Columbia Sportswear Co 2026 Q3 Earnings Call

Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's third 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. 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. 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, 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. Good afternoon. For the third quarter, we are pleased to report results that exceeded our quarterly revenue and earnings guidance. Our better-than-expected revenue growth primarily reflected a portion of delayed fall 2026 wholesale orders shipping earlier than expected, coupled with improved underlying business trends in the U.S. Our operating margin also exceeded expectations. Gross margin upside was driven by higher full price realization and favorable U.S. DTC freight costs, despite elevated fuel prices. SG&A expenses were lower than planned, declining year-over-year and demonstrating healthy operating leverage on disciplined spend management. Our business outside the U.S. and Canada, which represents roughly 35% of global net sales, continues to lead our growth and maintained its strong momentum with sales up 9% versus the prior year. Our U.S. business declined 1% but would have grown if not for the supply chain-related delays impacting the timing of wholesale shipments.

We are particularly pleased with the momentum we saw in DTC e-commerce, which provides the pinnacle expression of our brands. U.S. e-com grew mid-single digit percent in the quarter, including high single-digit percent growth for the Columbia brand. This momentum accelerated through the quarter, including strong early sell-through of fall 2026 products. Importantly, it also came with reduced promotions consistent with our strategy of repositioning e-com as a more full-price channel. Our U.S. brick-and-mortar sales grew modestly. Stronger productivity more than offset continued traffic headwinds at our outlet doors amid a challenging macro environment. Overall, we are highly encouraged by our third quarter performance in the U.S. Trends for the Columbia brand are stabilizing, and we are seeing continued tangible signs of progress with the ACCELERATE growth strategy. We are seeing this progress not only in the quality of our U.S. e-com business but also the consumers we are attracting.

Over the past two quarters, growth of new consumers has accelerated, and the third quarter represented the strongest growth in new consumers since 2023. An increased share of our e-com sales can be attributed to purchases by our target dynamic, active, and professional elite consumer groups. This momentum in e-com reflects the combined progress we are making in elevating our brand, product, marketing, and marketplace through ACCELERATE, not any single factor, product, or marketing campaign. We have been building that foundation since launching our Engineered for Whatever marketing platform last August and relaunching columbia.com last September. Earlier this year, we began amplifying our mid-funnel marketing engine with more targeted marketing, increased influencer partnerships, and creative activations. Our full funnel marketing strategy is reaching our target consumers and materially improving the sell-through of our featured products.

Together, these efforts provide strong indications that the strategy is gaining traction and increases our confidence that we are on the right track. A key theme underlying our third quarter performance is the momentum we are building in fleece. We are thrilled with the sell-through we are seeing across multiple franchises. A major highlight within this category has been our Helvetia fleece, a style that first launched in 1991. This fall, we offered the Helvetia in several new bold colorways and prints, bringing new energy to an iconic legacy product, which appealed to younger targeted consumers. Additionally, to celebrate Helvetia's heritage and lean into the current '90s nostalgia, we launched our Fax-4-Fleece campaign in early September.

Featuring a 1991-era fax machine, we challenged consumers through social media channels to be among the first 91 people to send us a fax, if they could actually find a fax machine, in order to receive a free fleece. The energy and engagement created by this campaign for both the Helvetia and the Columbia brand was incredible. To our surprise, we received over 8,000 faxes, far exceeding our expectations. This energy has extended beyond the Fax-4-Fleece campaign. Our new MTR fleece, a more premium style launched this fall, has seen strong early demand. Columbia Fleece has even been positively trending on TikTok as of late. Earlier this month, we launched a special edition of our Helvetia featuring the iconic PDX Airport colored carpet. It sold out within minutes online, and consumers lined up around the block at our Portland flagship store.

Earlier this week, we launched our latest campaign with our Don't Panic Room contest. Similar to our highly successful Expedition Impossible campaign, we are challenging consumers to submit videos, this time highlighting their survival skills. The winner will receive the actual Don't Panic Room bunker. It's been modified as a shipping container, and it's filled with essentials needed to survive anything that mother nature throws at you. The Don't Panic Room includes spacious living quarters, non-perishable supplies, and most importantly, plenty of Columbia gear. We are seeing the momentum created by our innovative products and marketing translate into stronger marketplace positioning. The Amaze Puff, launched in fall 2025, continues to resonate with our target female consumers and retail partners alike. After largely selling out last fall, it's among our top sellers and biggest growth drivers for fall 2026 with an expanded variety of styles and colorways.

That product story will have prominent visibility within elevated retail spaces. For example, in Q4, the Amaze is being featured in dozens of Dick's Sporting Goods House of Sport doors and in Macy's flagship Herald Square door in New York City. Beyond the Amaze Puff, we're highly encouraged by the momentum in products primarily designed for and marketed to our younger target consumers, and especially women. Among newer products, Amaze Sweats, introduced this year, are already among our top-selling women's pants. We are seeing momentum in established and refreshed styles as well. This includes the men's ROC Pant, a legacy style that we redesigned and relaunched last year targeting the dynamic, active consumer. The Sienna Hill Jacket, a legacy women's style, also sold through exceptionally well in Q3, supported by strong mid-funnel marketing. We're also excited by the momentum we see building in PFG, or Performance Fishing Gear.

The PFG team is doing a phenomenal job of connecting with its target consumers and communities. We have renewed our focus on brand-enhancing specialty accounts and engaged in over 40 events and activations year-to-date with several more planned throughout year-end. In Q3, we continued bringing energy to the 30th anniversary of our iconic Bahama Shirt, including a collaboration with country music superstar Luke Combs that drove strong engagement for the brand. In June, we launched the Terminal Tech performance apparel line. It features our proprietary Omni-Shade and Omni-Wick innovations, providing all-day sun protection, breathability, and comfort on the water. Terminal Tech largely sold out during Q3, and it's a key driver of our growth in PFG's spring 2027 order book. Another key growth driver for PFG in Q3 and spring 2027 is the Dry Tortugas boot.

It contributed to another solid quarter of growth for Columbia Brand footwear, which was up mid-single digits percent in Q3 overall. Importantly, this growth was led by more premium styles featuring our proprietary Omni-MAX technology, such as the Peakfreak and the Tellurix families in Hike and the Konos in trail running. A major highlight for our footwear business in Q3 was the continued success of our sponsored athletes on the trail, further demonstrating that our trail running product is capable of performing at the highest levels of the sport. in August, Columbia athlete Gabriel Rueda placed 20th at the UTMB finals in Chamonix, France. The 108-mile race around Mont Blanc is considered to be the world's most prestigious and competitive trail running event.

Last month, longtime athlete Yassine Diboun claimed a spot on the podium in the Mammoth 200 in California, where he took third place in his first career 200 miler. Competing for over 60 hours, his Columbia Konos Trillium footwear propelled him through the rugged terrain while his Columbia apparel kept him protected and comfortable through a wide variety of challenging conditions. Big congrats to our athletes and product teams who continue to demonstrate that Columbia truly owns the trail. Turning back to third quarter financial performance. Net sales increased 2% to $963 million, driven by growth in international markets, partially offset by a modest decline in the U.S. From a channel perspective, our DTC business grew 5% globally, including 9% growth in e-com and 4% growth in brick and mortar. Our wholesale business was relatively flat versus the prior year.