Columbia Sportswear's Q3 2025 Earnings Call: Contradictions Emerge on Tariff Strategy, U.S. DTC Performance, and China Expansion

Date of Call: None provided

Financials Results

• Revenue: $943.0M, up 1% year-over-year
• EPS: $0.95 diluted EPS, includes $0.46 impairment impact (Prana & Mountain Hardwear); prior-year EPS not stated
• Gross Margin: 50%, down 20 basis points year-over-year

Guidance:

• Q4 net sales expected to decline 5% to 8% year-over-year
• Q4 diluted EPS expected $1.04 to $1.34
• Full-year net sales expected $3.3B to $3.4B (flat to down 1% YoY)
• Full-year diluted EPS expected $2.55 to $2.85, includes $0.46 Q3 impairment
• 1H26 wholesale forecast: flat to low-single-digit growth
• Plan to offset 2026 tariff impact via high-single-digit seasonal price increases, vendor negotiations, production resourcing and other mitigation actions

Business Commentary:

* International Market Growth: - Columbia Sportswear reported a double-digit % sales growth in its Europe direct business during Q3. - Growth was driven by effective outreach to younger and more active consumers and the expansion of the DTC business.

• U.S. Market Challenges and Brand Rejuvenation:
• U.S. net sales decreased by 4%, with U.S. DTC net sales declining by a high single-digit %.

• The decline was due to slower-than-expected sell-through of new product lines and ongoing efforts to refine online promotions and marketing investments.

• Tariff Impact and Mitigation Strategies:

• Columbia estimates the 2025 direct impact of incremental tariff rates to be approximately $35 to $40 million.

• The company plans to offset the impact through a combination of price increases, negotiations with vendors, and resourcing production.

• New Brand Platform and Marketing Strategy:

• Columbia launched its global brand platform, Engineered for Whatever, which received overwhelmingly positive early response.
• The campaign aims to revitalize the brand by leveraging humor and gritty gear testing, targeting younger and more active consumers.

Sentiment Analysis:

Overall Tone: Neutral

• Net sales increased 1% to $943M and international momentum (double-digit Europe direct growth) balanced U.S. softness; management called the Engineered for Whatever campaign response "overwhelmingly positive" while gross margin declined 20 bps to 50%. Management estimates 2025 incremental tariff impact $35–$40M (annualized ~$160M) and guided Q4 net sales down 5–8% with EPS $1.04–$1.34.

Q&A:

• Question from Bob Durbell (BTIG): On the Bugaboo re-release who gets credit and do you have more products lined up (Amaze Puff, footwear pipeline)? Any early takeaways from the Engineered for Whatever campaign?
  Response: Company confirmed product/authorship and said Amaze Puff velocity is strong with men's and additional variants planned, archival Peter Moore footwear to follow; early campaign feedback has been very positive and is re-energizing the brand.

• Question from John Kernan (EB): $160M unmitigated tariff impact next year—confidence in mitigating with high-single-digit price increases? Also timing/magnitude for SG&A recovery and what top-line growth needed to reduce the SG&A rate?
  Response: Management is confident they can mitigate tariff dollars via pricing, vendor negotiations and resourcing production; SG&A rose due to Accelerate marketing investments (marketing ~6% to ~6.5%) but profit-improvement actions are expected to enable SG&A leverage next year.

• Question from Paul Lejuez (Citigroup): Explain lower promotions—was that across DTC and wholesale and what do you assume for Q4 promos? Do spring order books include the high-single-digit price increases?
  Response: Lower promotions largely reflect lapping last year's heavy liquidation and PFAS transition; retailer margins look healthier and U.S. spring order books do include the high-single-digit price increases (dollars up, units down).

• Question from Peter McGoldrick (Stifel): Quarter-to-date U.S. Columbia performance vs prior slow-weather starts and what’s contemplated in guidance? Also, Cyrel turnaround—is it becoming a multi-year growth driver?
  Response: Plans assume a normal weather year with recent week‑to‑week demand pickup encouraging; Cyrel is being expanded to year‑round assortments with non‑winter product to drive growth alongside its winter core.

• Question from Laurent Vasilescu (Exane BNP Paribas): Why did you tick down the top end of the guide ~1% and can you unpack the U.S. magnitude for the 1H26 wholesale outlook (elasticity given high-single-digit pricing)?
  Response: Guide trimmed mainly due to Q3 U.S. DTC softness that was applied into Q4 assumptions; 1H26 expects sustained international growth partially offsetting a weaker U.S., with more detail to be provided in February.

• Question from Tom Nkik (Needham): How should we think about gross margin vs SG&A in Q4 and any other meaningful drivers beyond tariffs and pricing? What is the Q4 tariff impact?
  Response: Q4 tariff impact estimated at $20–$25M (vs $15M in Q3); gross margin likely down modestly more than Q3's 20 bps, and pricing is the principal variable for margin recovery next year.

• Question from Jonathan Komp (RW Baird): Channel inventory levels and possibility of normalization helping next fall; timeline/opportunity for margin recovery given SG&A growth outpacing revenue over recent years?
  Response: Channel inventories are in good shape with retailers anxious to merchandise; company expects margin recovery via cost reductions and profit-improvement actions and aims to realize SG&A leverage as those savings lap next year.

• Question from Mitch Kummetz (Seaport Global): U.S. DTC down—how much was fewer temporary stores vs early benefits from the new platform? And product maturation for Accelerate—what inning are you?
  Response: U.S. DTC decline was driven predominantly (>90%) by fewer temporary clearance stores; product progress is encouraging—Amaze Puff and Rock Pant performance indicates Accelerate is gaining traction.

• Question from Mauricio Serna (UBS): Clarify pricing cadence—high-single-digit for Spring 2026 and fall—do increases stack? Was the Q3 wholesale shift mostly U.S.? And Q4 SG&A growth assumptions?
  Response: Price increases are high-single-digit per season but do not stack cumulatively; ~80% of the earlier-shipped wholesale benefit was U.S.-based; Q4 SG&A expected to grow low- to mid-single digits.

Contradiction Point 1

Tariff Mitigation Strategy

It involves the company's approach to mitigating tariff impacts, which is crucial for financial planning and investor expectations.

How confident are you in offsetting the $160M tariff impact next year with high single-digit price increases? - John Kernan (EB)

2025Q3: We are confident in offsetting these tariff impacts with high single-digit price increases. - Timothy P. Boyle(CEO)

How will tariff costs evolve and what mitigation potential exists in H2 2025, and how might this trend into FY2026? - John David Kernan (TD Cowen)

2025Q2: We are absorbing the lion's share of tariff impacts this year. - Timothy P. Boyle(CEO)

Contradiction Point 2

U.S. DTC Business Performance

It highlights differing perspectives on the U.S. DTC business performance, which is a key component of the company's overall sales strategy and investor expectations.

How are temporary stores impacting U.S. DTC sales, and what early benefits is the new global platform delivering? - Mitch Kummetz (Seaport Global)

2025Q3: Ninety percent of the high single-digit decrease in U.S. DTC is due to the lack of temporary clearance stores. - Timothy P. Boyle(CEO)

What drove the first-half results compared to February guidance, particularly wholesale shipment changes? Why was the full-year revenue guidance reduced by $60 million due to U.S. wholesale and DTC weaknesses? - Laurent Andre Vasilescu (BNP Paribas)

2025Q2: Our U.S. wholesale business is experiencing some softness, particularly in the U.S. DTC business. - Jim A. Swanson(CFO)

Contradiction Point 3

Market Share Opportunities and Demand Creation

It concerns the company's strategy to take market share and drive demand creation, which are crucial for growth and competitive positioning in the market.

Can you share early feedback on the Engineered for Whatever campaign? - Bob Durbell (BTIG)

2025Q3: The Engineered for Whatever campaign was launched to revitalize the company's irreverent spirit. The campaign aims to differentiate Columbia from competitors who take themselves too seriously. - Tim Boyle(CEO)

How do you plan to increase market share and drive demand? - Peter McGoldrick (Stifel)

2025Q1: We believe that we have opportunities to grow our market share, and we can do that in a number of different ways. One, is to take market share from our competitors. - Tim Boyle(CEO)

Contradiction Point 4

Inventory and Channel Health

It relates to the company's inventory situation and channel health, which are critical for managing cash flow and sales performance.

What is the current inventory status in the channel, and will units normalize next year? - Jonathan Komp (RW Baird)

2025Q3: Inventory levels are healthy, and retailers are anxious to be merchandised. The channel does not appear to be building up inventory, and the inventory situation is considered appropriate. - Tim Boyle(CEO)

Can you clarify if inventory rationalization is measured in dollars and your expectations for ending inventory? - Paul Kearney (Barclays)

2025Q1: We would like to have a more balanced inventory profile across all channels and it's especially important that our wholesale partners have an appropriate level of inventory to effectively merchandise our products. - Jim Swanson(CFO)

Contradiction Point 5

China Market Expansion and Strategy

It involves the company's strategic approach to the China market, which is a critical region for growth and market penetration.

You mentioned entering China directly for the first time. Can you explain the decision and outline your strategy for that market? - John Kernan (Edward Jones)

2025Q3: We are entering the China market as an independent brand. We have agreed to sell directly to consumers as well as to retailers in China. - Tim Boyle(CEO)

What are China's recent market trends and opportunities, and how do they affect the long-term outlook? - Krista Zuber (TD Cowen)

2025Q1: As we continue to build our Columbia Sportwear China wholesale business, we are confident that this expansion will establish a strong platform for our ongoing growth. Our localized product design, production, and distribution are driving market share gains. - Tim Boyle(CEO)