COLUMBIA SPORTSWEAR CO Q1 FY2025 earnings call

• Addressed global trade uncertainty and outlined strategies to mitigate U.S. tariff impacts, including diversifying supply chain, rationalizing inventory, and working with vendors. - Highlighted first quarter financial performance: net sales up 1% to $778M, gross margin expansion, and EPS growth. - Discussed Columbia's new marketing platform launching in August, product innovations like the Omni-MAX Konos Featherweight shoe and Reign No Shine jacket. - Outlined performance of emerging brands: Mountain Hardware, prAna, and SOREL had varying net sales trends.

Net sales increased 1% year-over-year to $778 million. Wholesale net sales increased 2%, while direct-to-consumer was flat. Gross margin expanded 30 basis points to 50.9% and SG&A expenses increased 1%. Diluted earnings per share was $0.75, up 6% year-over-year. Columbia net sales increased 3%. Mountain Hardware net sales decreased 14%, prAna net sales decreased 10%, SOREL net sales decreased 8%. U.S. net sales decreased 1%. International performance was strong: LAAP net sales increased 14%, China net sales increased low teens percent, Japan net sales increased mid-teens percent, EMEA net sales increased 7%, Canada net sales down 2%.

• Withdrew full year 2025 outlook. - Anticipates Q2 net sales to grow 1%-5%. - $40M to $45M incremental COGS impact from tariffs in the second half, with no offsetting pricing in 2025. - Conservative planning for U.S. business due to consumer uncertainty and retailer caution in the face of trade uncertainty.

• Uncertainty in U.S. trade policy impacting product costs and consumer demand. - Potential negative impact on international economic growth and consumer demand for Columbia's products globally. - Risk of excess inventory and margin compression due to tariff-related cost increases.

Q: Afternoon. Thank you very much for taking my question and thank you Tim for all your thoughts on the tariff situation. It sounded from the prepared remarks that your fall order book did not meaningfully change if I heard correctly. I note, Tim and Jim, I know you're not guiding for today, but should we assume that wholesale for 2H should be similar to what you expected in early February, which I think was somewhere up low single-digits? And longer term -- yes, sorry. And then second part of that question is just longer term, I believe there's a lot of private label offering in the U.S. that comes from China. Are there any opportunities to take market share near-term and longer term just because of the situation?

A: Certainly. Well, again, the category 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 going to take advantage of it. And we think that there will be an opportunity for us to grow the business from a market share perspective, just based on the what you pointed out as it relates to China's shortcoming shortfall in deliveries to the U.S.

Q: 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?

A: Certainly, 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. And we see opportunities to take share from these smaller brands and also take share potentially from our customers' business. That's the primary -- why we feel confident that there's going to be an opportunity for us just based on our balance sheet. And the fact that, frankly, we have a very structured, well-established expertise in navigating tariffs globally. The U.S., well, 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.

Q: Good afternoon. This is Krista Zuber on for John. Just first on the SG&A cost saves. On the last call, you really spoke to achieving sort of the $90 million in cost saves for 2024. And you're now tracking, I believe, the 8-K suggested roughly $150 million annualized for fiscal 2025. What have you since identified in your cost structure review of potential areas that's driving this spend reduction? And ultimately, kind of what do you view with the optimum SG&A rate longer term for the company, excluding this, I don't even know if you can exclude the current period, but in a rosier picture, I guess? Thank you.

A: Yes, Krista, this is Jim. Yes. So what we described, the $150 million, keep this in mind, those are annualized cost reduction plans that we've got to encompass both what we set out and we achieved in FY 2024 so the $90 million and then the incremental amount that we intend to execute on this year that would bring the cumulative amount up to the $150 million by the time that we exit this year, by and large, is reflective of the components that we've described at 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 and 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. So -- and then in addition to that, all forms of other spend and whether that's capital spend, we're porting back on that a bit in the U.S. given the uncertainty of the trade environment that we're operating in and all other forms of discretionary spend. So we feel like we've got a good beat on achieving that $150 million 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 that we make progress towards driving leverage in our SG&A and getting -- pushing that back in the direction where it has 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 environment that we're operating in here today.