Q3 2021 Columbia Sportswear Co Earnings Call
[music].
Greetings and welcome to Columbia Sportswear third quarter 2021 financial results Conference call at this time all participants.
Are in a listen only mode. A question and answer session will follow today's presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Andrew Burns.
This president of Investor Relations and strategic planning. Thank you you may begin.
Good afternoon, and thanks for joining us to discuss Columbia sportswear company's third quarter results and.
In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary and financial review presentation, explaining our results. These documents are also available on our Investor Relations website investors Dot Columbia Dot com.
With me today on the call are chairman, President and Chief Executive Officer, Tim Boyle, Executive Vice President and Chief Financial Officer, Jim Swanson, and Executive Vice President and Chief administrative Officer, Peter Bragdon.
This conference call will contain forward looking statements regarding columbia's expectations, anticipations or beliefs about the future.
These statements are expressing 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.
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 and we do not undertake any duty to update any of the forward looking statements. After the date of this conference call to conform to forward looking statements to actual results or changes in our expectations I'd.
I'd also like to point out that during the call me, we may reference certain non-GAAP financial measures, including constant currency net sales for more 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 third quarter 2021 earnings release, and the appendix of our CFO commentary financial review following our prepared remarks, we will host a Q&A period during which we will limit each card two questions. So we can get to everyone by the end of the hour now I'll turn the call over to Tim.
Thanks, Andrew and good afternoon, everyone I hope, everyone is well and vaccinated.
Our third quarter results reflect the unique operating environment in which we find ourselves.
Characterized by high consumer demand for our products and an unprecedented supply chain disruption.
During the quarter delayed inventory receipts impacted U S wholesale shipments and resulted in a net sales shortfall compared to our internal plan.
I would emphasize that our net sales shortfall was not a function of consumer demand, which remains robust.
Early fall 2021 sell through at our North American wholesale customers stores as well as our own DTC business has been very encouraging.
The retail environment is healthy with low promotional activity contributing to higher than planned gross margin.
When combined with lower than planned SG&A spend we were able to exceed our operating income forecast.
Our fortress balance sheet is intact with cash and short term investments of over 600 million and no bank borrowings.
We had several brand highlights during the quarter.
Columbia introduced omni heat infinity, the largest innovation launch in our company's history.
This next evolution of the thermal reflective warmth further strengthens our portfolio of differentiated innovations, while providing exceptional once and value to customers.
Sorel bold collection of sneakers, sandals, and wedges drove meaningful growth on Sorel dot com with ecommerce sales more than doubling compared to third quarter 2019 pre pandemic levels.
Mountain hardware is energized fall 'twenty, one product line fueled outstanding growth, including expanded distribution at new retail doors.
And prana delivered healthy growth led by broad based recovery in its wholesale business.
As we enter the important holiday sales season, we are acutely focused on navigating supply chain disruptions and maximizing sales potential.
Our revised net sales outlook reflects the reality that we will not be able to entirely offset this headwind.
Given our improved outlook for gross margin and updated operating expense assumptions, we're raising our diluted earnings per share outlook to $4 55 to $4.80.
As we finished the year and look forward to 2022, I'm excited about our innovative product pipeline and the momentum we see across the brand portfolio.
Just on this strength, we believe we can achieve mid teens or better net sales growth in 2022 on top of the low 20% growth we anticipate in 'twenty one.
I will discuss our initial 2022 commentary in more detail later in the call.
Now I'll quickly review, our third quarter, 'twenty, one financial performance and reference year over year comparisons versus third quarter 2020.
Third quarter net sales increased 15%, reflecting DTC growth as well as higher fall 'twenty, one wholesale shipments as we anniversary prior year pandemic disruptions.
By channel net sales growth was driven by 25% growth in our DTC business and 10% growth in our wholesale business.
Within the DTC business brick and mortar net sales grew 36% in line with our expectations store traffic levels improved significantly compared to third quarter 2020, but remain below pre pandemic levels.
DTC E Commerce net sales grew 6% and represented 11% of the total sales mix.
We are encouraged to see sales in this channel remain substantially above 2019 levels as consumers return to in store shopping.
Gross margin expanded 180 basis points to 57% of net sales and SG&A expenses grew 7% year over year.
The combination of gross margin expansion and operating leverage resulted in 440 basis points of operating margin improvement compared to third quarter 2020.
Diluted earnings per share increased 62% to $1 52.
I will now review third quarter year over year net sales growth performance by region and brand for this review of our reference constant currency net sales growth rates unless otherwise noted.
U S net sales increased 15%, reflecting mid 30% DTC growth and low single digit percent wholesale growth.
Wholesale shipments were below our internal plan and would have been higher absent supply chain disruptions.
We're encouraged by our early fall 'twenty, one sell throughs, which is up year over year, despite lower retail inventory levels.
The growth in our U S DTC brick and mortar business reflects year over year improvements in store traffic levels as well as lower promotional activity that resulted in higher average order values.
Our U S. DTC E Commerce business also benefited from significantly less promotional activity compared to the prior year.
Turning to international sales performance.
During the third quarter sales trends continue to be influenced by each region's COVID-19 restrictions.
Vaccination rates and consumers' willingness to shop in store.
Canada, and Europe experienced post lockdown recoveries, while other regions, such as China, and Japan were impacted by government mandated COVID-19 restrictions during the quarter.
Latin America Asia Pacific region, or AAP third quarter net sales increased 10%.
In China net sales were up mid teens percent, primarily reflecting higher fall 'twenty, one wholesale shipments, partially offset by lower DTC sales in.
In the quarter DTC performance was impacted by lower store traffic, resulting from COVID-19 related government restrictions as well as isolated flooding and power outages across several provinces.
We remain focused on driving growth and enhancing the consumer experience in this important market.
For fall 'twenty, one we're investing in demand creation, including a digital first full funnel marketing campaign, highlighting omni heat infinity.
Korea net sales increased mid teens percent, primarily reflecting higher fall 'twenty, one wholesale shipments and to a lesser extent DTC growth in Japan net sales decreased low single digit percent as demand was impacted by the state of emergency declaration that was in place for.
Our mid July through quarter end.
Year to date, there have been over 200 days with some level of state of emergency restrictions in place in Japan compared to approximately 50 days in 2020.
<unk> distributor markets were up low, 20% driven by higher fall 'twenty, one wholesale order shipments.
Europe Middle East Africa region, or EMEA third quarter, net sales increased 9% driven by low double digit growth in our Europe direct business and mid single digit growth in our EMEA distributor business.
Growth was driven by higher fall 'twenty, one wholesale order shipments as well as improved DTC performance in our Europe direct business as lockdown restrictions eased.
Canada net sales increased 18% in the third quarter, primarily driven by higher fall 'twenty, one wholesale shipments and improving DTC performance as this market reopened.
Looking at performance by brand Columbia brand net sales increased 15% in the third quarter as DTC brick and mortar growth was constrained by supply chain disruptions that impacted wholesale net sales performance.
Across all channels sell through of Columbia's fall 'twenty, one product line has been encouraging top performing categories include fleece sportswear and rainwear with continued strength in PFG products.
In October we officially kicked off our global marketing campaign to support the launch of Omnia Infinity, our new highly differentiated addition to the omni heat family.
This full funnel campaign spans in store traditional and digital social outlets and we'll be engaging customers around the world throughout the season.
In fact later this winter omni heat Infinity will enter new territory as the first Columbia product to reach the Moon.
Stay tuned for more details on that front.
Our omni heat Infinity launch has been covered extensively by media outlets, including men's journal gear patrol, good housekeeping women's health and outside magazine among others.
Buying media coverage of the launch has surpassed 340 million impressions and counting.
Omni heat Infinity was also featured on the late late show as host James Corden and his staff went head to head with our newest brand ambassadors from the USA curling team.
In September we announced a multiyear sponsorship with USA curling Columbia will be working closely with the USA currently national team program, including the mens womens junior and wheelchair team.
Currently is one of the most watched sports during the Winter Olympics.
Columbia uniforms, and our logo will be prominently displayed as the U S team defends its gold metal over multiple weeks of competition.
I can't think of a better way to showcase our brand and our global support that takes place completely on ice.
In addition to the on the Infinity launch we had several unique brand stories to highlight across our digital platforms during the quarter.
We featured brand ambassador bubble Wallace and renowned national geographic photographer babic to fresh sheet as they captured the brewery, Utah Desert Nite Sky.
Together, they journey to Utah's remote gooseberry Mesa to take Bubbas passion for outdoor photography to the next level, while relying on their Columbia gear to keep them warm.
Earlier. This month, we also got a chance to celebrate Bubba is historic first Cup series win at Talladega Superspeedway Congratulations Bubba.
We also featured country musician in Colombia Ambassador Luke Combs as he found adventure on the wide open spaces of Montana with his wife and friends led by our Columbia Sportswear adventure grew they explored some of big Sky countries hidden gems.
During a series of fishing trapshooting and quad writing excursions.
On the product partnership front were continuing our successful collaboration with Disney and Lucasfilm with another Star Wars collection for fall 'twenty one.
This new special edition collection is inspired by the galaxies most notorious bounty Hunter Bob of Fat and will launch ahead of us highly anticipated new Disney plus series. This December.
Before discussing our emerging brands I'd like to update you on some recent Columbia brand management changes, we're pleased to announce that responsibility for global direct market sales will be managed by Tim Sharon and the newly created position of senior Vice President Global wholesale.
Tim will leverage his extensive international experience as the overseas Asia direct Canada, Europe, direct and our U S wholesale businesses.
We are also taking this opportunity to further align our Columbia brand offense with our U S. DTC leadership now reporting directly to the Columbia brand President Joe Boyle.
Turning to our emerging brand portfolio.
Exceptional consumer demand for Sorel was evident in the third quarter Sorel Dot com net sales increased over 30% versus third quarter 2020, and we're up over 100% compared to third quarter 2019. This growth was led by sneakers sandal and wedge category performance as well as pop.
Their winter style products like the out and about.
During the quarter Sorel washed a multichannel marketing campaign to introduce the new bricks boot and heal collection, which is driving new customer traffic to Sorel dot com and quickly becoming a favorite among influencers and celebrities.
The continued success of these new categories and styles validated <unk> evolution to become a year round function first fashion footwear brand.
Overall Sorel brand net sales decreased 5% as DTC e-commerce growth was more than offset by lower fall 'twenty, one wholesale shipments, resulting from supply chain disruptions.
Prana net sales increased 19% in the quarter led by broad based wholesale growth.
I am encouraged to see progress account base, including National accounts smaller independent retailers and new points of distribution embraced the France fall 'twenty one product line.
Prana is latest outerwear collection, which features many sustainable features is off to a promising start to the season female.
E mail consumers are showing strong interest in the down collection.
Including the premium priced <unk> series.
Prana will be emphasizing outerwear.
Which is an important growth category for the brand and its new marketing campaign launching in early November <unk>.
During the third quarter, we announced Monica marrow was appointed Prana brand President She brings extensive experience in leadership roles building inspirational Omnichannel brands.
I'm confident that her growth mindset strategic discipline and people first approach will strengthen the prana brand.
Mountain hardware net sales increased 47% in the quarter.
Growth was led by higher fall 'twenty, one wholesale shipments that reflect the team's tremendous efforts to enhance the product line and extend the brand's reach into new retailers.
The new in store displays at important wholesale accounts look amazing I hope, we get a chance to see the mountain hardware display at some of the newly opened public land stores.
When reviewing the presentation of mountain hardware innovative product.
You start to get a sense for the tremendous potential of this authentic premium mountain sports brand.
During the quarter Mountain hardware innovation received awards and media Callouts outside magazine recently gave the power Bonga ski pack a gear of the year Award in its recent 2022 buyers guide gear Junkie feature of the Super DFS stretch down jacket in a recent article on the best.
The jackets of all time.
During the quarter, we announced Troy Sycon was appointed that New Mountain hardware brand President Troy has served as vice president of sales for the past three years and has been co leading the brand on an interim basis. This well deserved internal promotion facilitates a smooth transition and allows the team to focus on.
Accelerating growth during this pivotal time in the brand's history.
He is an energetic leader that will serve mountain hardware well.
I'll now discuss our 2021 financial outlook and preliminary 2022 commentary.
This outlook and commentary includes forward looking statements. Please see our CFO commentary and financial review presentations for additional details and disclosures related to these statements.
Our updated 2021 outlook contemplates a $21, 5% to 23% year over year net sales growth.
Compared to pre pandemic 2019 results, our updated 2021 outlook contemplates flat to 1% net sales growth.
Yeah.
Looking at the balance of the year, our updated guidance reflects the supply chain disruptions that have intensified in recent months.
Inbound shipping times port congestion and other logistic delays have elongated in transit times from factory to inventory receipt.
Additionally factory closures in southern Vietnam have added additional pressures to an already stressed global supply chain.
While Vietnam factories began to reopen October.
The factory downtime has impacted the availability of <unk> products and timing of spring 'twenty two production.
To date order cancellations, resulting from delayed receipts and deliveries have been minimal.
In this high demand inflationary environment, we remain confident in our ability to profitably sell in transit inventory in current or future seasons.
I would also note that the job market repaint remains very tight and staffing challenges across our retail stores and distribution centers presents further risk to realizing net sales during the peak holiday sales season.
Based on year to date results and the healthy full price selling environment, we are raising our gross margin guidance for the full year. We now expect gross margin to expand by 190 to 210 basis points.
We expect SG&A to grow slower than net sales demand creation is expected to increase as a percent of sales to 6% in 'twenty, one compared to five 7% in 'twenty.
Combined we expect operating margin to be in the range of $12 six to 13, 2%.
Diluted earnings per share is expected to be in the range of $4 55.
To $4 80.
Compared to our prior range of $4 30 to $4 55.
While significant uncertainty persists and we have not completed our 2022 planning process I would like to share. Some initial thoughts on how we are approaching the year.
This commentary and incorporates our current view of the supply chain disruptions constraints and expenses, but could materially change as conditions evolve.
Our spring 'twenty two wholesale sales forecast continued to improve since the last update and now reflects over 30% growth compared to spring 'twenty one sales levels.
Just on momentum we see across the business, we believe mid teens or better net sales growth for the full year is attainable.
Looking at gross margin performance, we expect higher product and freight costs as well as the likelihood of a more normalized promotional environment will create gross margin pressure in 2022.
We do not expect planned price increases will fully offset these inflationary headwinds.
We are also planning to make investments across the business, including demand creation retail store expansion supply chain and digital capabilities that will add to our overall spending levels.
On the digital front, we're accelerating our digital and analytics capabilities to leverage consumer data.
Enhance the consumer experience across our platforms and drive efficiencies across the organization.
We're also investing in supply chain capabilities to expand distribution capacity improve inventory management and adapt to shifts in our sales mix with these factors in mind. We're currently planning our 2022 operating margin to be similar to the range provided in our 2021 and finance.
<unk>.
It is important to reiterate that we are maintaining this level of operating performance, despite significant cost pressures and growth investments across the business.
In summary, I am confident we have the right strategy in place to drive sustainable and profitable long term growth.
We're investing in our strategic priorities to.
Drive global brand awareness and sales growth through increased focused demand creation investments.
Enhanced consumer experience and digital capabilities in all of our channels and geographies.
Expand and improve global direct to consumer operations with supporting processes and systems.
And invest in our people and optimize our organization across our portfolio foreheads.
That concludes my prepared remarks.
Operator could you please help us.
Get questions for the remainder of the hour.
Certainly ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Press Star two if you would like to remove your question from the Q4.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Bob <unk> with Guggenheim Securities. Please proceed with your question.
Hi, Tim.
Hi, everybody.
Tim just.
For the record I am vaccinated, so we're doing well here.
We would be.
A couple of questions. Just if you could I guess on the supply chain challenges.
In terms of the inventory the receipts.
In terms of you said minimal cancellations.
What are you seeing like in terms of where in transit like the arrival times of what you're getting and when you talk about the spring product that you said spring now looking up 30% like just the ability to actually get that product and make those numbers could you just give us a little bit more insight in terms of how.
It's running operationally for you guys today.
Yes, certainly and I would point out that the bulk of these supply chain.
Related issues are in the U S. It seems like in Canada and in Europe, the deliveries have been much more timely.
And just as a reminder, we we have product entering the U S. In many different ports, including Seattle, Portland Long Beach, Los Angeles, Savannah, and others. So.
It's a variety of delays at all of these ports.
And so by far the bulk of our fall merchandise has been shipped from the factory.
Much of it has been received although we did have at quarter end, we had a fairly significant increase in our in transit inventory or Jim may have the specific numbers, but.
It's it's fairly significant and it's.
Unfortunately happening at a time when the brand is incredibly popular and selling very well so.
We are turning around this merchandize thats it gets into our distribution centers as fast as possible and the constraints are not necessarily in our dcs, but rather.
In in waiting for the merchandise to arise from Luke ships, and Bob just to add a little bit of color here.
First and foremost obviously, we're seeing significant consumer demand. So some of our challenges it is a bit more on the supply chain as you're pointing out some of the specific data to share with you we've produced well over 90% of our total production for all 21 season.
And we received right around 70% of that so theres still a fair amount that's on the water or coming through a court order for us to get it out and then earlier. This year, we were experiencing in transit times from a logistics standpoint that we're about three weeks longer than they ordinarily been and with.
The port situation and availability of trucks and drivers and so forth worsening as we came through the quarter that basically doubled so three weeks it becomes six weeks in.
Effectively what leading to one the miss on the quarter and in part the reduction of revenue outlook for the year.
Okay great.
Just as you think about that.
I think you said, 90% the remainder of the 10% and as you think about your spring orders and the <unk>.
Or is that you have placed with the.
The factories, how will you guys address either canceling the orders or will you just take everything and then sit on it and work it through the factory outlets is maybe if you could talk about how you're philosophically thinking about.
That over the coming weeks and months would be helpful. As well, yes, certainly well as you know Bob we have a high percentage of our merchandise is carryover year after year.
It's a gradual change in our styles, but not necessary.
Changing all the time so much of this merchandise is going to be in line merchandise that we would sell in the spring time throughout and maybe even in the south further assist we'd sell it year round.
So we're in a position frankly with the Companys balance sheet that we can utilize it.
So buy and hold this merchandise.
Specially when we're talking about an inflationary environment that we're seeing on the sourcing side.
We're going to be keeping this merchandize and generally selling it to our.
Our in line wholesale customers.
In a proper time proper season.
Great. Okay, and then I guess, just one last question and then I'll turn it over sorry.
In terms of the way price increases that you have planned can.
Can you just talk us through how you're thinking about that with with many of these higher costs in <unk>.
In season merchandise.
Certainly well.
The costs associated with.
Ocean freight shipping.
Relatively unseen.
Surprise, so we're going to be including those prices as well as increased costs from the manufacturing side in our calculations and our our pricing for for future seasons. So our expectations are that.
There'll be minimal impact.
And as I said the brand is selling incredibly well now there is a shortage of product.
And our expectations are that we'll be able to fully pass on these these price increases to consumers and retailers, yes, Bob and I just I. Just note. We did provide some preliminary remarks regarding our 2002 outlook and.
In light of the inflationary headwinds and to Tim's point, we've increased price.
Where we've got purchasing or pricing power rather.
But we do anticipate some degree of margin pressure was to come back in and fine tune that as we come to our year end earnings call, we'll provide more specific full year 'twenty two guidance.
Great. Thank you very much.
Thank you.
Our next question comes from the line of Laura So last SKU with BNP Paribas. Please proceed with your question.
Good afternoon, and thank you for taking my question and congrats.
And solid results in this environment for sure.
I wanted to ask.
Did you parse out I apologize for not knowing this but could you parse out was there a shift from <unk> into <unk> and then.
Obviously, you lowered your overall revenues by $80 million to $90 million is that does that lost revenues or is that potential slippage into next year and hence why you raised your <unk>.
Your spring order book from effectively around 20% to now over 30%.
Yes, <unk>, it's incredibly difficult to measure timing effects between the third and fourth quarter.
Yes keep in mind, we're comping against a very difficult environment last year in light of.
Order cancellations that we placed from a production standpoint with that said as you look at the Miss on the on the quarter of $50 million. So theres at least that that's shifting out and we were already aware of.
Certain of the in transit times being longer and production delays.
You already used Q3 of 19 as a bit of an indicator of the degree of timing shift that's going to be in the 100 million plus range.
Which if you look at our wholesale business in Q3 of this year over Q3 of 19, it's in that order of magnitude in terms of how you think about the relative shift between the two quarters and then as it relates to your latter question regarding slippage.
It's difficult to tell as Tim touched on we have not seen significant wholesale order cancellations to date, there is a need that inventories lean in the market and as soon as we can get things shipped we're working closely with our logistics partners and our customers to expedite freight to the degree possible. So.
I think it remains to be seen but we would.
We're planning to ship through the quarter and hopeful that we can continue to convert those orders in the first part of Q1.
That's very helpful. Thank you very much.
Sorry, I was going to say, it's probably it's probably important to note that for many of our retailers and including our own stores. The month of January for selling winter merchandise is about the same size as the month of November.
Okay. Okay. Thank you for that and then <unk>.
Impressive I mean, 30% potentially growth for spring.
Our spring orders.
Can you unpack that a little bit.
Is it across footwear apparel is it the emerging brands or is that the Columbia brand like any any color on that would be very helpful for the audience.
Yes, it's pretty broad based growth Laura.
If growth across the entire brand portfolio with a particular focus on Columbia, Sorel and mountain hardware, but all four brands growing.
And geographically speaking.
Nearly all geographies up I think at the region level all regions were up led by the U S.
Europe's up to a lesser degree, but still meaningful China is up mid teens percent, the only geography, where we'd be down a little bit as Japan, which should come as no surprise given the state of emergency and just inventory that many of our wholesale customers continue to carry and then with respect to apparel footwear I don't have.
Specifics, but.
I believe we are in the footwear category outpacing apparel and I can confirm that lower.
We're on the call here.
That's very helpful and maybe.
Now, let me turn to slide last question on China, I was pleasantly pleased to see.
It was up mid teens on a constant currency basis can you just maybe give us a little bit more color just what youre seeing out there is it just order book ahead of the Beijing 2022 games are there or anything else that you might want to share with us.
Certainly well as you know we've been quite open about the fact that China has been an underperforming geography for the company for a few years now and we may see.
Significant changes in management over there.
Not only are the senior leadership, but with mid level.
Managers of various specific activities.
Also changed and I believe that we are well on our way to being a much improved business over there as we've said many times, it's the largest single opportunity from for us from a geographic standpoint.
It's good to know that the brand resonates and the consumers.
Our.
We are embracing our brand and then when you add in the importance of newness and the impact of omni heat infinity in that market I think we're really looking at an opportunity to change and get back to growth in that market.
Thank you so much for all the color.
Okay.
Our next question comes from the line of Tim Miller aligned with BTG. Please proceed with your question.
Thank you this is Nick on LIBOR.
Hello.
First question is just on gross margin next year.
So to see pressure.
Any quantification you can give us in terms of.
Do you think it will be down versus F. 'twenty one.
2020 does any commentary you can give us on kind of the puts and takes.
Okay gross margin next year would be really helpful.
Nothing that we would be able to quantify at this stage, we plan to come around as part of our February call, we'll provide a more comprehensive update on our full year outlook by pressure.
At this stage.
Contemplate some degree of gross margin contraction as we look at 'twenty. Two that's the reason for some of the signaling there and the pressure points are going to be a combination of.
Some of these ongoing supply chain effects, namely on the on the ocean freight and being able to absorb that into our pricing as much as possible. So that's that's going to be a more significant component and then we've been operating in a very favorable oil price environment from a consumer perspective in 'twenty one.
And so to the degree there's a normalization of inventory settles out in the marketplace that would be another potential pressure point, but we will look forward to coming back in for Brian providing more color.
Okay.
And then just curious during the quarter did you see any impact.
And the Delta Varian surging.
Any call out specifically by geography, and the impact in store traffic.
And if so are you seeing the consumer come back.
Albert.
In the geographies, where they may have pulled back.
On the OLED.
Modest.
Our D to C business and looking at the store traffic throughout the quarter. There was steady progress and there is certainly some effects that youre going to youre going to have in pockets, but it's come back pretty quickly. So.
So I don't think anything noteworthy to speak of in that standpoint, we've seen more of an effect internationally. So we did indicate that Japan has been under a continued state of emergency for most of the quarter. We saw some similar experiences with government restrictions in China that we noted.
Those are probably the more meaningful components.
Okay.
Best of luck in Q4.
Thank you.
Our next question comes from the line of Paul as you with Citigroup. Please proceed with your question.
Thanks, It's Tracy Kogan filling in for Paul I was wondering if you could talk in more detail about what.
What factors benefited your SG&A. This quarter I think you mentioned some expense reductions and just wondering what what buckets. Those are in and then I think you mentioned lease termination benefits I was just hoping you could quantify that and then secondly, I think there are some implied SG&A leverage next year I was wondering what the driver was thank you.
Yes look I'm, just looking at the quarter in particular, and where we came in favorable relative to our outlook.
A couple of different things come to mind on this one being.
It's been a tight labor market.
And so our distribution centers.
In our retail stores, we've been light from that standpoint, despite incentives that we've put in place so that drove probably the more significant component of SG&A being down on a quarter and then to a lesser degree theres going to be some some reductions in discretionary spend and variable speed.
And on the on the top line on the topline Miss and then looking out to next year, we haven't provided any specific color as it relates to.
SG&A leverage aside from it provided that in.
In our operating margins will approximate this year with a range of 12, 6% to 13 to I guess, it's too preliminary here today to get inside that puts the puts and takes there are some strategic investments that we're looking out to next year that we would seek to make in the way of demand creation as we have this year looking at digital.
Early in the business.
From a supply chain standpoint.
And how do you how long do you forecast currently that these physicians will remain open and benefits. Your SG&A is that as you see it now a couple of quarters or more than that.
Well, it's going be challenging I think at least through the fourth quarter here.
Now that we're into it in terms of having the level of staff that we'd like to within our Dcs to process orders.
Within our stores within our call Center.
I think that that issues that we're going to need to work with for.
At least through the fourth quarter, which is where our peak volume is and then.
Resettle and plan ahead for 2022.
Great. Thanks very much.
Thank you.
Our next question comes from the line of Alex Perry with Bank of America Securities. Please proceed with your question.
Hi, Thanks for taking my question.
I was wondering if maybe you could talk a bit about more about sorel in the quarter.
How much of the decline was due to production issues and overall supply chain headwinds and maybe could you talk about the outlook for securing additional production capacity for Sorel and also the broader footwear business. Thank you.
Yes, so sorel is an incredibly.
Rapidly growing brand is very disappointed that we have the supply chain.
Disruptions in this quarter.
The brand has historically been known.
Almost exclusively as a winter brand, but the real growth has been in the sneaker categories. The wedge categories and its expansion beyond just winter so.
I would say, 100% of our Miss and that brand was a function of either.
Supply chain disruptions at the factory or inbound logistics issues.
We're working with.
Large factory groups for future production.
Where we want us we want to be able to fulfill the promise of cereals growth.
But it's likely going to be at least one more season before we're completely.
Capable of getting all the products that the brand demands.
It's really been an enormous success and was quite disappointing from.
From the supply side, Alex maybe just add just a little more color there are absolutely spot on with regard to the.
The business being down on the quarter it isn't entirely wholesale based with just what the effects of later production.
But of that event later or longer and transit times and supply chain disruptions, coupled with the production capacity constraints that we that I think what's most indicative in terms of where the brand is if you look at the E Commerce business. So the ecommerce business, we still grew well over 30% on the quarter and when you look at it on a two year stack basis. The brand is growing.
100% in comparison to the third quarter of 2019 so.
Despite the lower revenue in the quarter. The underlying fundamentals are quite strong and we're encouraged looking out to next year with the brand and as it relates to the Columbia brand because you asked about the footwear business in general we are operating under constrained environment, there with factory closures in many parts of Asia.
The brand's footwear business is finally hitting stride.
And as we've talked about for years has the capacity to be the largest product category for the business. So it's disappointing that we are having the supply side issues because the demand is certainly there.
That's incredibly helpful. Thank you and then just as my follow up is could you maybe help us parse out the mid teens revenue growth outlook for 2022, a bit more I guess.
How much of that is are you seeing benefits from channel sell from some of the other of your larger competitors consolidating their wholesale presence and then just off of that given the supply constraints that you're seeing there.
Does that affect your ability to serve sort of late season Reorders as we work our way into <unk> 'twenty two thank you.
Certainly while there certainly has been an advantage for us as some some brands have a abandon certain parts of the retail.
Universe.
And Thats thats been helpful, but it hasnt been the entire reason for the brands growth of popularity has been.
A function of the increased marketing spend the product.
Innovations that we've shown and.
So the expectations are.
As we've talked about.
A function of how much product, we think we can get to supply the demand for next year because of that.
The gross demand will be larger than we're able to fulfill.
And Alex on your underlying assumptions for the 22 revenue plan. We're still very early obviously, we've got a we've got the spring order book in hand, I think neurons had asked a question earlier in terms of some of that 30 plus percent growth.
Due to fall shipments shifting it in the first half of next year. The vast majority of this is reflective of the spring order book that we've taken and so aside from the spring order book, we are just wrapping up sales meetings and going to market for the fall season right. Now so there's not a lot of visibility that we have in terms of fall orders will take those over.
<unk> for the next couple of months and then beside other than that it's just the strength that we see in the brands the product innovation that we've got coming into the marketplace.
Gives us the confidence and the ability to drive that level of growth.
Year.
Perfect. That's really helpful best of luck going forward.
Thanks.
So it is all the time, we have for questions I'd like to hand, it back over to management for closing remarks.
I want to thank everybody for joining in today were anxious to.
Fulfilling the promise of our order book and get your merchandize shipped to customers and consumers.
Look forward to following up with you on fourth quarter results. So thanks for listening in and don't forget to get vaccinated.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.