-zone distribution and work with vendors on mitigation.
• Guidance update: The company withdrew its full‐year FY 2025 outlook due to policy volatility but still expects Q2 net sales to grow 1%–5% year-over-year.
• Growth strategy: Starting in August Columbia will roll out a new global marketing platform, boost demand-creation investments to above 6% of sales and emphasize digital and social channels to differentiate the brand.
• Cost‐saving plan: Columbia is on track to exceed a $150 million three-year profit‐improvement target via supply-chain efficiencies, discretionary-spend restraints and pausing select US capital investments.

Presentation

[Operator]

Greetings. Welcome to the Columbia Sportswear First Quarter twenty twenty five 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. Please note this conference is being recorded.

[Operator]

I would now turn the conference over to your host, Andrew Burns. You may begin.

[Andrew Burns, VP - IR & Strategic at Columbia Sportswear Company]

Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's first quarter results. In addition to the earnings release, we furnished an eight ks 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, President and Chief Executive Officer, Tim Boyle Executive Vice President and Chief Financial Officer, Jim Swanson and Executive Vice President and Chief Administrative Officer and General Counsel, Peter Brackdon. This conference call will contain forward looking statements regarding Columbia's expectations, anticipations or beliefs about the future.

[Andrew Burns, VP - IR & Strategic at Columbia Sportswear Company]

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 that 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.

[Andrew Burns, VP - IR & Strategic at Columbia Sportswear Company]

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 tables included in our earnings release and the appendix of our CFO commentary and financial review. Following our prepared remarks, will host a Q and 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.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Thanks Andrew and good afternoon everyone. First quarter net sales and earnings exceeded our guidance range. Globally our wholesale business was better than planned driven by late season demand for winter products and early spring product shipments. Our business outside of North America which represents approximately 40% of annual sales remained strong. During the quarter we generated healthy growth in nearly all of our international markets with double digit percent growth in the LAAP region and high single digit percent constant currency growth in the EMEA region.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Before the April 2 tariff increases were announced, our solid first quarter performance put us on track to achieving our full year targets. I'd like to begin this call by outlining our view on global trade and our plans to mitigate the impacts associated with the recent US tariff increases. Let me start by stressing the unprecedented level of public policy uncertainty that our industry is facing in The United States. We have been in business since 1938 and have navigated successfully through many incredibly challenging environments. But our industry has never faced a period when the rules and regulations around trade with The United States are simply unknown and unknowable.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

I have never been more excited than I am today about our brands, strategies, and the overall strength of our company. We have a diversified supply chain and a team of experts with deep international trade experience. We began this year with a fortress balance sheet, healthy inventories and building momentum in the Columbia brands accelerate growth strategy. These strikes give me confidence in our ability to emerge from this period as a stronger company with an improved position in the marketplace. When the rules around trade are unknown, it's impossible for any company to predict with confidence what the cost of US products will be, what the returns on certain investments in The US will be, and ultimately how The US marketplace will be impacted overall.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Quite simply companies are unable to confidently plan and invest in their US businesses until there's clarity with respect to US trade policy. History has shown that tariffs are designed to raise the price of imported goods. In The US, well over 90% of all apparel and footwear is imported and is already heavily taxed under legacy trade laws. The additional 10% universal tariff is on top of already existing high duties. The magnitude of the additional proposed country specific tariffs has the potential to profoundly impact our industry and significantly raise prices to US consumers.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

For many consumers the affordability of apparel and footwear will increasingly become a household issue. This will be further exacerbated if higher tariff rates go into effect. To date we have taken several actions. Prior to the April 2 tariff declarations we domesticated all on hand US inventory through our own foreign trade zone distribution centers saving us millions in potential tariff costs. For products that are impacted by the reciprocal tariffs we are accelerating shipments to the extent possible in order to receive products during the ninety day tariff pause.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Because it's not practical at scale nor affordable, we do not intend to utilize air freight as a solution to accelerate inventory receipts. China remains a strategically important country for us and we intend to continue leaning into opportunities for increased product creation and manufacturing in China not only for our China direct business but for other markets around the globe. We have very little direct exposure to tariffs on products from China. A low single digit percent of our finished good products imported into The US are manufactured in China. Given the exorbitant tariffs on these goods, we will be diverting the vast majority of this product to other markets where it can be sold profitably.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

While much of our Fall twenty five product has been ordered and sold, we are rationalizing inventory buys where possible to reduce the risk of excess inventory in a challenging environment. We're also taking actions to restrain discretionary spending and where appropriate pausing capital investments in The US until we have clarity. For fall twenty five we're focused on maximizing our marketplace opportunity. We're working with our retail partners to deliver value to consumers and keep inventory and dealer margins healthy. As a result, we expect to absorb much of the incremental tariff cost in 2025 at the current incremental 10% universal rate.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

For 2026, we're contemplating strategies to offset the impact of higher US tariffs on our business. We have a team of experts exploring possibilities to mitigate the impact of increased tariffs including redesign, redevelop, resource and reprice products among other mitigation factors. Overall, we're taking a multi pronged approach to managing the business during this period of uncertainty. On the one hand, we're taking decisive actions to preserve capital and to mitigate the impact of higher US tariffs. On the other, we believe that our brands and strong financial position can enable us to gain market share.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

The Columbia brand's exceptional value will be a competitive advantage in this period of rising prices for US consumers. As part of the Columbia brand's accelerated growth strategy, we remain committed to increasing our investment in demand creation to bring our new highly differentiated marketing campaign and enhanced product assortment to life. We have a long history of irreverent, daring and downright hilarious brand advertising. Often featuring Gerrick herself, Columbia's marketing has always been distinctive from the rest of the outdoor category. In recent years that has been less present in our markets.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

With the Columbia Accelerate Growth Strategy clearly defined, this is the moment to embrace our roots and write a new chapter for our iconic brand. Starting this August we will begin to roll out our new global marketing platform that will be the Columbia brand character and voice for years to come. We will scale our new distinctive voice through a full funnel strategy with greater emphasis on a consistent year round share of voice in the market. Not only are we planning to invest more in marketing, we're also leveraging modern digital and social first strategies to be more efficient and effective with our demand creation investments. In this period of tariff turmoil we have the opportunity to set ourselves apart.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Turning to our financial outlook, Given the heightened uncertainty regarding tariff rates and the impact this will have on product costs and consumer demand, we are withdrawing our full year 2025 outlook. With that said, I'd like to provide some details on how we're approaching the balance of the year. Prior to the tariff increases we were on track to deliver on our full year financial targets. For the second quarter we anticipate net sales to grow 1% to 5% year over year. This is in line with the first half net sales outlook we provided in February.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

As of the date of this release the incremental 10% universal tariff and the higher tariffs for China are in effect. Applying these tariff rates to the product that we have yet to receive in The US for the fall twenty five season would add between 40 to 45,000,000 to the cost of sales as the underlying inventory is sold. Given our focus on delivering exceptional value to consumers and maximizing the marketplace opportunity, we do not expect to offset these higher tariff costs in 2025. Our tariff mitigation strategy will evolve in response to trade policy changes. We continue to make progress on our profit improvement plan and have identified cost savings and profit enhancing opportunities beyond the $150,000,000 3 year target we established in 2024.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We expect The US market to be challenging in the back half of the year. Consumers will be paying higher prices for many of the goods they buy and we expect this to negatively impact consumer demand. Our fall order book has not meaningfully changed since our call in February but we anticipate retailers will be cautious with their inventory intake in this uncertain environment. As a result we're planning our US business conservatively to minimize inventory risk and preserve profitability. We haven't seen a meaningful change in trends in most of our international businesses which were quite healthy in the first quarter.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

It's not possible to predict the extent to which US tariff actions will impact international economic growth and consumer demand for our products globally. I'll now quickly review first quarter financial performance. Net sales increased 1% year over year to $778,000,000. Wholesale net sales increased 2% while direct to consumer was flat. Gross margin expanded 30 basis points to 50.9% and SG and A expenses increased 1%.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

This performance resulted in diluted earnings per share of 75¢ up 6% year over year. Looking at net sales by geography, US net sales decreased 1%. US wholesale business was relatively flat. Spring twenty five shipments were up modestly. During the quarter, winter weather boosted late season fall product sales but hindered early spring season sell through.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

In addition to weather, calendar category trends and consumer uncertainty had weighed on spring season demand. US DTC net sales declined low single digit percent. US e commerce net sales were down high single digit percent. We had an excellent winter clearance sale in February but it was not enough to offset challenging market conditions. US brick and mortar net sales were up low single digit percent driven by contribution from new stores.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We exited the quarter with eight temporary clearance locations down from 28 exiting the fourth quarter. For my review of first quarter year over year net sales growth in international geographies I will reference constant currency growth rates to illustrate underlying performance in each market. LAAP net sales increased 14%. China net sales increased low teens percent led by strong e commerce growth. Through our product offerings, marketing activations and marketplace strategies we're working to create a more premium Columbia brand experience for Chinese consumers.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Building off the prior season success of our transit line we continue to expand our localized product offering designed to meet the unique needs of younger Chinese consumers and the growing outdoor market. This quarter we opened our first high street store in China on Waihi Road in Shanghai. This celebrates Columbia's deep heritage and drove consumer engagement through both online impressions and in store events. We remain committed to investing in our business in China in the years ahead. Japan net sales increased mid teens percent benefiting from strong demand for late season and winter product with growth across all channels.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Our localized product in Japan blends style, functionality and performance to create wear anywhere product. Our team in Japan has done a great job building successful franchises that resonate with consumers. Some local product highlights from this quarter include our sapland litter boots, Hawthorne waterproof footwear and backpack offerings to support the back to school season. In May we'll be opening a Columbia High Street location in the center of Hirojuku, a premier retail area in Tokyo. I'm excited to see this premium expression of the brand come to life.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Korean net sales increased low single digit percent aided by late winter weather. LAP distributor markets were up low 20s percent primarily reflecting robust spring twenty five order growth. In both our LAP and EMEA distributor markets, OmniMax footwear has continued to be an incredible success story demonstrating the power of great product, marketing activations and retail presentation. The Columbia brand is strong and our partners are investing in retail door expansion. EMEA net sales increased 7%.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Europe direct net sales increased high single digit percent with growth across all channels led by DTC stores. For spring twenty five, Europe's key marketing campaign positions Columbia as the leader in height. The team is focused on bringing young active consumers into the brand through local activations like the Columbia Heights Society as well as social content with hike influencers. Across the European marketplace, our team is doing a great job evaluating the consumer experience with in store marketing and brand managed spaces in concert with strategic partners. Our EMEA distributor business was down slightly despite strong Spring twenty five orders as the timing of shipments is more heavily weighted to the second quarter.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Canada net sales were down 2% in the quarter with sales down modestly across wholesale and DTC. Looking at first quarter performance by brand, Columbia net sales increased 3%. On the product front, we introduced our lightest shoe ever, the OmniMax Chronos Featherweight. Designed to perform on the trail and in the city with adaptive cushioning, flexible support and grippy outsole. The incredible versatility of this product is being highlighted to consumers with the new footwear marketing campaign, Every Surface is a Trail.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Marketing efforts to promote Columbia's new running shoes include title sponsorship of the View Trail Race series in Sedona, Arizona. The event draws unique runners from across the Southwest and provides our teams with the opportunity to engage with this important audience at the grassroots level. Our new Rain No Shine jacket was awarded Conde Nast Travelers best overall pick for lightweight rain shells. This jacket is designed to keep you dry in the wettest conditions and features our OutDry Extreme waterproof breathable membrane in a new matte finish. In March, Columbia partnered with KIF and Japanese clothing brand South to West eight to create a custom outdoor inspired collection.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Each piece blends Kiff and South to West eight silhouettes with Columbia's utility and outdoor functionality. Our popular PFG fishing line had several collabs and collections this spring. Our PFG artist series featured popular South Florida artist Bentley. This limited edition collection highlights original work inspired by Miami's Graphic Artists and its local fish species. We activated this collection with a Bubba Wallace in store event at Dick's Sporting Goods House of Sport in Miami.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

For the Homestead Miami NASCAR race, we wrapped bonus car in PFG graphics inspired by the collection. During the quarter, we also partnered with Columbia brand ambassadors Luke and Nicole Combs to create their own collections. We collaborated with Nicole to create a PhD specialized edition of apparel and accessories designed to take her from the boat to the beach and beyond. We worked with Luke to create a PhD special edition turkey hunting collection featuring a premium field ready features, advanced tech and his favorite Maasio Green Leaf Kennel Park. These incredibly successful collections and collaborations validate Columbia brand's authenticity and allow the brand to reach Smith and Smithers.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

I'd also like to congratulate the Columbia team for earning the top apparel and footwear brand score in Newsweek's America's Best Loyalty Program survey. Newsweek takes input from thousands of loyal program members to uncover which offerings consistently deliver the most rewarding experiences. It measures customer satisfaction, perceived value, customer support, trust and overall benefits. Columbia's greater reward program delivers a meaningful portion of our DTC sales and is an important component of our overall consumer retention strategy. Well done team.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Shifting to our emerging brands. Mountain Hardwear net sales decreased 14% in the first quarter. While full price selling was healthy across channels, we had lower closeout sales compared to elevated PFAS clearance activity last year. We remain committed to investing in the Mountain Hardwear brand, including elevating our presentation at wholesale. For spring twenty five we opened a handful of branded retail environments in the specialty outdoor channel.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Initial sell through trends have been promising at these locations and we plan to open more for fall. Brahma net sales decreased 10% in the quarter reflecting challenging e commerce performance in part due to lower finance activity compared to elevated levels in the prior year. I remain excited about Brahma's product and marketing direction. As we head into the fall season, new product collections and refreshed brand imaging will be increasingly evident to consumers. During the quarter Prada refreshed its Boulder Colorado retail location to better highlight key product franchises and elevate brand storytelling.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

The immediate lift to store performance indicates that Piranha's improved product assortment and presentation at retail is resonating with consumers. SOREL net sales decreased 8%. The team is making great progress refreshing the product line with new styles like the Olna Avenue sneaker and the Roman clog which have the potential to become important product franchises in the seasons to come. Sorel's evolution will continue into the fall season with new women's styles and expanded men's selection, high energy collabs and refreshed brand imagery. In closing, Columbia's Fortress is a strong company that has weathered many challenges.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We have an amazing portfolio of brands, decades of international trade experience and a fortress balance sheet. I'm confident we have the strength to navigate near term uncertainty and unlock significant long term growth opportunities. We remain committed to investing in our strategic priorities. Two, accelerate profitable growth, create iconic products that are differentiated, functional and innovative, drive brand engagement with increased focused demand creation investments, enhance consumer experiences by investing in capabilities to delight and retain consumers, amplify marketplace excellence that is digitally led omni channel and global and empowered talent that is driven by our core values. That concludes my prepared remarks.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We welcome your questions for the remainder of the hour. Operator, could you help us with that?

[Operator]

Certainly. 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 2 if you would like to remove your question from the queue.

[Operator]

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. Our first question comes from Laurent Vasilescu with Exane BNP Paribas. Please proceed.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Afternoon. Thank you very much for taking my question, and and thank you, Tim, for all your thoughts on the tariff situation. It it sounded from the prepared remarks that your fall order book did not meaningfully change, if I heard correctly. I know, Tim and Jim, I know you're not prepared you're not guiding for today, but should should we assume that wholesale for two h should be similar to what you expected in early February, which I think was somewhere in in up low single digits? And and long term, like Yes, sorry.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

And maybe second part of that first question is just longer term. I believe there's a lot of private label offering in The US that comes from China. Are there any opportunities to take market share near term and longer term just because of the situation? Thank you.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Certainly, well again, out of the category of headwinds. We really don't know what the consumer is going to be doing in the back half of the year. On the tailwinds, there's so much product that comes from China both from private label and from smaller brands where we believe there's an opportunity for the company to gain market share and we'll be focusing on making sure that as it's available to us we are able to take advantage of it. We think that there'll be an opportunity for us to grow the business from a market share perspective just based on what you pointed out as it relates to China's shortfall in deliveries to The US.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

And Laurent, as it relates to the ball order book, as we took that through February, March, there were no surprises in the wrap up of that order book relative to what we reported in February. And as Tim noted, we've not seen any meaningful cancellations to date.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Okay. Thank you, Tim and Jeff. And then I appreciate that. I know it's hard in this volatile environment, but I appreciate that you called out 40 to 45 I think $45,000,000 of incremental COGS based on the tariff rates as of today. Should we assume that that kind of splits between 3Q and 4Q?

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

And clearly, I think you called out that you're not offsetting that with pricing for fall order books. But could you raise pricing starting spring twenty twenty six? And if that's the case, like how much would you raise pricing globally or just in The US? Thank you very much.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Certainly, well, think our plans for spring twenty six, which are in flux right now, because we really don't know what we're likely to pay for things in fall twenty five, let alone spring twenty six. But again, we will be surgically viewing the business and when the opportunities arise for us to either take market share by keeping existing pricing or offering some incentives, we'll be doing that on an almost ad hoc basis as it begins, as we begin to take orders for the season.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, then launched, Laurent as it relates to the 40 to 45,000,000 in tariffs. By and large, we would expect that to be in the second half of the year. We don't ship a lot of the, or very little of the fall merchandise here in the second quarter, there may be a little bit that goes out. And then that 40,000,000 to $45,000,000 that's incurred or realized through our P and L, the underlying inventory sold. So, there's the potential that you'd see some of that cost actually out into '26 to the degree we haven't shipped it or sold it through our own D2C channels at the end of the year.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Very, very helpful. Last housekeeping question here, just the midpoint of guidance for 2Q revs. Appreciate that you're giving that to us tonight. But the 3%, any color around how we should think about that by the key markets that you report? And if you're seeing anything in terms of near term sentiment in China, because you've done very well over the last several quarters in China.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

So just love to get some color there. Thank you very much.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, I mean, from an overall standpoint, the guidance range that we provided of one to five, the 5% would essentially align with the prior outlook that we provided back in February. And keep in mind that from a wholesale standpoint, we had an order book for the spring season that we last reported on that contemplated a mid single digit rate of growth. So, this is generally consistent with that barring anything significant changing from a wholesale customer standpoint, which we've not seen to date. Aside from that, Laurent, we're assuming that the trends that we've more recently seen in the business, which include our international businesses continue to be healthy. So our outlook would contemplate that continuing to be the case across Europe and China, and then continued some slowness that we've seen in our US direct to consumer business.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Okay, thank you very much and best of luck.

[Operator]

The next question comes from Peter McGoldrick with Stifel. Please proceed.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

Hi. Thanks for taking our question. You pointed to opportunity to take market share in the current environment. And I was hoping you could elaborate on those comments if that's a global consideration and given the level of consumer uncertainty, could you share your internal expectations for market performance in the various regions you participate?

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Certainly. Well, let me answer the first one. As it relates to market share, many of the companies that we compete with and as Laurent mentioned, many of our customers that have private label businesses that are centered in China will have a difficult time importing products at all, maybe paying very high prices for it. So we see opportunities to take share from those smaller brands and also take share potentially from our customers' private label business. That's the primary why we feel confident that there's going to be an opportunity for just based on our balance sheet and the fact that frankly we have a very structured, well established expertise in navigating tariffs globally.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Because The US, while it's a crazy time right now for tariffs, we navigate tariffs around the world and are quite good at. So the opportunities for us to be successful when others are not should be quite good.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

Thank you for that. And then I was hoping you could talk about your plans to support demand creation. Previous guidance had considered a step up to 6.5% of sales. I recognize that you've withdrawn guidance, but I was hoping you could talk about your level of commitment to growing demand creation and relative to the prior outlook.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, we intend to continue to spend at a higher level than we have in the past on projects and campaigns starting really in August of this year. And we think that it's going to be quite good for the company for a couple of reasons. First of all, we're going to spend more. Second of all, we're going to be more efficient with our spend and changing strategically how we spend the money. And lastly, campaign's creative is very different.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We'll have an opportunity to show you that at the August when you'll see much more of the company's marketing assets being distributed. But I think that those three things will give us a very big leg up, especially in a time when competitors will not be able to be investing as heavily as we will.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

And Peter, while we're not providing a full year outlook, you'll note in the CFO commentary that we've published, if you look at the SG and A analysis that's in there, our marketing spend as a percentage of sales for the first quarter was 6.4%. So that's somewhat indicative of that intent that we've got in terms of putting more dollars behind marketing and the Accelerate strategy.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

I appreciate the perspective and I look forward to the advertising campaign.

[Operator]

Next question comes from John Kernan with TD Cowen. Please proceed, John.

[Krista Zuber, Director at Cowen and Company]

Good afternoon. This is Krista Zuber on for John. Thank you for taking our questions. Just first on the SG and A cost saves. On the last call, you really spoke to achieving sort of the $90,000,000 in cost saves for 2024.

[Krista Zuber, Director at Cowen and Company]

And you're now tracking, I believe, eight ks suggested roughly $150,000,000 annualized for fiscal 'twenty five. What have you since identified in your cost structure review as potential areas that's driving this spend reduction? Ultimately, what do you view as the optimum SG and A rate longer term for the company, excluding this I don't even know if you can exclude this current period, but in a rosier picture, guess. Thank you.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, Chris, this is Jim. Yeah, so what described, 150,000,000, keep this in mind, those are annualized cost reduction plans that we've got that encompass both what we set out and we achieved in FY24, so the $90,000,000 and then the incremental amount that we intend to execute on this year that would bring the cumulative amount up to the 150,000,000 by the time that we exit this year. By and large, it's reflective of the components that we've described up to this point in terms of operational cost savings. We've described some work that's going on within our supply chain that's encompassed distribution costs, whether that be third party logistics and distribution savings that we achieved in the last year, including labor optimization. There's automation efforts that are ongoing. We did execute a reduction in force last year. Certainly that's on the table in terms of factors that we need to be considering for the balance of this year as well. And then in addition to that, all forms of other spend, and whether that's capital spend as we're pulling back on that a bit in The US, given the uncertainty of the trade environment that we're operating in, and all other forms of discretionary spend.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

So we feel like we've got a good beat on achieving that $150,000,000 as we exit this year. To your question regarding the longer term goal here, without getting down to the specifics on this, certainly our expectation would be we make progress towards driving leverage in our SG and A and pushing that back in the direction where it had historically been, as well as in the case of our operating margin and seeing our operating margins return into the double digit and beyond zone. But it's going to take time given the uncertainty of the environments that we're operating in here today.

[Krista Zuber, Director at Cowen and Company]

Got it. Thank you for that. And just one, my second question just on China. The turnaround in your business there has been very encouraging and what you're seeing just like to get some insight into what you're seeing there. You were up low teens, I believe constant currency in Q1.

[Krista Zuber, Director at Cowen and Company]

Can you talk more to the recent trends, the positive outdoor category trends, the elevation that you've really been able to achieve in that market, and kind of how that's shaping your view more or less for the balance of this year and the longer term opportunity in the market? Thank you.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, so I mean, it's good to remember that we are quite small in China, but compared to many of our competitors. So the opportunity for us to grow rapidly is quite is there. The expansion opportunities are good as well because there's an established retail operation there with not only our own stores but stores that our customers would operate for all intents and purposes under a franchise agreement. So outdoor is strong there. The brand is strong and we're seeing lots of opportunity for expansion.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

We're also going to be continuing to invest there in localized design and production, which we believe can give us a leg up against many of our competitors.

[Krista Zuber, Director at Cowen and Company]

Thank you.

[Operator]

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

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yes. Thanks for taking my questions. Tim, as you think about the consumer or maybe some of your wholesale partners, have you seen any preemptive buying, any pullback in the spending? And then also maybe just from a top well, as far as sales and margins, what is your kind of FX outlook? How has that changed given what we've seen with the dollar over the last, since you guys last reported?

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, take the FX portion of that Mitch. We're not providing a full year outlook here today. In terms of what's embedded in Q2 outlook that we've provided, I think it's on the conservative end of the range, knowing that the dollars weakened a fair amount. So that should be a bit more of a benefit relative to what we anticipated coming into the year. But speaking to it any further than that on the full year, I'd back my comments at this stage.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, and I think for us even though we're a month or so into this tariff, I don't even know how to describe it, tariff world. Our customers as it relates to the retail customers are looking to us for guidance on much of this stuff. And unfortunately we're not really able to do much other than tell them the company's strong, you can rely on us from a balance sheet perspective, that we will be stronger than many of your vendors and we'll provide as much information as we can. I was in touch with virtually every one of our major customers at a high level to tell them here's our approach. We don't know much but as we know we will be filling you guys in and we think there's an opportunity to take market share from weaker competitors.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

The consumer I think clearly is spooked on what's going on and we've seen that across all different kinds of commodities. Again, it's just too difficult to be speculative.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

As a follow-up, you guys mentioned that there hasn't been any change to the order book. But Tim, I think you said that you expect retailers to be cautious. Are you going to be building to the order book? Are you going to be pairing that back assuming that there are some cancellations might hit? And how are you thinking about, you know, your willingness to hold inventory?

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Are you are you more likely to kind of pack and hold knowing that, you know, stuff that you have in inventory now you you you bought it maybe at a lower cost than you might down the road? Is there more willingness to kind of hold on to things especially if it's kind of like basic kind of carryover product?

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, so we sold the bulk of this inventory November of last year. We bought it but we had not received it all. So depending on when the merchandise actually shows up, think we've got something like half of our products. We've seen some of the new tariffs but basically half of our inventories in The US is here in house. And we're going to continue to receive inventory.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Hopefully it'll be at some reasonable tariff charge. Between a potential shortage from other vendors and our strong balance sheet, we believe we can be a provider of product as it's required to our retail partners and to consumers through our own DTC business beyond where others will be able to provide that.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, mentioned maybe just a couple of added remarks related to that. So for the fall twenty five season we've purchased a lion's share of our inventory, it's in the 80 five-ninety plus percent range of fall twenty five that's been bought. So certainly you know these final buys that we're making as we finish out season, we're rationalizing those inventory purchases relative to you know any given number of scenarios from demand standpoint. And then with regard to holding inventory, know we've had a strong preference in the past to ensure that we do that in the least disruptive way and profitable way of leveraging the fleet of outlet stores that we have. So you know that'll be top of mind as we get to that point and we need to make those decisions in the latter part of the year.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, I might also comment We have a global business and so to the extent we can move product around the world to take advantage of markets that don't have the crazy tariff implications, we'll do that.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Great. Thanks again.

[Operator]

Next question is from Paul Lejuez with Citigroup. Paul, please proceed.

[Paul Lejuez, Managing Director at Citi]

Hey, thanks guys. On that 40,000,000 to $45,000,000 of tariff pressure that you talked about in the second half, I'm curious if that already considers the sharing of some of the burden by your vendors or if that's an opportunity to work that 40,000,000 to $45,000,000 lower? And then second, can you just remind us of your top three customers and what percent of sales they represent within the wholesale business? Thanks.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, so as it relates to our vendors, we have a well established grouping of large vendors to the company. We consider them to be partners. We work together to the extent possible to mitigate as much of this additional tariff costs as we can. It may not be through discounts, may be through some other help that they may give us on where we're shipping merchandise shipping merchandise over a longer period of time etc. So we consider the fact that we have these strong relationships with our vendors to be another example of high quality company with a great balance sheet that can weather storms like this.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

And as it relates to our customers, we don't really provide top customers. We do not have a 10% customer. We have customers all over the globe. We think we're quite well set to weather this storm.

[Paul Lejuez, Managing Director at Citi]

Just typically the 40,000,000 to $45,000,000 that already includes some vendor sharing that in a tax burden or no?

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

That's the direct tariff cost to us on the universal 10% incremental tariff for the fall twenty five season.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

In The USA. We don't really know what is if it goes to 175% on every country in the world, it may be a different number.

[Paul Lejuez, Managing Director at Citi]

And do you think that you'll have some success with getting the vendors to share in some of that burden?

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Well, again, these are partners of ours. We will work together to do what we can, whether that's moving an order to a different time, moving an order to a different ship to location in a country that's not The USA, discount. There's all these myriad ways we can work together to help together move through this stormy period.

[Paul Lejuez, Managing Director at Citi]

Got it. Thank you. Good luck.

[Operator]

Next question is from Jonathan Komp with RW Baird. Jonathan, please proceed.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Yes. Hi, good afternoon. If I could just follow-up to ask further on the China, The U. S. Sourcing, it sounds like you're shifting a lot of that product.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

So essentially, don't have exposure on that piece, China, The U. S. This year. Can just ask, will that also be the case going forward? Or is that just unique to the fall period?

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Then any risk from that that you see in terms of suboptimal assortments or any potential shortages here in The US based on some of those shifts?

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

No, the company for years has been moving from China for a number of different reasons, not the least of which China has for a while been the least competitive sourcing operation for products that we sell. So we were able to reduce the company's intake into The US from China to a very low single digit. We were able to further reduce that this year because we moved product around the globe so that we would keep the orders in our factories there and still provide profitable sales around the world. I don't see any impact on the company's ability to provide high quality products across our offerings from areas outside of China but we will continue to produce products in China for local China production and for consumption around the world where China's products are considered to be not heavy with tariffs.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Okay, great. That's really helpful. And then one more follow-up just on the unmitigated exposure, the 40,000,000 to $45,000,000 this year. It looks like effectively that's more than a 300 basis point hit in the second half to your U. S.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Gross margin structure. Are there any other potential offsets you're contemplating for this year? And is that sort of a one time step down? Or are you thinking about looking to recapture some of that next year depending on all the scenarios? Just trying to get to how you're thinking about that margin impact this year.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Right, well, that's based on an assumption that the president does not increase the size of the current 10% additional tariff. So that's our assumption. That's how we're modeling the business. Who knows, the guy may wake up tomorrow and the whole world has changed.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

John, we believe that to be a one time, we're absorbing the lion's share of that 40,000,000 to $45,000,000 this year. Our belief and expectation is we plan for next year. It's premature in terms of all the steps that Tim touched on all the different levers that we have available to us. And if we begin that planning for next year, certainly we would look to make various decisions to absorb and recover any incremental tariffs that were that's incurring.

[Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co]

Okay, great. Best of luck. Thanks again.

[Operator]

Up next is Paul Kearney with Barclays. Please proceed.

[Paul Kearney, VP - Equity Research at Barclays]

Hey, good afternoon. Thanks for taking my question. You mentioned that you're pulling in inventory during the pause period and rationalizing buys for the back half. Can you clarify if that is on a dollar basis? And can you talk about your expectations on the cadence of ending inventory for Q2 through Q4? And any detail on region would be helpful.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Well, as it relates to rationalizing inventory, that is looking at that both in dollars and in units. And of course we're not providing specifics on that. And as it relates to pulling in inventory, certainly what we're seeking to achieve there is knowing that July 9 and the risk of these incremental tariffs then becoming in place, we want to pull forward as much as we can from a production standpoint, being able to receive that inventory and pay the duties at the current known universal 10% incremental rate. So to the degree we can work closely with our factory partners, with our logistic partners, we're doing everything we can to pull that inventory in from that vantage point.

[Paul Kearney, VP - Equity Research at Barclays]

Great, thank you. And then with regards to pricing, obviously you're making the decision to not take pricing up for the fall. Are you seeing other non private label competitors take up prices or you anticipate that they will in the fall and is that potentially an opportunity to take further share? Thanks.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, I mean again I think we're one of the first reporting companies but we know that many small competitors that we deal with and also many of our customers' private label products emanate from China. Those products we believe will be, if they're successfully imported in United States, which is a question, we believe we can easily compete with them and our expectation is that we'll be taking share from that.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah there's very little known today in terms of what either our competitors or customers private label what everybody's doing with their own pricing so TBD.

[Paul Kearney, VP - Equity Research at Barclays]

All right thank you very much best of luck.

[Operator]

Thank you. Next, we have Alex Perry with Bank of America. Please proceed, Alex.

[Alexander Perry, Director, Equity Research at Bank of America]

Hi. Thanks for taking my questions here. I guess, just to ask sort of in a different way, the decision to pull guidance, was that more of a factor of the uncertainty in the demand environment or cost environment? Like, you seeing volatile trends in DTC in particular that make it hard to predict? It sounds like the wholesale business is relatively stable and with a similar view as the last time you got But what's sort of going on in the demand environment that makes it hard to predict? Thanks.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Well, would just say this, Alex. What we're indicating to you, and we've provided a Q2 outlook that by and large is maintaining the prior first half outlook that we would have. Pulling the full year guidance, nobody knows. There's so many uncertainties with regard to how the consumer and the retailer behaves and acts in the second half of the year. For that reason, we've made the decision to withdraw the guidance.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Not to mention the numerous variables when you think about it from an overarching earnings standpoint. But we're not seeing anything today in the trend of our US business, either from a wholesale or D2C business perspective, that would suggest a downtrend, if you will.

[Alexander Perry, Director, Equity Research at Bank of America]

Yeah, that's really helpful. And then can you just sort of remind us of sourcing penetration by country and where you have the most exposure as it stands today, just as we're sort of thinking about reciprocal tariffs? Obviously, there's the ability to shift, but as it stands today, where do you have the most exposure?

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, I just recommend, Alex, you look to our 10 ks. It's pretty, we just filed that a month or two ago, and it's got all of the relevant data points that are in there. We've provided quite a bit of clarity here on the call as it relates to our China exposure specifically.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Yeah, Alex, I would just point out that we believe we're among the most distributed rail companies. So we have resourcing from many, many countries and we're quite adept at moving production around the world to take advantage of tariffs and specialties in certain markets.

[Alexander Perry, Director, Equity Research at Bank of America]

Perfect, really helpful. Best of luck going forward.

[Operator]

Next question comes from Mauricio Serno with UBS. Please proceed.

[Mauricio Serna, Executive Director at UBS Group]

Great. Good afternoon. Thanks for taking my question. I joined a little bit late, so pardon me if I asked something that you may have already answered. But first on the guidance for Q2, I know it implies like the first half is you're keeping the guidance stable.

[Mauricio Serna, Executive Director at UBS Group]

Just want to understand like for Q1, does that mean there was like some type of pull forward that happened there? And then on gross margin on Q1, I see it was up 30 basis points. Was that like in line with your expectations? Was there anything that surprised you to the upside or downside? Thank you.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, as it relates to the guidance for the second quarter, so first half we've more or less held. We've widened the range out, just given the risks associated with what's going on from a trading standpoint. There was our Q1 beat with a combination of things. There some pull forward that we delivered slightly earlier on our spring twenty five wholesale orders relative to what was in our outlook at the time. And then to an extent, we also had some favorable cold weather in many geographies that helped aid in the top line.

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

So, that gives you a bit of overview on that. And as it relates to the Q1 gross margin, it was only up 30 basis points for the quarter. That's more or less in line with where we thought it would come in, maybe slightly under. There's no significant driver one way or the other, and there's several items that have contributed to the improvements there. So nothing significant to call out.

[Mauricio Serna, Executive Director at UBS Group]

Got it. And then just a quick follow-up. Just thinking about the guidance that you provided for the first half, only talked about like the sales outlook. Just wondering, given that the tariff looks like a second half impact, why not give a full EPS guide for the first half? And with that in mind, mean, should it still be fair to see like a better gross margin expansion in Q2 relative to Q1, just given the much easier compares that you have?

[Jim Swanson, EVP & CFO at Columbia Sportswear Company]

Yeah, I don't want to get into a ton of details on that, but suffice to say that the reason we haven't given first half or Q2 earnings is there's far too many variables once you start getting down into the P and L. And whether that's tariff costs that you incur, there's a lot of unknowns with regard to the health of the retailer, the deeper we get in into this, and whether there's downstream bad debt risk that we need to book provisions on. Think there's just countless variables and outlook for any period of time right now that I would caution you know that's really we haven't done it and we'll you know we'll provide updates along the way to the group we can, but there's just too much risk out there right now and too many uncertainties.

[Mauricio Serna, Executive Director at UBS Group]

Makes sense, understood. And then very lastly, you said like $85,000,000 impact to cost on second half. So is it fair to assume that first half of next year that number should just be lower because by that point you're implementing some mitigation strategies, right? Just want to talk to.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Well we've been very focused on July I think it is the pause lapses but we have no idea what July is going be or July 11 for that matter. It's very difficult to be projecting large global business results.

[Mauricio Serna, Executive Director at UBS Group]

Understood. Thank you so much. And best of luck.

[Operator]

We have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

[Tim Boyle, Chairman, President and CEO at Columbia Sportswear Company]

Thank you. Well, listen, thank you for joining us today. We faced many challenges during the company's eighty seven year history and every time we persevered and become stronger. I'm confident we can weather this storm and emerge with an improved position in the marketplace. So we look forward to talking to you next quarter.

[Operator]

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

Participants

Executives

• Andrew Burns, VP - IR & Strategic
• Tim Boyle, Chairman, President and CEO
• Jim Swanson, EVP & CFO

Analysts

• Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas
• Peter McGoldrick, Equity Research Associate at Stifel Financial
• Krista Zuber, Director at Cowen and Company
• Mitch Kummetz, Senior Analyst at Seaport Research Partners
• Paul Lejuez, Managing Director at Citi
• Jonathan Komp, Senior Research Analyst at Robert W. Baird & Co
• Paul Kearney, VP - Equity Research at Barclays
• Alexander Perry, Director, Equity Research at Bank of America
• Mauricio Serna, Executive Director at UBS Group