Q4 2023 Columbia Sportswear Co Earnings Call

Greetings and welcome to the Columbia Sportswear fourth quarter 2023 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero.

Operator: Welcome to the Columbia Sportswear 4th Quarter 2023 Financial Results Conference. Next time, all participants are listed only in the Question and Answer Session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. Please note, this conference is being recorded. Now I'll turn the conference over to your host, Andrew.

<unk> on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Andrew Burns.

Andrew: Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's fourth-quarter results. In addition to the earnings release, we furnished an 8K containing detailed CFO commentary and a financial review presentation explaining our results. This document is also available on our investor relations website, investor.columbia.com.

Proceed.

Yeah.

Good afternoon, and thanks for joining us to discuss Columbia sportswear company's fourth quarter results. In addition to the earnings release refresher 8-K containing a detailed CFO commentary on financial review presentation, explaining our results.

Document is also available on our Investor Relations website, Investor Doc Columbia Dot Com.

Timothy P. Boyle: 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, Chief Administrative Officer, and General Counsel, Peter Braggart. This topic 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 predicted. Many of these risks and uncertainties are described in Columbia's SEC filings. However, we caution that forward-looking statements are inherently less reliable than historical information.

With me today on the call are chairman, President and Chief Executive Officer, Tim Boyle.

<unk>, Vice President and Chief Financial Officer, Jim Swanson, and Executive Vice President Chief administrative officer, and General Counsel Peter Bragdon.

This conference call are 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 expected.

Many of these risks and uncertainties are ascribing 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.

Andrew: 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 Memphis RACNOW for referencing these non-GAAP measures, please refer to the Supplemental Financial Information section in the 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 call Now, I'll turn the call over to Tim. Thanks, Sandy, and good afternoon.

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 and non-GAAP measures and an explanation of Memphis right now for referencing these non-GAAP measures. Please refer to the supplemental financial information section.

The financial tables included in our earnings release, and the appendix of our CFO commentary and financial review.

Following their 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, Andrew and good afternoon.

Timothy P. Boyle: I'm proud of what our global workforce was able to achieve in 2023 as we navigated a challenging environment. One of our top priorities throughout the year was executing an inventory reduction plan. I'm pleased to report that we exited the year with inventories down 27% compared to last year. This inventory reduction helped us generate over $600 million in operating cash flows for the year. International markets were another bright spot, growing 7% on the year. In constant currency, China full year net sales grew a low 30%.

I'm proud of what our global workforce was able to achieve in 2023, as we navigated a challenging environment.

One of our top priorities throughout the year was executed getting the inventory reduction plan I'm pleased to report that we exited the year with inventories down 27% compared to last year. This inventory reduction helped us generate over $600 million in operating cash flows for the year.

International markets were another bright spot growing 7% on a year in constant currency, China full year net sales growth low 30%.

Timothy P. Boyle: The investments in talent and operational improvements we've made over the last several years are yielding results. For example, our Europe Direct Business Group has a low double-digit percent, reflecting strong execution across our product, brand, and marketplace strategies. We also generated healthy growth in Japan, up low double-digit percent, and Canada, up mid-single-digit percent for the year. However, in the U.S., the marketplace proved more difficult. Consumer demand and traffic tapered off throughout the year. In the fourth quarter, a warm winter impacted cold weather categories.

The investments in talent and operational improvements we've made over the last several years are yielding results.

Our Europe direct business grew low double digit percent, reflecting strong execution across our product brand and marketplace strategies.

We also generated healthy growth in Japan up low double digit percent and Canada up mid single digit percent for the year.

The U S. The marketplace proved more difficult consumer demand and traffic tapered off throughout the year in the fourth quarter, a warm winter impacted cold weather categories.

Timothy P. Boyle: I note that the onset of winter weather more recently has boosted sell-through. This helps us and our retail partners work through seasonal inventories and mitigate the impact of carryover inventory in future seasons. Overall, 2023 net sales increased 1% to $3.5 billion. In this muted growth environment, we experienced SG&AD leverage, and our operating margin performance was well short of my personal goal for the business. Our balance sheet is strong. We exit the year with $765 million in cash and no debt.

I'd note that the onset of winter weather more recently has boosted sell through this helps us and our retail partners worked through seasonal inventories and mitigate the impact of carryover inventory in future seasons.

Overall 2023, net sales increased 1% to $3 5 billion.

In this muted growth environment, we experienced SG&A deleverage and our operating margin performance was well short of my personal goal for the business.

Our balance sheet is strong we exited the year with $765 million in cash and no debt.

Timothy P. Boyle: This provides resiliency during turbulent periods and allows us to continue to fund growth initiatives while returning capital to shareholders. In 2023, we repurchased $184 million in stock and paid out $73 million in dividends. Our commitment to returning capital to investors is evident in our track record. Since the beginning of 2018, we've repurchased over $1 billion in stock, which resulted in a 14% reduction in year-end shares outstanding. Over this time period, we also increased our quarterly dividend by 36%, from $0.22 to $0.30. Looking ahead, we expect 2024 to be a challenging year.

This provides resiliency during turbulent periods and allows us to continue to fund growth initiatives, while returning capital to shareholders in.

In 'twenty, two 'twenty, three we repurchased $184 million in stock and paid out $73 million in dividends.

Our commitment to returning capital to investors is evident in our track record.

It's just the beginning of 2018, we've repurchased over $1 billion in stock, which resulted in a 14% reduction in year end shares outstanding.

Over this time period, we also increased our quarterly dividend by 36% from 22 cents to 30 ships.

Looking ahead, we expect 2024 to be a challenging year.

Timothy P. Boyle: Retailers are placing orders cautiously, and economic and geopolitical uncertainty remains high. Our spring and fall order books reflect these challenges. The impact of these headwinds is most pronounced in the U.S., but we are projecting growth in many markets outside of North America. Our initial net sales outlook for 2024 is a decline of 2-4%. We're seeking opportunities to maximize sales in this environment, and my personal goal is to exceed this.

Retailers are placing orders cautiously and economic and geopolitical uncertainty remains high.

Our spring and fall order books reflect these challenges the impact of these headwinds is most pronounced in the U S. We are projecting growth in many markets outside of North America.

Our initial net sales outlook for 'twenty four is a decline of 2% to 4%.

We're seeking opportunities to maximize sales in this environment and my personal goal is to exceed this outflow.

Timothy P. Boyle: Despite our cost containment actions to date, we expect a net sales decline to result in operating margin contractions. To mitigate further erosion and profitability, and to improve the efficiency of our operations, we are implementing a multi-year profit improvement program. When the benefits of this program are combined with the cost savings that we anticipate from normalized inventory levels, we believe we can reach $125 to $150 million in annualized savings by 2026.

Despite our cost containment actions to date, we expect that net sales declined to result in operating margin contraction.

To mitigate further erosion in profitability and to improve the efficiency of our operations. We are implementing a multi year profit improvement program.

When the benefits of this program are combined with the cost savings that we anticipated from the normalized inventory levels. We believe we can reach $125 million to $150 million in annualized savings by 2026.

Timothy P. Boyle: In our initial 2024 financial outlook, we're including approximately $75 to $90 million in realized cost savings, net of severance and related costs of up to $5 million. We are focused on four areas of cost reduction and realignment. The first area of focus is operational cost savings. In addition to eliminating expenses associated with carrying excess inventory, we are optimizing our distribution network and driving cost efficiencies throughout our supply chain. We are also optimizing our technology cost structure while increasing the throughput and agility of our digital technology team. The second area of focus is organizational cost savings. Our overall headcount and personnel expenses have outpaced the growth of our business. We're executing a workforce reduction plan, primarily impacting our U.S. corporate teams.

In our initial 2024 financial outlook, we are including approximately $75 million to $90 million in realized cost savings net of severance and related costs of up to $5 million.

We are focused on four areas of cost reduction and realignment.

The first area of focus is operational cost savings. In addition to eliminating expenses associated with carrying excess inventory, we are optimizing our distribution network and driving cost efficiencies throughout our supply chain. We are also optimizing our technology cost structure, while increasing the throughput.

And the agility of our digital technology team.

The second area of focus is organizational cost saving.

Our overall head count and personnel expenses have outpaced the growth of our business, we're executing our workforce reduction plan, primarily impacting our U S corporate teams.

Timothy P. Boyle: This represents at least a 3-5% reduction in our U.S. corporate personnel costs. This work will be done with respect and thoughtfulness, consistent with our core values, while taking the actions required to get back to sustainable growth. We expect the vast majority of these actions to be completed by the end of March.

This represents at least a 3% to 5% reduction in our U S corporate personnel costs.

This work will be done with respect and thoughtfulness consistent with our core values, while taking the actions required to get back to sustainable growth.

We expect the vast majority of these actions to be completed by the end of March.

Timothy P. Boyle: The third area of focus is operating model improvements. We are streamlining decision rights and our ways of working to drive improvements in our operating efficiency and execution of strategic priorities. The last area of focus is indirect or non-inventory spending. We are focused on driving cost savings in this area through strategic sourcing and vendor rationalization outside of our supply chain. It's important to note that we are not cutting back on demand-creation investments. At the same time, we believe there is an opportunity to optimize the efficiency of our marketing spend to drive greater returns. Steps are being taken to amplify the impact of this spending. We anticipate these cost savings will ramp up over the course of 2024 and 2025, with the full benefit being realized in 2026.

The third area of focus includes operating model improvements, we are streamlining decision rights and our ways of working to drive improvements in our operating efficiency and execution of strategic priorities.

The last area of focus is indirect or non inventory spending.

We are focused on driving cost savings in this area from our strategic sourcing and vendor rationalization outside of our supply chain.

It is important to note that we are not cutting back on demand creation investments.

At the same time, we believe theres, an opportunity to optimize the efficiency of our marketing spend to drive greater returns.

Are being taken to amplify the impact of this spending.

We anticipate these cost savings will ramp up over the course of 24 and 25% with the full benefit being realized in 2026.

Timothy P. Boyle: This profit improvement program is an integral component of our goal to restore operating margins to a low teens percent rate. We've achieved this level of operating margin performance before, and we're confident it's achievable again. I will now review fourth-quarter financial results. Net sales were at the low end of our guidance range, and operating income was below plan, reflecting the compounding effects of a difficult U.S. environment and a warm winter. Overall net sales decreased 9% year-over-year to $1.1 billion.

This profit improvement program is an integral component of our goal to restore operating margins to a low teens percent rate. We've achieved this level of operating margin performance before and we're confident it's achievable again.

I will now review fourth quarter financial results.

Net sales were at the low end of our guidance range and operating income was below plan, reflecting the compounding effects of a difficult U S environment and a warm winter.

Overall net sales decreased 9% year over year to $1 1 billion and.

Timothy P. Boyle: The decline was primarily driven by our wholesale business, which declined 17%. On time, fall 23 shipments shifted a greater portion of sales into the third quarter this year relative to last year. The impact of this timing shift was greater than $100 million in the fourth quarter when compared to the fourth quarter of last year.

The decline was primarily driven by our wholesale business, which declined 17%.

On time fall 'twenty, three shipments shifted a greater portion of sales into the third quarter of this year relative to last year. The impact of this timing shift was greater than $100 million in the fourth quarter when compared to the fourth quarter of last year.

Timothy P. Boyle: Direct-to-consumer net sales declined 4%, with weakness concentrated in the U.S. Gross margin expanded 20 basis points as lower inbound freight costs and favorable channel mix more than offset promotional activity. SG&A expenses were essentially flat as higher DTC expenses were offset by lower demand creation spending on lower net sales and incentive compensation expense. For the full year, our demand creation as a percent of sales increased slightly to 6% compared to 5.9% last year. We incurred a $25 million non-cash karma and karma charge during the quarter, which impacted Deruvedeering's per share by 31 cents. The looter donors' per share in the quarter decreased 23% to $1.55.

Direct to consumer net sales declined 4% with weakness concentrated in the U S. Gross margin expanded 20 basis points as lower inbound freight costs and favorable channel mix more than offset promotional activity.

G&A expenses were essentially flat as higher DTC expenses were offset by lower demand creation spending on lower net sales and incentive compensation expense.

For the full year, our demand creation as a percentage of sales increased slightly to 6% compared to five 9% last year.

We incurred a $25 million noncash impairment charge during the quarter, which impacted diluted earnings per share by 31 cents dilutive.

Diluted earnings per share in the quarter decreased 23% to $1 55.

I will now review fourth quarter year over year net sales growth by region for this review I will reference constant currency growth rates.

Timothy P. Boyle: I will now review fourth quarter year over year net sales growth by region. For this review, I'll reference constant currency growth rates. U.S. net sales decreased 12 percent. U.S. Wholesale decreased 15%, primarily driven by on-time haul shipments, which shifted sales into the third quarter relative to last year.

U S net sales decreased 12%.

U S wholesale decreased high teen percent, primarily driven by on time fall shipments, which shifted sales into the third quarter relative to last year.

Timothy P. Boyle: U.S. DTC net sales decreased by high single-digit percent. Across both brick-and-mortar and e-commerce, software consumer traffic and weather weighed on results. Our DTC business performed well during peak sales when those like Black Friday and Cyber Monday took off during non-peak periods. Brick and Mortar was relatively flat, driven by the contribution from new stores opened over the last year, as well as incremental sales from temporary clearance locations. U.S. e-commerce net sales were down high teams percent.

U S DTC net sales decreased high single digit percent.

Across both brick and mortar and e-commerce softer consumer traffic and weather weighed on results our DTC business performed well during peak sales windows like Black Friday, and cyber Monday, but fell off during non peak periods Rick.

Brick and mortar was relatively flat driven by the contribution from new stores opened over the last year as well as incremental sales from temporary claris locations.

U S E Commerce net sales were down high teens percent Sorel Dot com was particularly hard hit in the fourth quarter is shifting consumer trends, coupled with warm weather impacted demand.

Timothy P. Boyle: Terrell.com was particularly hard hit in the fourth quarter as shifting consumer trends coupled with warm weather impacted demand. Latin America, Asia Pacific region, or LAAP, net sales increased 7%. China net sales increased by high teens percent, led by strong DTC performance. The team drove e-commerce growth across several platforms during the key double 11 holiday period. Transit, our premium China-specific collection, performed well this season, highlighting our continued efforts to create localized products that resonate with Chinese consumers. Under the strategy of our new leadership team, we're now gaining traction in this important market. We expect China to again be one of the fastest growing parts of our business in 2024. Japan's net sales increased by mid-single-digit percent, led by wholesale and, to a lesser extent, e-commerce growth.

Latin America Asia Pacific region, or L. AAP net sales increased 7%.

China net sales increased high teens percent led by strong DTC performance. The team drove e-commerce growth across several platforms. During the key double 11 holiday period.

Transit our premium China specific collection performed well this season, highlighting our continued efforts to create localized product that resonates with Chinese consumers.

Under this strategy of our new leadership team, we're now gaining traction in this important market.

We expect China to again be one of the fastest growing parts of our business in 2020 for Japan.

Japan net sales increased mid single digit percent led by wholesale and to a lesser extent e-commerce growth.

Timothy P. Boyle: During the quarter, we built on the momentum of our Sapland boot collection by expanding distribution to wholesale and e-commerce. The collection celebrates the sister city connection between Sapporo and Portland in a boot that combines style with performance. The Sapland was a key pillar of growth in the quarter, and sell-through of the collection was exceptionally strong across all channels. Korea Net Sales declined by low teens percent as we continue to reset the business.

During the quarter, we built on the momentum of our SAP Lan boot collection by expanding distribution to wholesale and e-commerce.

The collection celebrates the sister city connection between Sapporo, and Portland, and our booth that combined style with performance the.

The SAP land was a key pillar of growth in the quarter and sell through of the collection was exceptionally strong across all channels.

Korea net sales declined low teens percent as we continue to reset the business. Our team in Korea is focused on building a sustainable growth model with several multi year initiatives across talent distribution marketing and product.

Timothy P. Boyle: Our team in Korea is focused on building a sustainable growth model with several multi-year initiatives across talent, distribution, marketing, and product. We saw traction on our reset strategy in the fourth quarter through digital commerce expansion and authentic outdoor brand experiences like the Hike Society. L.A.P.

We saw traction on our reset strategy in the fourth quarter through digital commerce expansion and authentic outdoor brand experiences like the hikes Society.

L. A P distributor markets increased low 20%, reflecting earlier shipment of spring 'twenty four orders.

Timothy P. Boyle: Distributor Markets increased by a low 20%, reflecting earlier shipment of Spring 24 orders. We have phenomenal distribution partners around the world that are operating over 400 full-priced Columbia-branded stores, with many more planned for 2024. In many of these markets, the Columbia brand is the leader in the outdoor market. Recently, our partners have opened some truly unique stores across Asia and the Americas. In November, a Columbia store opened in Namche, Nepal, which is a four-day yacht trip from the nearest airport.

We have a phenomenal distribution partners around the world that are operating over 400 full price Columbia branded stores with many more planned for 24.

And many of these markets the Columbia brand is the leader in the outdoor market.

Recently, our partners have opened some truly unique stores across Asia and the Americas.

In November our Columbia store opened in AMG, Nepal, which is a four day yeah track from the nearest airport.

Timothy P. Boyle: This store positions Columbia at the gateway to Mount Everest, serving outdoor adventurers as their journey to base camp begins. In globally renowned fishing destinations Puerto Vallarta and Lima, Peru, our distributor partners opened PFG Retail Concepts. These stores highlight our innovative products through adventure anguish from around the world. It's inspiring to see the power of the Columbia brand brought to life in so many unique destinations. The Europe, Middle East, and Africa region, or EMEA, saw net sales decrease 7%.

This store positions Columbia at the Gateway of Mount Everest, serving outdoor adventures as their journey to base camp begins.

And globally, we're now in fishing destinations portable aorta and Lima, Peru, our distributor partners opened PFG retail concepts. These stores highlight our innovative products to adventure English from around the world.

It's inspiring to see the power of the Columbia brand brought to life in so many unique destinations.

Europe, Middle East and Africa region, or EMEA net sales decreased 7% Europe direct net sales decreased low single digit percent driven by an odd time fall 'twenty, three wholesale shipments, which shifted sales into the third quarter relative to last year. This was largely offset.

Timothy P. Boyle: Europe direct net sales decreased by a low single digit percent driven by on-time fall 23 wholesale shipments, which shifted sales into the third quarter relative to last year. However, this was largely offset by robust DTC growth. Europe Direct was one of our top performing markets in 2023, and the Columbia brand is well positioned in the marketplace. However, as we noted on the last conference call, we expect growth to decelerate in this market in 24 months, given economic and geopolitical pressures. Our EMEA distributor business declined below 20% driven by on-time fall 23 shipments, which shifted sales into the third quarter relative to last year. Recently, the ocean freight disruptions on the Red Sea have been in the news.

By robust DTC growth Euro.

Europe direct was one of our top performing markets in 2023.

The Columbia brand is well positioned in the marketplace as.

As we noted on the last conference call, we expect growth to decelerate in this market in 'twenty, four given economic and geopolitical pressures.

Our EMEA distributor business declined low 20% driven by on time fall 'twenty, three shipments, which shifted sales into the third quarter relative to last year.

Recently, the ocean freight disruptions on the Red Sea have been in the news.

Timothy P. Boyle: You've experienced some impacts to the flow of Spring 24 production, but our in-window delivery rates to wholesale customers are still well above 90%, and cancellation exposure related to the delay is low as of right now. We will continue to monitor the situation closely. Canada net sales declined 29% driven by on-time fall 23 shipments, which shifted sales into the third quarter relative to last year.

We've experienced some impacts to the flow of spring 'twenty for production.

But our in window delivery rates to wholesale customers are still well above 90% and cancellation exposure related to the delay is low as of right now.

We will continue to monitor the situation closely.

Canada net sales declined 29% driven by on time, all 23 shipments, which shifted sales into the third quarter relative to last year. This was partly offset by DTC growth and.

Timothy P. Boyle: This was partly offset by DTC growth. In Canada, we continue to invest in our strategic wholesale partners. In 2023, we opened several shopping shops with Mark's and Sport Expair. We've been pleased with their performance and expect to open more in 2024. Looking at performance by brand, Columbia brand net sales decreased 7% during the quarter and increased 2% year-over-year.

In Canada, we continued to invest in our strategic wholesale partners in.

In 2023, we opened several shop in shops with marks and sport expire.

We've been pleased with their performance and expect to open more in 2024.

Looking at performance by brand.

Columbia brand net sales decreased 7% during the quarter and increased 2% on the year, while fourth quarter weather improved challenging, particularly in the U S. Colombia is full year growth reflects the strength of the brand in international markets.

Timothy P. Boyle: While fourth quarter weather improved challenging, particularly in the U.S., Columbia's four-year growth reflects the strength of the brand in international markets. This fall, we continue to build momentum around OmniHeat Infinity with an expanded assortment. Despite a warm winter, OmniHeat Infinity Technology continues to draw praise for its lightweight performance and was included in several best of lists from Outside Magazine and Men's Health.

This fall, we continue to build momentum around omni heat infinity with an expanded assortment.

Despite a warm winter omni heat infinity showed strong growth on the year.

Im Gonna heat Infinity technology continues to drop craze, Chris lightweight performance and was included in several best of lists from outside magazine and men's health.

Timothy P. Boyle: Of note, Columbia's new Arch Rock Double Wall Elite Jacket won an important 2024 travel award from Good Housekeeping magazine. On the partnership front, we launched our eighth Star Wars collaboration, which was one of our most exciting yet. The latest collection was inspired by the iconic Rebel flight suit worn by Luke Skywalker in the original trilogy.

Note Columbia's new Archrock double wall elite jacket, one an important 2020 for travel award from good housekeeping magazine.

On the partnership front, we launched our eighth Star Wars collaboration which was one of our most exciting yet.

The latest collection was inspired by the iconic rebel flight suit worn by Luke Skywalker in the original trilogy. The line generated significant brand heat and key styles sold out quickly.

Timothy P. Boyle: The line generated significant brand heat, and key styles sold out quickly. Marketing efforts for this collection included a video featuring our NASCAR athlete Bubba Wallace and the original Luke Skywalker, Mark Hamill. The video went viral, earning millions of impressions on Columbia's social channels.

Marketing efforts for this collection included a video featuring our NASCAR athlete Bubba Wallace and the original Luke Skywalker, Mark Hamill. The video went viral earning millions of impressions on Columbia social channels.

Timothy P. Boyle: As we look ahead, we forecast Columbia brand sales to be about flat in 2024. Despite external pressures, we will not pull back on our innovation pipeline nor our demand creation spending rate. We're seeking opportunities to maximize sales despite retail costs. The Columbia brand's vision is to be the number one outdoor brand in the world. We are embracing this growth mindset as we optimize our product, brand, and marketplace strategy. I'll spend the next few minutes highlighting the actions we're taking to accelerate Columbia's growth trajectory. In addition to serving existing customers with accessible outdoor essentials, we're focusing on bringing younger consumers into the brand. This target consumer craves purpose-built, high-performance products from brands they know and trust. Consumers trust the Columbia brand for its quality, value, and reliability.

As we look ahead, we forecast Columbia brand sales to be about flat in 2024, despite external pressures, we will not pull back on our innovation pipeline, nor our demand creation spending rate, we're seeking opportunities to maximize sales despite retailer cautiousness.

The Columbia brand's vision is to be the number one outdoor brand in the world. We are embracing this growth mindset as we optimize our product brand and marketplace strategies.

I'll spend the next few minutes highlighting the actions, we're taking to accelerated colombia's growth trajectory.

In addition to serving existing customers with accessible outdoor essentials, we're focusing on bringing younger consumers into the brand.

This target consumer craves, the purpose built high performing products from brands, They know and trust consumers Trust, the Columbia brand for its quality value and reliability, we want to further emphasize innovation performance and style to do this we're investing in products channels and Brad.

And experiences that fuel their active lifestyles.

To reach these new consumers, our chief product officer, Woody Blackford is focusing on Reenergizing Columbia's product line. The foundation of our success is creating iconic products that are a differentiated functional and innovative.

Timothy P. Boyle: We want to further emphasize innovation, performance, and style. To do this, we're investing in products, channels, and brand experiences that fuel their active lifestyle. To meet these new consumers, our Chief Product Officer, Woody Blackford, is focusing on re-energizing Columbia's product line.

In the coming seasons, we will be elevating innovation and style with new collections as well as updates to our most iconic products.

Timothy P. Boyle: The foundation of our success is creating iconic products that are differentiated, functional, and innovative. In the coming seasons, we will be elevating innovation and style with new collections as well as updates to our most iconic products. We're optimizing our color and style counts to focus our efforts on fewer, more powerful collections with clear purpose.

We're optimizing our color and style counts to focus our efforts on fewer more powerful collections with clear purpose.

I'm confident that we can continue delivering exceptional products to our core consumer.

Introducing new products that appeal to consumers seeking greater performance and style.

Timothy P. Boyle: I'm confident that we can continue delivering exceptional products to our core consumer while introducing new products that appeal to consumers seeking greater performance and style. In footwear, we're developing product franchises that propel long-term growth. The innovation-led process that has fueled our success in apparel can be directly applied to footwear. We developed classics like the Newton Ridge, which remains a top-selling style today.

In footwear, we're developing product franchises that propel our long term growth.

Our innovation led processes that has fueled our success in apparel can be directly applied to footwear we.

We developed classics like the Newton Ridge, which remains a top selling style today.

We've expanded our performance offerings with the facet and peak freak collections.

We're introducing product platforms like omni, Max which can be applied across several product categories delivering versus utility scale and unmatched comfort to consumers.

Timothy P. Boyle: You've expanded our performance offerings with the Facet and Peak Freak collections. We're introducing product platforms like OmniMax, which can be applied across several product categories, delivering versatility, scale, and unmatched comfort to consumers. We are also refreshing our most popular PFG styles and creating new ones that attract younger, active consumers. PFG is the leading fishing apparel brand in the U.S., with dozens of iconic styles that have stood the test of time.

We're also refreshing our most popular PFG styles, and creating new ones that attract younger active consumers.

<unk> is the leading fishing apparel brand in the U S with dozens of iconic styles that have stood the test of time, we're focused on strengthening this position and extending it to reach new anglers around the world.

On the marketing front, we are targeting a more balanced full funnel approach.

Emphasizing mid funnel investments to drive consideration from new consumers I believe we can more efficiently deploy our advertising spend to capture additional share and drive growth.

Timothy P. Boyle: We're focused on strengthening this position and extending it to reach new anglers around the world. On the marketing front, we're targeting a more balanced, full-funnel approach, emphasizing mid-funnel investments to drive consideration from new consumers. I believe we can more efficiently deploy our advertising spend to capture additional share and drive growth. We've spoken about unlocking the marketplace of the future, a digitally-led, omni-channel marketplace that elevates the consumer experience. We want Columbia.com to be the best expression of the brand, highlighting our latest products and innovations with enriched brand storytelling.

We've spoken about unlocking the marketplace of the future a digitally led omnichannel marketplace that elevates the consumer experience.

We want Columbia Dot com to be the best expression of the brand.

Letting our latest products and innovations with enriched brand storytelling.

We want every consumer even those who did not make a purchase to come away with a positive marketing message about Columbia's differentiated innovation and brand heritage.

Investing in our online consumer experience with an enhanced membership program and a more seamless shopping experience, including improved landing pages product discovery and search capabilities.

Timothy P. Boyle: We want every consumer, even those who do not make a purchase, to come away with a positive marketing message about Columbia's differentiated innovation and brand heritage. We're investing in our online consumer experience with an enhanced membership program and a more seamless shopping experience, including improved landing pages, product discovery, and search capability. I also believe our DTC brick-and-mortar feed can serve core consumers as well as strengthen brand perception by delivering the best brand experience possible.

I also believe our DTC brick and mortar fleet conserve core consumers as well as strengthening brand perception by delivering the best brand experience possible.

We're focused on enhancing our assortments and in store presentations to tell better brand stories and to drive sales.

From a wholesale marketplace perspective, we're focused on elevating our product assortment and enhancing our in store retail presentations. We are working closely with our best in class strategic partners to bring new consumers to the brand.

As we differentiate the marketplace, we will work closely with strategic retail partners to bring new collections to the consumer led by innovation and style.

Timothy P. Boyle: We're focused on enhancing our assortments and in-store presentations to tell better brand stories and to drive sales. From a wholesale marketplace perspective, we're focused on enhancing our product assortment and enhancing our in-store retail presentation. We are working closely with our best-in-class strategic partners to bring new consumers to the brand. As we differentiate in the marketplace, we will work closely with strategic retail partners to bring new collections to the consumer, led by innovation and style. Moving to our Emerging Brands. In November, we announced Cory Wong as our new Sorrel brand president.

Shifting to our emerging brands in November we announced core long as our new Sorel brand President.

Korea is a veteran of the footwear and apparel industry with leadership experience across an array of growth brands as leadership and consumer champion mindset will be key in fueling the next era of <unk>.

Sorel growth.

Sorel brand net sales decreased 18% in the quarter and 3% on the year in.

In the fourth quarter shifting.

Shifting consumer trends, coupled with weather impacted demand weak sell through performance. This season is weighing on wholesale orders as a result, we expect 2024 to be a challenging year with net sales forecast to decline approximately 20%.

Timothy P. Boyle: Corey is a veteran of the footwear and apparel industry with leadership experience across an array of growth brands. The leadership and consumer champion mindset will be key in fueling the next era of Cigarell Growth. Thoreau brand net sales decreased 18% in the quarter and 3% on the year.

When we acquired Sorel over 20 years ago. It was a men's utility boot brand with minimal sales.

Since then the brand successfully evolved into our women's led footwear brand with hundreds of millions in annual sales.

Timothy P. Boyle: In the fourth quarter, shifting consumer trends coupled with weather impacted demand. Weak sell-through performance this season is weighing on wholesale orders. As a result, we expect 2024 to be a challenging year with net sales forecast to decline approximately 20%. When we acquired Sorrel over 20 years ago, it was a men's utility boot brand with minimal sales.

The next phase of the brand embraces cereals heritage and the opportunity to serve all consumers.

Globally by bringing the most styles in the outdoors and the most outdoors and style.

The team is thoughtfully refining the product line and marketing strategies to accelerate growth in 2025 and beyond I remain confident.

Confidence Sorel has meaningful long term growth potentials.

Mountain hardware net sales decreased 11% in the fourth quarter and 7% on the year the decline in the quarter was driven by lower all 23 wholesale shipments partially offset by DTC growth. Despite a challenging sales environment I am confident mountain hardware product line and brand positioning are on track.

Timothy P. Boyle: Since then, the brand successfully evolved into a women's-led footwear brand with hundreds of millions in annual sales. The next phase of the brand embraces Sorel's heritage and the opportunity to serve all consumers globally by bringing the most style to the outdoors and the most outdoors in style. The team is thoughtfully refining the product line and marketing strategies to accelerate growth in 2025 and beyond. I remain confident that Shirelle has meaningful long-term growth potential. Mountain Hardware's net sales decreased 11% in the fourth quarter and 7% on the year.

The brand one to Covenant is four awards in the fourth quarter, where its new alpine are T Pak and Spectre sleeping bag.

In 2024, we have the opportunity to further elevate its presentation in e-commerce.

And with strategic wholesale partners.

Mountain hardware net sales or for quest to increase mid single digit percent in 2024.

Timothy P. Boyle: The decline in the quarter was driven by lower fall 23 wholesale shipments, partially offset by DTC growth. Despite a challenging sales environment, I'm confident Mountain Hardware's product line and brand positioning are on track. The brand won two coveted Espoo awards in the fourth quarter for its new Alpine RT pack and Spectre sleeping bag.

Prana net sales decreased 29% in the quarter and 21% on the year.

Prana team remains focused on repositioning the brand and unlocking its growth potential they.

They have made great progress, reducing excess inventory and strengthening the brands products and marketing strategies for future seasons.

We anticipate modest growth in 2024 weighted towards the second half of the year as we stabilize the business and lay the foundation for growth.

Timothy P. Boyle: In 2024, we have the opportunity to further elevate its presentation in e-commerce and with the Strategic Wholesale Partners. Mountain Hardware Net Sales are forecast to increase mid-single-digit percent in 2024. Prana Net Sales decreased 29% in the quarter and 21% on the year.

I'll review, our 2024 financial outlook.

This outlook and commentary includes forward looking statements.

Please see our CFO commentary and financial review presentation for additional details and disclosures related to these statements.

For the full year, we expect net sales to decline in the range of 2% to 4%.

Timothy P. Boyle: The product team remains focused on repositioning the brand and unlocking its growth potential. They have made great progress reducing excess inventory and strengthening the brand's product and marketing strategies for future seasons. We anticipate modest growth in 2024, weighted towards the second half of the year, as we stabilize the business and lay the foundation for growth. Our reviewer at 2024 Financial Outlook This outlook and commentary includes forward-looking statements. Please see our CFO commentary and financial review presentation for additional details and disclosures related to these states. For the full year, we expect net sales to decline in the range of 2 to 4%.

Gross margin is expected to expand approximately 100 to 150 basis points to 56 to 51, 1%. The improvement in gross margin is primarily driven by improved inventory health favorable product costs and channel mix.

SG&A is expected to grow in 24, driven by higher DTC incentive compensation and enterprise technology expenses.

Actually I have set by lower supply chain costs and the impact of our cost reduction actions.

Based on the projected decline in net sales and SG&A growth operating margin is expected to contract between 50, and 130 basis points to seven six to eight 4%.

Timothy P. Boyle: Gross Margin is expected to expand approximately 100 to 150 basis points to 50.6 to 51.1%. The improvement in gross margin is primarily driven by improved inventory health, payable product costs, and channel mix. SG&A is expected to grow in 2024, driven by higher DTC, incentive compensation, and enterprise technology expenses.

We forecast diluted earnings per share to be in the range of $3 45 to $3 85.

Despite the earnings decline, we expect strong operating cash flow of at least $300 million of the year.

Before answering your questions I'd like to welcome Charlie Denson to our board of Directors Charlie is a veteran of the industry having served as the president of the Nike brand for 13 years is product and marketing expertise will be immensely valuable as we look to reaccelerate the business.

Timothy P. Boyle: Partially offset by lower supply chain costs and the impact of our cost reduction action. Based on the projected decline in net sales and SQ&A growth, operating margin is expected to contract between 50 and 130 basis points to between 7.6 and 8.4%. We forecast diluted earnings per share to be in the range of $3.45 to $3.85.

Overall, I'm confident in our team our strategies and our ability to achieve the significant long term growth opportunities, we see across the business.

We're investing in our strategic priorities to accelerate profitable growth.

Create iconic products that are differentiated functional and innovative draw.

Timothy P. Boyle: Despite the earnings decline, we expect strong operating cash flow of at least $300 million a year. Before answering your questions, I'd like to welcome Charlie Denson to our board of directors. Charlie's a veteran of the industry, having served as the president of the Nike brand for 13 years.

Drive brand engagement with increased focused demand creation investments.

Enhanced consumer experience by investing in capabilities to delight and retain consumers.

Amplify marketplace excellence that is digitally led omnichannel and global and empower talent, that's driven by our core values.

Timothy P. Boyle: His product and marketing expertise will be immensely valuable as we look to reaccelerate the business. Overall, I'm confident in our team, our strategies, and our ability to achieve the significant long-term growth opportunities we see across the business. We're investing in our strategic priorities to accelerate profitable growth and create iconic products that are differentiated, functional, and innovative.

Speaker Change: That concludes my prepared remarks, we welcome your questions for the remainder of the hour operator could you help us with that.

Absolutely. Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment it may be necessary to.

Operator: Drive brand engagement with increased focus on demand creation investments. Enhance the consumer experience by investing in capabilities to delight and retain consumers. Amplify marketplace excellence that is digitally-led, omni-channel, and global, and empower talent that's driven by our core values. That concludes my prepared remarks. We welcome your questions for the remainder of the hour. Operator, can you help us with that? Absolutely.

Pick up your handset before pressing the star keys, one moment, please while we poll for question.

Okay.

Our first question comes from Bob <unk> from Guggenheim Bob. Please proceed.

Thank you hi, good afternoon.

Okay.

So Tim two questions for you.

The first one is when you look at your full year projections.

How much of the order book on the wholesale side is complete at this point.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. Information Terminal

And then the second point around sort of the U S market is could you just comment on where you think the channel is especially with some of the more recent weather.

Robert Drbul: Indicate your line is in. If you'd like to remove your question from, participants using speaker equipment, it may be necessary to pick up your handset before pressing the, One moment, please, while we pull. The next question comes from Bob Drbul from Guggenheim. Bob. Thank you. Good afternoon.

Been positive over the last few months or month or so.

As it relates to our order book.

Let's say in the range of highways.

Yeah.

Oh, yes.

Our focus for the company.

Speaker Change: <expletive> will conclude everything.

So in that range.

Robert Drbul: Um, Tim, two questions for you. The first one is, you know, when you look at your four-year projections, how much of the order book on the wholesale side is complete, you know, at this point? And then the second point.

You remember, we take orders and cancels every day, so we're going to continue to focus on building.

So longer.

We get further into the market.

Operator: Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, I've been positive over the last, you know, few months-ish, month or so. Thanks for watching! It's a small piece for the company. This is the undecided event of the day. I'd like to invite our special guest, Charles L???o, it's his special occasion, award winner, to say a few words. Thank you, our diverse sponsors. Bye bye today. Bye tomorrow. Bye tomorrow. Bye tomorrow. Bye, I will see you later.

As it relates to the USA market conditions.

<unk>.

We think.

Speaker Change: Substantially since the first of the year.

You know our business.

DTC businesses.

Successful.

Speaker Change: That's liquidating winter products.

Yeah.

So I'm expecting that there's going to be reasonably good marketplace 72 football 24.

Got it and then.

Speaker Change: If I could just follow up on China can.

Can you expand a little bit more just in terms of the.

The success that you're seeing the encouraging results in China and in the outlook you talked about.

Timothy P. Boyle: Thank you. Bye, http://TheBusinessProfessor.com As it relates to the U.S.A. market conditions, we think that they've improved substantially since the first of the year. Our DTC business has been incredibly successful, and I know that our retailers have had great success liquidating major products. I'm expecting that it's going to be a reasonably good marketplace, www.COLM.com 2012 Columbia Sportswear.

Sure well remember we've been operating in China for many many years both through a distributor and that is a joint venture then as their own business.

Really underperformed historically, there I would say over the last several years.

New team, we call it our duty purely on.

The industry has been focused on that market.

We're just now seeing some of the key results.

He's built a great organization, which is highly focused on localizing the product and engaging with not only the.

Operator: All Rights Reserved. And then, um, let me just follow up on China. Can you expand a little bit more just in terms of, you know, the... Thank you all for joining us today.

Speaker Change: Consumers there.

Speaker Change: The large global retail operations, our expectations is that that business is going to lead the geographies for us.

Operator: We appreciate it. Thank you. What did you talk about?

Timothy P. Boyle: Sure. So remember, we've been operating in China for many, many years, both as a distributor and then as a joint venture and then as our own business. And we've really underperformed historically there, I would say, in the last several years.

Be very very successful.

It's got great metrics.

Great.

Thank you.

Speaker Change: Okay. The next question comes from Laurent <unk> with B N P. Laurent. Please proceed.

Thank you very much. Thank you very much for taking my question I wanted to ask.

Timothy P. Boyle: Our new team, we call it our new team, Pierre Lyon, who's a veteran of the industry, has been focused on that market, and we're just now seeing some of the key results. He's built a great organization, which is highly focused on localizing the product and engaging with not only the consumers there but some of the large global retail operations. Our expectation is that that business is going to leave the geographies for us and be very, very successful when we find it. It's got a great net return.

Laurent: A couple of questions here last quarter. The entire Q&A was was let's focus on P. Fast I Didnt hear anything about PFS in the prepared remarks, but I was just curious to know where do we stand with that from a legislative standpoint from an inventory standpoint.

Do you think you'll be able to clear through that when it comes to the New York and California deadlines for 2025.

Yes, well the reason we haven't mentioned is where it is well organized and control within our own inventories.

Laurent: We have a modest amount of inventory of DFAST remaining to be liquidated.

Timothy P. Boyle: Thank you. Okay, the next question comes from Lauren Veselescu with BNP. Lauren, please.

Take care.

Yes.

As it relates to legislation.

Other jurisdictions other than California, and New York.

There's been noise around the system.

Lauren Veselescu: Thank you very much. Thank you very much for taking my question. I wanted to ask a couple of questions here. Last quarter, the entire Q&A was focused on PFAS. I didn't hear anything about PFAS in the prepared remarks.

The globe pretty big on this topic as there are no other.

The areas that we know right now.

Anywhere near the deadlines of the California, and New York.

Chris.

We can talk about the impact.

Timothy P. Boyle: I'm just curious to know where we stand with that from a legislative standpoint, from an inventory standpoint? Do you think you'll be able to clear through that when it comes to the New York and California deadlines for 2025? Yes, well, the reason we haven't mentioned it is we're well-organized and controlled within our own industry. We have a modest amount of inventory of PFAS remaining to be liquidated, which will easily be taken care of. As it relates to legislation in other jurisdictions other than California and New York. There's been some noise around the system.

That's correct with our retailers I think thats been quota.

Yeah.

No.

Laurent: Confidence.

Laurent: Our retail team.

We've got partners excuse me.

Okay very helpful, Tim and maybe maybe Jim a question for you I think in your CFO comp.

Commentary you talk about expected benefits of 75 million to $90 million in profit improvement across gross profit and SG&A. Maybe can you just unpack that a little bit more how much of it is coming through gross profit versus SG&A expenses and how do we think about that cadence over the course of of the year.

Timothy P. Boyle: The world frankly on this topic, that there are no other, http://TheBusinessProfessor.com. You know, I think you can talk about the impact of the threat on our retailers. I think that's the part of the issue where we have money to stay afloat. Thank you. Thank you. Thank you.

First half second half thank you.

Yeah, you bet threat.

As it relates to the breakdown in terms of how to think about it between cost of goods sold and SG&A of approximately 20 million I'll speak to the high end of the range that $75 million to $90 million.

The range.

Lauren Veselescu: Thank you. We have partners. Okay. Very helpful, Tim. And maybe, Jim, a question for you. I think in the CFO commentary, you talk about expected benefits of $75 million to $90 million in profit improvement across gross profit and SG&A. Maybe you can just unpack that a little bit more?

The cost of goods sold loans about $20 million.

Right.

Optimization work that our team has been working on packaging.

Packaging savings and we're well along in terms of execution.

Wining those things.

The balance is in SG&A, and what I would say about that is there.

<unk> of that relates to the normalization of our inventory and Youll, you'll recall that we incurred pretty heavy inventory carrying costs and <unk> three related to distribution.

Jim A. Swanson: How much of it is coming through gross profit versus SG&A expenses, and how do we think about that cadence over the course of the year, first half, second half? Thank you. As it relates to the breakdown in terms of how to think about it, between cost of goods sold and SG&A, approximately $20 million speaks to the high end of the range, that's $75 to $90 million. On the high end of the range, the cost of goods sold comes home to about $20 million.

Just sticks and termination related causes.

Recovery.

The vast majority of that and then there is another $30 million or $40 million rather.

Savings that are tied up in operational cost savings across our business as well as organizational cost savings.

Jim A. Swanson: And that's comprised of great optimization work that our team's been working on, as well as packaging savings that were well along in terms of the execution in lining those savings up. The balance is in SG&A, and what I would say about that is that 30 of that is related to the normalization of our inventory, and you'll recall that we incurred pretty heavy inventory carrying costs at 23 related to distribution, some part of logistics, and termination-related costs. This is the recovery of the vast majority of that. And then there's another $30 million, or $40 million, rather, of savings that are tied up in operational cost savings across our business, as well as organizational cost savings on infrastructure. And this does include, unfortunately, headcount reductions, and there's a component of indirect spend. But let's break it down.

That does include unfortunately.

And there is a component of indirect spend that really break it down in terms of being able to quantify that over the course of the year on a quarterly basis.

Love to do much of the execution around this we're targeting have done late in Q1.

Expect it to be Q2 through the balance of the year.

Very clear and then maybe just last question Jim you know.

Obviously over the course of the December and January there was a lot of.

Questions around the Red Sea I recognize probably right now it's just the logistics challenge of a two week delay, but just curious to know with spot rates.

Recognize a lot of companies go through contracts, but spot rates.

Going up three ex Forex versus November and potential surcharges can you maybe just kind of walk through maybe just the what would be the impact if the rates hold over the course of the next two quarters at these levels. Thank you.

Jim A. Swanson: In terms of being able to quantify that over the course of the year, on a quarterly basis, that we have to do much of the execution around this, which we're going to have done late in Q1. And so you'd expect it to be Q2 through the balance of the year. Very clear.

Well, what we can speak to thus far is we've got long term contracts in place with certain of our ocean carriers.

Jim A. Swanson: And then maybe just last question, Jim, you know, obviously, over the course of December and January, there's a lot of questions around the Red Sea, recognized probably right now, it's just a logistics challenge, a 2-week delay, but just curious to know what the spot rates are... I recognize a lot of companies go through contracts, but with spot rates going up 3X, 4X versus November and potential surcharges, can you maybe just kind of walk through maybe just what would be the impact if the rates held over the course of the next two quarters at these levels? Thank you. Look, all we can speak to thus far is that we've got long-term contracts in place with a curtain of our ocean carriers into date. We have been incurring by and large those spot rates during markets, nor are we incurring the surcharges.

To date.

We've not been incurring are by and large those spot rates are in the market nor are we incurring.

The surcharges, so thus far.

Laurent: Anticipate that Eddie and vehicle.

One of our business.

Okay.

Okay, well, thank you very much Jamie.

Yes.

Okay. Thanks, so much for taking the questions.

You bet.

The next question comes from Abby <unk> with Piper Sandler. Please proceed.

Abby: Great. Thanks for taking the question just in terms of the gross margin expansion for the year I understand the guidance for the first time.

What gives you confidence in that in the expansion in the second half and is that peak pass.

Issue that could drive them you know.

More promotional cadence of that product like implied in that guide already and then just secondly, I think you talked a lot about how are you thinking about the footwear business at Columbia.

Jim A. Swanson: Thus far, we don't anticipate that it will have a meaningful impact on our business. Okay. Thank you. Thank you very much.

Yeah.

Now I'll touch on the first part of that and then pass it over to Tim as it relates to the footwear part of the question.

Operator: Okay, thanks so much for taking the question. Subs by www.zeoranger.co.uk. The next question comes from Abby Zveznik. Piper Sandler, please proceed.

Teams of the gross margin I think keep in mind. The single biggest driver or would you consider mid year in its entirety in the gross margin expansion that we've got planned.

Abby Zveznik: Great, thanks for taking the question. Just in terms of gross margin expansion for the year, I understand the guidance for the first half, but I guess what gives you confidence in the expansion in the second half? And is that this PFAS issue that could drive a more promotional cadence for that product, like implied in that guide already? And then, second, I think you talked a lot about Sorrel, but how are you thinking about the footwear business at Columbia for this year? Thank you.

We are in much healthier shape in terms of the underlying quality of our inventory.

Throughout 2023, and we were working through a fair amount of excess inventory the overall assortment of level.

Within our business across our DSD business.

Our retail stores themselves will be a better assortment. So that gives us gives us that confidence in terms of what youre seeing.

And the gross margin gains.

Jim A. Swanson: I'll touch on the first part of that, and then I'm going to pass it over to Tim as it relates to the footwear part of the question. As it pertains to the growth margin, I think, keep in mind the single biggest driver when you consider the year in its entirety in the growth margin expansion that we've got planned, you know, we're in much healthier shape in terms of the underlying quality of our inventory. Throughout 2023, you know, we worked through a fair amount of access to inventory; the overall assortment of what we'll have within our business, across our agency's business, So that gives us some of it, gives us that confidence in terms of what you're seeing in the growth margin. James, John, for providing us here today. Thank you for your attention. Can you hear us?

<unk>.

Got it.

We're providing here today.

Speaker Change: Okay, Andrew can you hear us.

So this isn't the right inventory level.

As it relates to the Columbia footwear Columbia's.

Andrew: It doesn't take presence in winter.

Well, although we do have a new set of products.

Launching in spring 'twenty four.

Max which is.

Andrew: Oh.

Andrew: Contingency.

Andrew: No.

Platforms, including Uppers.

Shared midsole and outsole, which has been very well received and then as it relates to our international business. The footwear opponent of our international business is much larger so we have a lot of confidence in what we've got the right approach to the business and we'll continue to invest in that area as well.

Great. Thank you.

Okay. Our next question comes from Paul Louise with Citigroup. Please proceed.

Thanks, It's Tracy Kogan filling in for Paul I had two.

Timothy P. Boyle: This relates to the Columbia footwear, uh, Columbia's, uh, certainly... Tennessee, Consistency of Platforms, including UPPERS. Shared Mid-Soles and Out-Soles, which has been very well received. And then as it relates to our international business, the footwear component of our international business is much larger. So we have a lot of confidence in that we've got the right approach to the business, and we'll continue to invest in that area. Okay, thank you. Alright, our next question comes from Paul Lejuez. Citigroup, Thanks. This is Tracy Kogan filling in for Paul.

Two questions. The first I was wondering if your first quarter guidance contemplates the improvement in performance you've been seeing in January if or if it's more based on what you are seeing in fourth quarter and then I was hoping you could talk more about the U S DTC channel.

You attribute the difference in performance.

E comm versus brick and mortar Archie late in the fourth quarter. Thank you.

Yeah, Tracy as it as it relates to the first quarter and the outlook that we provided certainly January has gotten off to a brisk start within our DTC business from a growth standpoint, we've seen St. Alright same thing as it relates to the wholesale sell through within our.

Paul Lejuez: I have two questions. The first is, I was wondering if your first quarter guidance contemplates the improvement in performance you've been seeing in January or if it's more based on what you were seeing in the fourth quarter. And then I was hoping you could talk more about the U.S. DTC channel and what you attribute the difference in performance in EECOM versus Bricks and Mortar to in the fourth quarter. Thanks.

Our wholesale distribution those those updates are that the impact on our business has been updated in our Q1 outlook.

Jim A. Swanson: Yeah, Tracy, as it relates to the first quarter and the outlook that we provided, personally, January has gotten off to a brisk start within our B2C business. From a growth standpoint, we've seen the same thing as it relates to the wholesale sell-through within our wholesale distribution. Those updates or that impact on the business have been updated in our Q1 outlook. We did build the overall trend for the quarter based on what we were seeing in the fourth quarter. So, it was adjusted in January, but we've been a bit conservative as you think about the balance of the quarter, just knowing how challenging marketplace conditions were in Q4.

Though the overall trend for the quarter.

Based on what we were seeing in the fourth quarter. So we've adjusted January but.

We've been a bit conservative as you think about the balance of the quarter, just knowing now challenging marketplace conditions were in Q4.

And then as it relates to the other part of your question on Q4 in our retail business.

I think we are seeing in our business as well as our wholesale partners.

The brick and mortar brick and mortar businesses tend to do better today than the <unk>.

Digital businesses.

Andrew: So we see.

The consumer to move closer to that.

Timothy P. Boyle: And as it relates to the other part of your question on Q4 and our PECA business, correct? Yeah, I think we're seeing in our business as well as our wholesale partners that brick-and-mortar businesses tend to do better today than the digital business. So we see a belief in the consumer to move the course rate, as construction moves away from highly promotional events. Morley

C Bailey.

Digital and then as it relates to our own E Commerce business that's.

Andrew: A portion of the weakness is.

Our.

Structured move.

From highly promotional events.

The brand be better represented the bulk rice.

E Comm business.

Operator: We talked during the work about how we're planning to make that the true showcase for the brand, so we would expect, over time, less commercial activity. Chris, thank you very much. The next question comes from John Kernan with TD Cowen; please proceed. Good afternoon, this is Krista Zuber on behalf of John.

Andrew: We talked.

Various remarks about how we're planning to make.

Okay great.

So we would expect over time, you have less promotional activity.

Speaker Change: Great. Thank you very much.

The next question comes from John Kernan with TD Cowen. Please proceed.

Good afternoon. This is krista zuber on for John Thanks for taking our questions.

John Kernan: Thanks for taking our questions. That's sort of more of a big picture question, if I could, on the long-term operating margin target. You're now sort of targeting a low teens operating margin. Kind of how do you see the pathway towards that over sort of a timeframe developing from here? I have one follow-up.

Sort of more of a big picture question, if I could on the long term operating margin target I think Tim you said.

You are now sort of targeting a low teens operating margin kind of how do you see the pathway towards that over sort of a timeframe developing from here and I have one follow up thank you.

Timothy P. Boyle: Thank you. Well, clearly, there has to be revenue enhancement. So we're expecting that the investments we're making, during this period and even the prior year, will be extended, and we'll yield revenue growth. This is what's going to be important to the business. We see the kinds of revenue growth that we're excited about internationally; we need to get that kind of growth domestically as well. So I'm confident that we can grow the operating margins back to those numbers. We've historically hit those numbers or greater.

Okay.

Speaker Change: Well clearly there has to be read.

Revenue enhancement, so we're expecting that the investments we're making.

During this period and even in the prior year will be extended and will yield.

Revenue growth. This is what's going to be important to the business. We see the kinds of revenue growth that we're excited about internationally, we need to get that kind of growth domestically as well.

So I'm confident that we can grow the operating margins back to those numbers. We've historically if those numbers are greater.

Timothy P. Boyle: Since the company's history as a public company, we have to be very mindful of our expenses and continue to manage those in a way that our investors are used to seeing. Yeah. I got it. Thanks. And then just on the inventory basis, can you just give us a little sense of kind of what you're seeing in the wholesale channels with your few wholesale partners and sort of the expectation of where you see inventory leveling out, given all your, you know, plans for reorganization, restructuring, and Fiscal 24. Thanks very much.

This is the company's history.

As a company.

Speaker Change: We will have to be very mindful of our expenses continue to manage those in a way.

Our investors are used to seeing us.

Manage those.

Got it thanks, and then just on the inventory basis can you just give us a little sense of kind of what youre seeing in the wholesale channels with your key wholesale partners and sort of the expectation of where you see inventory leveling out given all year.

Plans for reorganization restructuring in fiscal 'twenty four thanks very much.

Right.

We saw.

Significant conservatism in our.

Timothy P. Boyle: But we saw significant conservatism in our... Wholesale Partners' purchasing patterns, not only in preparation for Fall 24, but also in preparation for Spring 24, where there was a lot of noise about PFAS, etc. So I think the purchasing that's been made by our retail partners and wholesale partners is on the conservative side. We're prepared to help them a bit with inventory that we'll have available. But we're not going to take, you know, the risk.

Wholesale partners.

Dressing pattern not only in.

In preparation for fall 'twenty, four but also in preparation for bolt.

Spring 'twenty four.

There was a lot of noise about PFS et cetera.

So I think the purchasing.

But our retail partners.

Wholesale partners.

So the good side.

Speaker Change: Yeah, It was inventory that will be.

We are available, but we're not going to do.

Great.

Risks.

Inventory too.

Satisfy anything to date.

What about in the purchase.

Timothy P. Boyle: We're happy to purchase anything that they've got. Thank you for listening. Thank you. So, my expectations are that the inventories at retail will be quite... New York City would be in a much healthier position. So it can be a substance for, you know, we believe it to be quite healthy, despite the fact that, you know, we do have to be awfully cautious, it's incessant.

Let's just conservative.

So my expectations are that inventory.

Retail will be right.

It would.

It would be in a much healthier position and I think Chris said just to put that in context, when we look at where retailers inventory levels or the channel. Currently is this is specific to the U S. First in Columbia, and the Sorel brand's inventory channel is actually down year on year.

So it gives you some sense for us.

We believe it to be we believe it to be quite healthy. Despite the fact that retailers being awfully cautious as Tim said is done.

Operator: Take care. The next question comes from Alex Perry with Bank of America. Please proceed. Hi, thanks for taking my question. I just wanted to ask about the overall promotional environment. I guess what we should think about the promotional environment right now compared to last year? And then, you know, Jim, how do we square that away with your comments that inventory seems to be in a much healthier place compared to last year? Thank you.

Speaker Change: Thank you best of luck.

The next question comes from Alex Perry with Bank of America. Please proceed.

Hi, Thanks for taking my question I, just wanted to ask about the overall promotional environment I guess, how should we think about the promo environment right now compared to last year and then Jim how do we square that away with your comments that inventory seems to be in a much healthier place compared to last year.

Timothy P. Boyle: Well, I can speak to the company's commercial activities have moderated, certainly, as I said earlier, in the e-com space, so we can be in a better position with the brands felt in our most visible environment. I would expect that as inventories moderate across the channel, you're going to see much less promotional activity. So, of course, it depends on the particular retailer and what their own financial... and Jim Duffy. Thank you for your time. And I think this is a great opportunity to start to get a little bit of insight into what our fiscal health is, but I think, in general, we'll see less promotional activity. And that's, by and large, Alex. That's not what's reflected in our outlook as well.

Thank you.

Jim: Well I can speak to the company's promotional activities.

Moderated certainly as I said earlier in the E com space. So we can be in a better position with.

The brands.

In our most visible.

Barnes.

I would expect that as inventories moderate across the channel youre going to see much less promotional activity. So of course it depends on the screen.

The retailer and what they are their own financial.

The physical health is but I think in general you will see less promotional activity and that's by and large all that was reflected in our outlook as well.

Jim A. Swanson: You know, as our inventory is cleaner, as the retailer's inventory is clean, you know, that's more or less reflected, I think, in the first part of the year, Q1. Personally, they're working to clean up the remaining inventory they have coming out of all this, there's some promotions out there, but it's becoming increasingly tempest-fogged increasingly as we go throughout the year, and that's further normalizing the health, you know, that should be a net positive for how we're thinking about gross localization. Perfect, that's really helpful.

Jim: Our inventory is cleaner is the retailers' inventory is clean.

More or less reflected I think that's part of the year Q1, certainly they're working to clean up remaining inventory that's coming out of the fall seasons are there some promotions out there, but it is tipped us increasingly as we go throughout the year and that further normalizes is healthy that should be a net positive to how we're thinking about gross margin.

Perfect. That's really helpful best of luck going forward.

Operator: Best of luck going forward. Our next question comes from Mauricio Serna with UBS. Good afternoon.

Yes.

The next question comes from Richard Hill, Serna with UBS. Please proceed.

Mauricio Serna: Thanks for taking my question. Maybe just thinking about the sales side and from that 2% to 4% decline, what does that imply for the underlying growth of the outdoor category? Any difference that you're seeing between apparel and footwear?

Great.

Thanks for taking our question, maybe just thinking about the sales guidance you know from that 2% to 4% decline now what does that imply for the underlying growth of the outdoor category any differences that you're seeing between apparel and footwear and maybe is there like any impact as you can.

Timothy P. Boyle: And maybe there is any impact that you could attribute to your efforts or your initiatives to reduce the PFAS product or the restocking that's happening because of that? Yeah, our basic underlying products have not changed. We've merely changed the chemistry that's applied to the product to a chemical that has equal performance but no PFAS. And I think there is, frankly, some moderation in the demand for outdoor products. Certainly, in the U.S.

To your efforts or your initiatives to reduce the.

P fast product that he's talking about happening because of that.

Yeah, our basic underlying products.

That change, we merely change the chemistry that supply to the product to them.

Jim: Two a chemical that has equal performance, but no PFS.

Jim: And I think there is frankly, some moderation in demand.

As the products.

Certainly in the U S. So, we're saying up but.

Mauricio Serna: So we're saving up, but, you know, at the end of the day... When there's a moderation in terms of total demand, that's going to impact Less Financially Capable Companies More Quickly Than They Will. And then just a quick follow-up. On the gross margin, I see a cadence of, you know, like some 70, 110 basis points of expansion in the first quarter. And then the first half is slightly up.

At the end of the day.

Balance sheet matters.

There was a moderation in the church in total demand that that's going to impact.

Less financially capable companies more quickly than they will.

Yes.

Got it and then just a quick follow up on the gross margin I feel like the cadence as you know like some 70 110 basis point expansion in first quarter and then the first half is like like me up so like I guess, what would that imply some contraction in the second and the second quarters is one.

Mauricio Serna: So, like, I guess that that implies some contraction in the second quarters, just wanting to understand what's behind that. And very lastly, too, a quick follow-up on the temporary outlet stores. I mean, how does that work in terms of, like, how long are they supposed to be open, given, you know, they're called temporary?

What's behind that.

Jim: Very likely two quick follow up on the temporary outlet stores.

How does that work in terms of like how how long are they supposed to be open given they are called temporary and you know how ashamed also like impact your gross margin because of I guess like they tend to be more promotional.

Timothy P. Boyle: And, you know, how sharing those impacts your gross margin because, I guess, like, they tend to be more promotional? Yeah, let me talk about the outlet, the temporary outlet source first, and then maybe I'll ask Jim to talk a little bit about the gross margin topic. So, when we knew at the beginning of last year, maybe even the last part of the prior year that we had this inventory, there were two strategies that we took to liquidate the inventory. One was to approach the typical Ben Hurst that would buy this kind of stuff, T.J. Maxx, etc.

Thanks, Yes, let me start with the.

Outlet.

Temporary outlet stores first and maybe I'll ask Jim to talk a little about the gross margin topic.

So when we when we knew at the beginning of last year or maybe even the last part of the prior year was that we had too much inventory there were two strategies that we took.

Jim: Liquidate the inventory one was that we will approach with typical.

Vendors that with by the Scottish Theft T J Maxx, and saturate and we have a long history with and there was so much inventory around frankly that it became a much clearer than we could we can clear these inventories through our own temporary stores, we can open them profitably, which we haven't been able to do.

Timothy P. Boyle: That we have a long history with. And there was so much inventory around, frankly, that it became much clearer that we could clear these inventories through our own temporary stores if we could open them profitably, which we have been able to do. So we're going to maintain the stores as long as it's necessary to complete the final liquidation of the excess inventory. And then we'll analyze how many of them ultimately end up being kept, but by far, the majority of them will likely be closed in the 30s, 2024.

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So we're going to maintain.

Jim: The stores as long as is necessary to complete the final liquidation of the.

Excess inventory and then we'll take we'll analyze how many of them ultimately end up being.

<unk> kept.

Jim: By far the.

Jim: The majority of them will be likely close.

Jim: During 2024.

Jim A. Swanson: Yeah, retail just pertains to the growth margin and why you would expect greater growth margin expansion in Q1 as compared to the first half. Bear in mind, through the first quarter, we still anticipate lower inbound freight costs. Those will carry through basically the first quarter, and we've seen about a 300 basis point benefit in Q2 through Q4 of 23, and so it's the continuation of that into Q1. And then there's an offset to the degree we are continuing to work through sort of our inventory liquidation efforts, and then I should mention, in the second quarter of last year, we did have some inventory obsolescence provisions that were favorable. This will be, I think, a difficult competition.

Yes, the burrito as it pertains to the gross margin and why we would expect greater gross margin expansion in Q1 as compared to the first half the bear in mind through the first quarter, we still anticipate lower inbound freight costs.

Those will carry through basically the first quarter and we've seen about a 300 basis points benefit in Q2 through Q4 of 'twenty three and so it's the continuation of that into Q1 and then there is an offset to the degree we are continuing to work through certain of our inventory liquidation efforts and then I should mention.

In the second quarter.

Last year.

In the second quarter of last year, we did have some inventory obsolescence provisions that were favorable but will be it'll be a didn't make a difficult comp and then Tim was just pointing out to me as well our distributor business from a growth standpoint carry the lower gross margin. So that'll that'll have an impact here.

Jim A. Swanson: And then Tim was just pointing out to me as well, you know, a distributor business from a growth standpoint carries a lower growth margin, so that'll have an impact here in the first quarter. PewDiePie, or rather PewDiePie, Okay. Very helpful. Thanks so much. If there are any remaining questions, please indicate so by pressing star 1 on your touch tone. We appear to have no further questions in queue.

In the first quarter.

Or rather in Q2.

Speaker Change: Got it very helpful. Thanks, so much.

If there are any remaining questions. Please indicate so by pressing star one on your Touchtone phone.

We appear to have no further questions in queue I'd like to turn the call back to management for any closing remarks.

Jim A. Swanson: I'd like to turn the call back to management for any closing remarks. Thank you, Operator. This is Jim. So, I just want to point out that I'm personally very disappointed with the results that we provided today. Our global team is focused on returning and surpassing the levels of growth and profitability that we've historically produced.

Thank you operator, yeah. This is Tim so I just wanted to point out I'm personally very disappointed.

Tim: Good day.

Our global team is focused on returning <unk>.

Passing the levels of growth and profitability that we have historically produced.

Jim A. Swanson: We look forward to talking to you next quarter about how well we're doing on that plan. Thank you. Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Thanks, John. See you later. Take care.

So we look forward to talking to you next quarter, but how well we're doing on that plan.

Speaker Change: Thank you.

Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Thanks, John failure.

Hey, Ken.

Yeah.