Columbia Sportswear 2026 Q2 Earnings Call

You may begin. Good afternoon.

Thanks for joining us to discuss Columbia Sportswear Company's second quarter results. In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary and financial review presentation explaining our results. This document is also available on our investor relations website, investor.columbia.com. With me today on the call are Chairman and Chief Executive Officer, Tim Boyle, Co-Presidents Joe Boyle and Peter Bragdon, Executive Vice President and Chief Financial Officer, Jim Swanson, and Executive Vice President, Chief Administrative Officer and General Counsel, Richelle Luther. This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations, or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. 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. 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 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, we will host a Q&A period, during which we will limit each caller to two questions so we can get to everyone by the end of the hour. Now I'll turn the call over to Tim.

Thanks, Matt, and good afternoon. In the second quarter, we're pleased to have again delivered net sales growth exceeding our quarterly guidance, driven by strong growth in international markets, partly offset by continued headwinds in the U.S. Our reported earnings and profit margins include the impact of U.S. tariff refunds recognized during the quarter. Without this one-time item, our underlying performance was largely in line with our expectations, with sales beating the high end of our guidance and gross margins slightly below plan on higher promotional activity, while operating margins and loss per share landed roughly at the midpoints of our guidance range. International business, which represents over 40% of our sales, continues to lead our growth, up 9% year-over-year. While our U.S. business remained challenged this quarter and declined 4%, we saw sequential improvement despite consumer discretionary spending coming in under mounting inflationary pressure.

We saw this pressure translate into soft traffic in our U.S. DTC brick-and-mortar business during the quarter, resulting in higher discounts and lower sales than planned. Despite these headwinds, we were pleased to see positive and better-than-expected growth in our U.S. DTC e-commerce business, driven by our emerging brands. We're also encouraged by improving metrics in Columbia brand U.S. e-commerce, including new customer acquisition, which we view as indicators of progress on the ACCELERATE strategy. Additionally, we're seeing encouraging signs of the traction the Columbia brand is making with target consumers, including improvements in unaided awareness and purchase intent among professional elite and dynamic active consumers in North America. We're also realizing stronger growth rates with newer and more elevated products and collections aimed at these target consumer groups.

That said, we know it will take more time and work to bring the newness, innovation, and elevated style to our product portfolio at the level we need in order to continue shifting consumers' perceptions of the brand in the U.S. and put us back on a path of sustainable long-term growth. As a reminder, ACCELERATE is a multi-year strategy that we launched into the marketplace nearly one year ago based on key shifts about consumer, brand, product, marketplace, and marketing. While the foundational shifts of ACCELERATE are starting to show tangible signs of paying off, we have continued to refine the strategy. The Columbia brand is now focused on five strategic pillars. One, own the trail with a focus on both hike and trail run. Two, dominate warmth. Our on-mountain warmth and innovation story, including but not limited to ski and snowboard.

Three, power PFG, expanding our leadership in both fishing performance and lifestyle. Four, fuel outdoor lifestyle with product that has outdoor DNA but is designed for everyday wear with elevated style. Five, accelerate footwear, which is an opportunity embedded across each of the previous four pillars and a standalone growth priority in its own right. These five pillars are nested in the original shifts of the ACCELERATE strategy, providing a clickdown for more focused execution with our consumers. These pillars leverage our authenticity and heritage in the outdoors. The reputation for quality and durability that consumers have long known us for. They also incorporate many aspects of the playbooks that have already been driving the healthy and sustainable growth of our international businesses. We also know that today's consumers are expecting even more in terms of credibility, style, and relevance.

Performance credibility in their favorite outdoor activities, style in their everyday wear with an outdoor function and aesthetic, and relevance within the outdoor culture and communities to which they belong. In support of these five brand pillars, we're also sharpening our approach to segmenting our product construct with performance and innovation-led product designed for end-use activities, specifically hike, trail run, ski and snowboard, and fish, and with style-led product designed for consumers looking to incorporate versatile outdoor function and elevated aesthetic into their everyday life. Executing across our five brand pillar means executing an offense that encompasses all seasons, climates, and geographies where Columbia is present and where people can enjoy the outdoors with footwear and apparel that both fulfill their performance needs and make them look and feel great.

I'm excited to see these strategies continue to come to life in the marketplace over the coming seasons as we execute against these strategic pillars and the broader ACCELERATE work. I can feel the energy and excitement from our teams to focus on these strategic priorities that are both clear and aligned across the Columbia Brand organization, both here and around the world. I'm also excited to share that in addition to the positive consumer response to the Engineered for Whatever brand platform, our marketing team continues to gain recognition and accumulate awards for our Expedition Impossible campaign.

Following the Gold Clio award we highlighted last quarter, in late June, Expedition Impossible racked up an incredible 10 awards at the Cannes Lions Awards Festival, which is widely considered to be one of the most competitive and prestigious award events in the marketing and communications industry globally, with competition against some of the world's largest and most famous brands. Columbia's awards spanned across social media, public relations, brand strategy, and direct marketing, making us the single most awarded company at this year's event. Of particular note, Expedition Impossible won the Grand Prix award in brand experience and activation, and we also won the Dan Wieden Titanium Lions, the culmination of the festival and its marquee award, which has been compared to winning the Best Picture at the Oscars.

I want to congratulate our team once again for this well-deserved recognition and for the continued impact this work is creating for our brand. Since launching late last year, Expedition Impossible has garnered an incredible amount of media coverage and thousands of creative submissions from consumers or flat Earthers from around the globe. We're excited for the fun and adventure to continue through next week. On August the fourth, we will reveal who, if anyone, reached the edge of the Earth. Another major marketing highlight for Columbia Brand in Q2 was our campaign that pitted Columbia global brand ambassador Robert Irwin against 100 crocodiles. The crocs proved to be no match for Robert, thanks to the vastly superior traction, cushioning, and dryness provided by his footwear, the Columbia Tellurax Titanium Outdry trail shoe.

The campaign was both authentic to the Columbia brand and resonated with Robert's large and loyal following, attracting more than 3.7 million views and over 300,000 likes across digital platforms. The Tellurax, one of our most technical and premium footwear offerings in the hike category, sold out during the quarter and is poised to scale in future seasons on strong consumer demand. We also saw strong sell-through of additional items featured on the Rob's Look page of columbia.com during the quarter and look forward to more fun and creative moments from our partnership with Robert in the future. The success of Tellurax was part of another key ingredient this quarter for the Columbia brand, which is the momentum we're seeing in footwear, including high single-digit % growth globally in Q2.