Columbia Sportswear Company Q4 FY2025 earnings call

• Fourth quarter net sales and profitability exceeded guidance driven by better-than-expected U.S. demand.
• International sales growth was strong and broad-based. Launch of Columbia brand Accelerate Growth strategy attracting younger consumers. Engineered for Whatever campaign drove robust consumer engagement. Inventories healthy. SG&A growth rate slowed. $201 million in share repurchases and $66 million in dividends returned to shareholders. Fortress balance sheet with $791 million in cash and equivalents and no debt.
• 2025 full-year net sales increased 1% to $3.4 billion, impacted by U.S. headwinds, tariffs, brand impairments, and increased marketing spend. Highlights for Columbia brand include success of Amaze Puff collection, new Amaze collection for spring '26, Rock Pant program, and OutDry Extreme technology. Emerging brands: Prana had growth, Terrell had decline, Mountain Hardware had decline but underlying trends healthy.
• 2026 financial outlook: full-year net sales growth 1% to 3%, gross margin expected to contract 70 to 50 basis points to 49.8% to 50% due to tariff impact, SG&A expected to increase but at slower rate than net sales growth, operating margin 0.2% to 6.9%, diluted earnings per share $3.20 to $3.65, including positive impact of approx $0.10 from foreign currency exchange rates. First quarter sales anticipated down 2.5% to 4%.

Fourth-quarter net sales decreased 2% year over year to $1.1 billion. Gross margin expanded 50 basis points to 51.6%. SG&A expense increased 3%. U.S. net sales decreased 8%, while international net sales showed growth. LIAP net sales increased 10%, China net sales increased low double-digit percent, Japan net sales increased to high single-digit percent, Korean net sales increased low single-digit percent, LAP distributor markets delivered high teens percent growth, EMEA net sales increased 3%, Canada net sales increased 3%. Columbia net sales decreased 1% with international growth offset by U.S. declines. Emerging brands: Terrell net sales decreased 18%, Prana net sales increased 6%, Mountain Hardware net sales decreased 5%.

• Full-year net sales outlook contemplates growth of 1% to 3%.
• Gross margin expected to contract 70 to 50 basis points to 49.8% to 50% due to incremental unmitigated tariff costs.
• SG&A expected to increase but at slower rate than net sales growth.
• Operating margin expected 0.2% to 6.9%, diluted earnings per share $3.20 to $3.65, including positive impact of approx $0.10 from foreign currency exchange rates.
• First quarter sales anticipated down 2.5% to 4%, resulting in SG&A deleverage and earnings per share $0.29 to $0.37.

• Uncertainty around consumer reaction to price increases due to tariffs.
• Retailers' cautiousness regarding elasticity of demand for more expensive products.
• Impact of weather on sales, which is a significant variable.
• Dependence on successful execution of marketing campaigns and product launches to drive growth.
• Risks associated with forward-looking statements and potential material differences from actual results as described in SEC filings.

Q: How has the business developed over December, January, into February and updated thoughts on order book?

A: Bookings strong, cautious approach due to tariff uncertainty. Great weather in first quarter, low inventory in U.S., Amaze collection well accepted, exciting projects underway.

Q: On brand advertising, is marketing spend at right level?

A: Think could spend more but in right spot now, ad spend was 5.9% in '25, 6.4% in '26, seeking to maintain strategic investment.

Q: Take on Eddie Bauer potentially closing 200 stores?

A: Supplier to Eddie Bauer in past, brand fallen on hard times, overlap not much, expect to gain some business from outdoors folks.

Q: Cadence of tariff mitigation strategy and offsetting tariffs?

A: Major mitigation factor is high single-digit price increases for spring '26 and fall '26, also some tariff cost sharing and production resourcing.

Q: Health of U.S. market and outlook?

A: Annual estimations have softer first half and stronger second half, over 80% of fall order book in hand, excited about wholesale possibilities, retail performance can improve.

Q: Breakout of fall order book by region and price increases?

A: International businesses outpacing U.S., price increases primarily in U.S., anticipate growth across all four brands.

Q: Better conversion of fall 2025 U.S. wholesale orders?

A: Combination of lower cancel rates, higher reorder rates, replenishment metrics, curtailment of inventory purchases leading to demand exceeding supply, and successful products aiding conversion.

Q: U.S. wholesale growth in second half and DTC store openings?

A: U.S. wholesale in second half expected to have low to mid-single-digit growth, DTC new store openings in U.S. more or less offset with closures.

Q: Sell-through vs sell-in for U.S. wholesale and potential upside?

A: Sell-through good, fall '26 order book up, units down slightly due to price increases, retailers cautious, weather impactful.