Columbia Sportswear Q1 2026 Earnings Call | EPS Of $0.65 Crushes $0.34 Forecast On EU Strength.

Thanks, Matt, and good afternoon. In the first quarter, we're pleased to have again delivered net sales and profitability exceeding our quarterly guidance, driven by early spring 2026 wholesale shipments and better than expected demand in Europe and the US as well as disciplined expense management. Our international business, which represents over 40% of our sales, continued to lead our growth, up 16% year-over-year. While our US business remained challenged this quarter and declined 10%, the decrease was largely anticipated based on a decline in our advanced spring 26 wholesale orders. This also reflected our decision last year to reduce the supply of certain winter products as a precautionary measure in response to US tariff announcements. Cleaner inventories also drove less clearance sales. That said, I'm encouraged by signs of growing momentum in the US, including an increased fall 26 order book, which we expect to enable the wholesale business to return to growth in the second half. It's increasingly clear to me that the Columbia Accelerate growth strategy is resonating with consumers. A major highlight for the Columbia brand in Q1 was the Winter Olympics where the US curling team thrilled fans at home and around the world, capturing a historic silver medal in mixed doubles, all while competing in distinctive and iconic Columbia kits. This generated billions of views around the world for one of the most watched Olympic events along with more than 25 million views of Columbia's US curling jerseys on social media. Additionally, longtime Columbia and Team USA freestyle skiing athlete Alex Ferreira reached the pinnacle of his sport, claiming the gold medal in the men's halfpipe. Alex's performance and victory further demonstrate that Columbia's products meet the highest standards of elite winter athletes, and he has continued to inspire fans and drive energy for the Columbia brand since returning home. He's been celebrating at events such as the recent US Ski and Snowboard Nationals in Aspen, Colorado. The Columbia brand also garnered outsized attention at another sporting event of major importance in Q1, crashing the tailgate party at the big game in Santa Clara with Nature Calls, the only beer that uses Bearcat in the brewing process. Columbia sent two Bear ambassadors to the game and they made their presence known, appearing four times on the stadium's jumbotron and even making it on the live TV broadcast. This impact was enhanced by influencer partnerships with sports personalities around the event. Social media content from the game itself generated over 9 million views on social media alongside hundreds of news articles. We're excited that the return to our irreverent roots also continues to see recognition from the media and outdoor community. The Engineered for Whatever campaign was recently awarded a Gold Clio Award, one of the most respected international awards in advertising, marketing, and communication for the launch of our Expedition Impossible challenge that we spoke to you about last quarter, which has generated over 10 million organic views on social media. Congrats to the team and stay tuned for more exciting things ahead. Our engineering excellence was also reinforced in Q1 with several product awards from multiple media outlets. Among many examples, a highlight included our women's Arcadia 2 jacket and our men's Watertight 2 jacket, both being featured in the New York Times Wirecutter guide for best everyday rain jackets. A testament to the durability, performance, and value we build into every design. Our newer product collections and marketing activations launched under the Accelerate growth strategy and Engineered for Whatever campaign are increasingly resonating with consumers. This is evidenced by improvements in organic search interest, direct site traffic, and customer acquisition rate for the first quarter. Another first quarter highlight for the Columbia brand is the momentum we see building in PFG performance fishing gear. As a reminder, we have a long and deep heritage with PFG. As pioneers of the fishing apparel and footwear category, as a brand known for high performance, authenticity, and fun, PFG is inspiring the next generation of anglers supported by investments in sales and marketing, including an always-on social media strategy, a refreshing ground game, and the addition of new fishing athletes and ambassadors to the PFG roster. A key product highlight in the quarter was the Bahama shirt, long known for keeping anglers cool and comfortable and also widely known as the unofficial uniform of country music superstar Luke Combs. This year we're celebrating the Bahama's 30th anniversary and expect sales of the Bahama to grow by double-digit percent for the spring 26 season. The celebration will continue beyond Q1 with additional marketing investments and collaborations with authentic artists and influencers to drive energy for this iconic style. Another PFG highlight on the footwear side is the Dry Tortuga boot, which saw sales more than triple in Q1. We believe it's the most rugged, durable, and comfortable fishing boot on the market and delivers attractive styling that's a standout in the fishing category. Looking ahead, we're excited about the potential for PFG to build on this recent momentum and take share in this growing market, particularly with younger consumers who are increasingly adopting the sport and lifestyle of fishing.

Now, I'll provide an update on our fall 26 order book, which is another indicator of the traction we're gaining with our Accelerate strategy. Since our last update, the order book continues to trend positively, reinforcing our expectations for mid-single-digit percent wholesale growth globally in the second half. While the overall growth is encouraging, the dimensions of that growth provide further signals of progress under the Accelerate strategy. As a reminder, we launched Accelerate roughly two years ago, and given product development timelines, we're now increasingly seeing the new products created under this strategy hit the market, driving growth in the order book and representing an increasing share of Columbia brand sales. In addition to US growth in the fall 26 order book, we're excited to see double-digit percent sales growth in Columbia's women's business and in footwear. At a product level, on a global basis, we're seeing outsized growth in our most premium and innovative products and platforms, including double-digit percent growth or better in our Titanium product and our Omni-Heat Arctic technology, as well as meaningfully scaling of our new MTR fleece. Our two major product launches from fall 25, the Amaze and Rock lines, will continue to scale with orders up more than double versus the prior year. We're also thrilled to have Amaze featured in triple the number of Dick's Sporting Goods locations this fall as compared to last year. Turning to the current operating environment, while we remain focused on execution and what we can control, the operating environment remains highly dynamic with major external events affecting our business since we last spoke three months ago, particularly involving tariffs in the US and the conflict in the Middle East. First, let me address the tariff situation. Following the US Supreme Court's tariff ruling in late February, the US administration implemented a 10% universal tariff under Section 122, which is set to expire in July. Our prior full-year guide, full-year outlook, which was issued prior to the court's ruling, included unmitigated incremental tariff impacts of approximately 300 basis points on our gross margin. We are now expecting a slight improvement based on the 10% universal tariffs extending through July and the assumption that the US administration will implement new tariffs at or near IEEPA tariff rates following the expiration of the Section 122 rates. We now expect an approximate 200 basis point unmitigated headwind from tariffs to our full-year gross margin outlook. As a reminder, we made the decision last year to absorb nearly all of the fall 25 impacts of incremental tariffs and not raise prices. The court's ruling also required the refund of IEEPA tariffs already paid. As of the date they were terminated, we had paid a total of approximately $80 million in IEEPA tariffs. Approximately $55 million of which has been recognized through cost of sales with the remainder residing in inventory on our balance sheet as at the end of the first quarter. We have already taken action by submitting our refund claims and we fully intend to pursue every avenue available to secure the refunds that we are owed. We have not yet recognized any benefit of refunds in our financial statements, nor have we updated our financial outlook for such refunds. Turning now to the ongoing conflict in the Middle East, which broke out in late February. First, my thoughts go out to any of our customers, employees, business partners, and their loved ones who may be directly impacted by this conflict. Their safety and security is always our first and primary concern. As far as our business is concerned, this conflict has already triggered order cancellations and forecasted order reductions for certain Middle East distributor markets. While these impacts have not meaningfully changed our full-year financial outlook to date, the prolonged nature of the conflict poses further risks. Macroeconomic and supply chain risks are among the areas that could have a more profound effect. These risks, including the potential softening of consumer demand, driven by the ongoing surge in energy prices and the resulting inflationary pressures on consumers' wallets. Increased oil prices are expected to put pressure on our product input costs with the exposure beginning in our spring 27 season. Further, the conflict's impact on global supply chains could result in late arriving inventory, increased freight and logistics costs, and potential order cancellations. Due to the high degree of uncertainty associated with the ongoing conflict, and resulting impact on the global economy and supply chains, we are not able to incorporate these risks into our updated 2026 financial outlook. Despite these external factors, I am confident in our ability to navigate these risks given our highly experienced leadership team, flexible and resilient global supply chain, fortress balance sheet, and high-quality products that provide a strong value proposition to the consumer.

Turning back to our first quarter financial performance, net sales were roughly flat year-over-year at $779 million, reflecting a balanced performance across channels with both DTC and wholesale coming in flat in the prior year. Gross margin contracted 20 basis points to 50.7%. Driven by 310 basis points in incremental unmitigated tariff costs partly offset by mitigation actions including targeted price increases. SG&A expenses increased nearly 1%, reflecting higher DTC expenses partially offset by lower enterprise technology and supply chain personnel expenses reflecting cost reductions actions which were taken last year. This overall performance resulted in diluted earnings per share above our guidance range. Inventories remain healthy and are relatively flat versus the prior year in dollar terms with units down approximately 11% year-over-year. We remain steadfast in our commitment to driving shareholder value, returning meaningful cash to shareholders, including $150 million in share repurchases during the first quarter, which resulted in the retirement of 2.5 million shares, an opportunistic acceleration of activity relative to recent periods. We continue to maintain our fortress balance sheet, exiting the quarter with $535 million in cash and short-term investments and no debt. Looking at net sales by geography, US net sales decreased 10% but performed better than planned. The decline in sales resulted from a lower spring 26 order book, constrained supply of winter season product which limited our ability to fulfill consumer demand and lower clearance sales on lean inventory. The US wholesale business was down low-teens percent. The US DTC net sales declined high-single-digit percent in the quarter. Brick and mortar was down mid-single-digit percent partially reflective of clean inventories and inclusive of the impact of less temporary clearance stores compared to last year. E-commerce was down low-teens driven by the shortage of winter product and lower conversion of consumer traffic. We're encouraged with the early spring 2026 selling led by key categories including footwear, outerwear, women's sportswear, and PFG. We continue to see momentum building through our elevated homepage, personalized and digital marketing efforts, including improvements in engagement and customer acquisition. 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 3%. China net sales increased mid-single-digit percent driven by growth in wholesale from increased spring 26 orders which benefited from earlier wholesale shipment timing. Highlights from the quarter included a successful airport campaign featuring our Titanium Dry technology and Terrex performance hiking shoe in China's top three airports during the Chinese New Year season which drove strong full-price sell-through for those product lines. We also launched the Columbia Fishing Club to deepen connections with anglers across China. Following the success we've had with similar club events and activations based on hiking, we can see the impact that activities like these are having for our brand in China, including strong year-over-year growth in new member acquisition and active purchasers, as well as market share gains with younger consumers and women. Japan net sales declined mid-single-digit percent reflecting headwinds from softer international tourism as well as later shipment of spring 26 wholesale orders. While it was a challenging start to the year, we're encouraged by recent trends with a notable improvement in business momentum following the recent launch of spring 26 product. Korea net sales increased high-single-digit percent with growth across all channels driven by the execution of marketplace initiatives. The Korea team continued to do a great job of leveraging the Engineered for Whatever campaign in Q1 and amplifying consistent high-impact brand visibility across consumer channels driving strong sell-through for key products such as the Terrex. I'm also pleased with how the team continues to elevate the marketplace and consumer experience, driving improved productivity in targeted doors. I want to take a moment to thank Jeff McPike for his strong leadership of the Korean business. This summer, Jeff will be returning to the US to assume the critical role of Vice President, North America Retail. In this role, Jeff will be responsible for leading all aspects of our North America brick-and-mortar business. I'm confident in the ability of the Korea team to continue building on the momentum established under Jeff's leadership. Our LAAP distributor markets delivered low double-digit percent growth in Q1, reflecting a healthy order book for spring 26. Growth was driven by the Columbia brand in both footwear and apparel, particularly sportswear. As our distributor teams continue to do a spectacular job strengthening our brand with active consumers in these diverse global markets, EMEA net sales increased low 20% overall. Europe direct net sales increased high-teens percent fueled by strong DTC performance and healthy wholesale sales partly reflecting earlier shipments of spring 26 orders. Results across channels reflected robust demand for winter season product aided by favorable weather early in the quarter and ample inventory availability. We're thrilled with a strong start to the year and anticipate seeing that momentum continue with a strong start to our spring season. Our EMEA distributor business increased low 30% reflecting earlier shipments of orders and a healthy order book for spring 26. Canada net sales increased low single digits in the quarter driven by growth in DTC brick and mortar reflecting increased productivity from existing stores and strong winter sell-through. Looking at the first quarter performance by brand, Columbia net sales increased 1% as international growth more than offset expected declines in the US. Turning now to our emerging brands, all of which are expected to grow in 26. As a reminder, each of these brands derive a significant majority of their revenue from the US marketplace. SOREL net sales decreased 12% due largely to reduced supply of winter season products in the US as previously discussed and lower closeout sales leading to declines across all channels and more than offsetting strong momentum in the international markets. Encouragingly, we have seen sales trends improve with the launch of spring 26 styles, including healthy growth in sneakers, a priority category that demonstrates SOREL is becoming viewed as more than just a winter brand. prAna net sales decreased 5% driven by declines in wholesale, partly offset by solid growth in inline DTC channels. This included low-teens percent growth in e-com driven partly by a shift in social media strategy that's helping to drive strong brand momentum including improvement in new customer acquisition, customer retention, revenue per customer, and robust growth with younger consumers. Mountain Hardwear sales were flat year-over-year. Weakness with winter season product amid unfavorable weather in the western US early in the quarter was eventually offset by strong momentum with spring 26 product particularly in e-commerce driven by a surge in organic search demand. US wholesale grew low-single-digit percent in the quarter led by high-quality specialty retail and digital partners with key product categories of equipment and outerwear driving the growth in Q1. Looking ahead, we're excited about the recent launch of the Dry Spell technology innovation, which sets a new standard for waterproof breathability. Additionally, Mountain Hardwear's new Lightness of Being brand campaign will emphasize innovative equipment and technical apparel for the trail, elemental protection from the sun and rain, as well as seasonal sports styles inspired by consumer insights.

We'll now discuss our financial outlook for the second quarter of 26 and for 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. While Q1 results exceeded our expectations, we've noted that part of the outperformance was timing related with some wholesale shipments occurring earlier than planned. The partial and likely temporary reprieve of Section 122 US tariffs also present some favorability to our initial assumptions as discussed. On the other hand, the impacts associated with supply chain disruptions and inflationary pressure from the ongoing conflict in the Middle East represent key risks that were not contemplated in our initial guidance and that we currently cannot forecast. Based on the information we have today, we are maintaining our full-year outlook for net sales growth in the range of 1 to 3%. We now expect gross margins of 50.3 to 50.5% or down 20 basis points to flat versus the prior year. The improved outlook reflects the termination of IEEPA rates by the Supreme Court and our assumption that rates will remain at current levels through July before reverting back to tariff rate levels approximate to the IEEPA rates subject to the uncertainty of future actions by the US administration. We continue to expect that SG&A will represent 43.6 to 44.2% of net sales, increasing slightly year-over-year, but at a slower rate than net sales growth. Based on these assumptions, we are raising our operating margin guidance to 6.7 to 7.5% for the year, leading to diluted earnings per share in the range of $3.55 to $4.00. In addition to stronger gross margins, this range also reflects the benefit of our accelerated first quarter share repurchase activity relative to our prior assumption. For the second quarter, which is our seasonally lowest revenue quarter of the year, we anticipate sales in the range of down 1% to up 1% versus the prior year. This will result in slight SG&A deleverage and when combined with our anticipated decline in gross margin result in a loss per share of 46 cents to 37 cents. In closing, while I'm not satisfied with our overall financial performance in Q1, I'm pleased with the continued strength of our international business and our team's ability to execute and start the year off on a positive note by driving upside to our initial plans. Further, I'm encouraged by the additional signs of underlying momentum in our business under the Accelerate strategy, particularly with the Columbia brand in the US, our largest market. Although the operating environment remains highly dynamic and uncertain, our fall 2026 order book and positive early indicators of our Accelerate strategy provide us with confidence that we're on the right track. Thanks again to our global workforce who are instrumental in the execution of our strategies and business success. That concludes my prepared remarks. Operator, could you help us facilitate the questions?

Certainly. Well, as it relates to the order book for fall, we were pleased, we expected it to come in at a number and we were pleased that it came in north of that number. So, we're excited about the strength there and again, we're cautioning because there's so many unknowns today about the Middle East conflict and the potential for increased tariffs beyond where we've estimated. Geographically, I think we're in a good place. We had strong reports from many of the markets including Europe was good, despite the fact that they had sort of a tough early winter in Europe as did we here in North America. So it was really quite broad. I might just point to the continued improvement and strength in our international distributor markets which despite those that are in the middle of the conflict in the Middle East are doing well. Yeah, I would just add as we look at that order book and we take our advanced orders combined with our anticipation of in-season business for the second half of this year, we do contemplate growth across all geographies led by international and growth across each of our brands. So, we're quite encouraged by the order book as it's come in.

Well, yeah. Thanks, Bob. I think as we know the administration may or may not allow us to get the returns timely. We have filed all of the documents required to get the tariffs back. But we clearly haven't contemplated those in our plans for 26. We certainly hope we'll get them back promptly. As it relates to what we will do with those funds, we have our standard allocation of capital rules that we use which will follow some of our vendors or contributors along the line to helping us sort of in a spirit of partnership and we want to make sure that those folks are well taken care of. We're in discussions. We want to make sure that we utilize it correctly, but we're going to be leaning on our historical capital allocation plans.

Well, at the end of the day, it's really the acid test is a larger order book at a bigger revenue. So, that's we're pleased to see that coming along nicely. But I guess I would say these activations that we've engaged in with our ad agency Adam & Eve which would include the Expedition Impossible flat earth challenge and the hacking of the big game in Santa Clara in January, those are primarily focused on a younger consumer and it's great to see the reaction from those people in terms of visits to our website and important connections in that way. So we're going to be leaning on the acid test to make sure that we've got growth growing across the business.

Yeah. So the Amaze product for fall of 25 was quite broadly distributed across our better customers and better areas of distribution. So we're thrilled to see the results there. I mean it was primarily a women's product. So that area has been very good and sold through at very high margins. We've also taken the learnings from Amaze and extended it into our spring 26 product line where we have a number of products which are following in the Amaze learnings including soft hand on the fabrics, stretch, and colors that are very attractive and are complimentary to younger females. We intend to for fall 26 to extend it beyond those categories of merchandise into some rain and some fleece products where we think we can make the entire Amaze family a much bigger part of our business and frankly a full franchise where we can be very successful and especially with younger consumers.

Yeah, I would think that when we talk about our brick and mortar, you have to remember that we're comparing it against a much smaller number of stores. We had many many stores that were temporary in the effort to liquidate inventories from the logistics logjam that we had. Additionally, we had a high percentage of liquidation inventory in those stores, which typically have a lower impact and a lower rate on our gross margins in those stores. And so that's I think is the primary way you're seeing the decline in sales in those numbers. We've always considered ourselves to be a wholesale primarily business and retail is used as a steam valve, escape valve for the company to liquidate inventories the right way and so that's the primary use on the outlet channels. On the full price channel, it's a newer category of retail that we use and we're still learning our way around that and we expect that digital is going to be the primary way that we expose our brands to consumers in the best possible light. So that will come we believe as the Accelerate program becomes more fully established.

I think it's a bit premature for us to provide the exact framing on that. We're in the process of finalizing costing and beginning to buy for the spring season. There's no doubt that certain of those raw materials have been already processed and ready in advance of the mill season. So, this is going to bleed in over some period of time, but there's no doubt that come the spring season, we'll begin to see that pressure and if these things don't calm over the coming months here, I think it increasingly bleeds into the fall season as well. And we also have other mitigation efforts including engineering our products in a different way and changing the componentry so we're not trapped with a single source like that.

Then the order books for the fall. Yeah, the order book for the US was, as we said, we're very pleased we came in slightly north of where we thought was going to end up. So, we're thrilled. Of course, we have these two great, in addition to a solid growth across the business, we have these two great categories of merchandise, the Amaze puff and it's this new entrance and then the Rock pant which was another great product that's doing very well for us.

Yeah, I think our retailers ended up quite clean, frankly. And so I expect that we'll be going into a season where we have lots of opportunity. The question is whether or not the consumer shows up in the kind of robust way. So that's why even though we've got indications across the business that we've got a better year looking at us than what we did, we just want to make sure that we've got the appropriate conservatism. And frankly we don't have a lot of extra inventory. Even if things get wildly better, we just don't have a lot of inventory on a speculative basis.

So, thanks operator and thanks everybody who's listening in today. I hope that you'll come away from this discussion today with a better appreciation of the progress that we're seeing and it gives us the confidence that we're on the right path. There is still much work ahead of us to fully realize our strategic vision and unlock the full potential of Columbia. Our financial foundation is solid. Our international business remains robust and we can now see our US business starting to turn the corner with the traction we're gaining under our Accelerate growth strategy. In dynamic times like these, strong companies emerge stronger and I'm confident that our strengths and competitive advantage will position us to compete and win. Look forward to seeing you all in our next quarterly review in the next few months. Thank you.