Q1 2024 Columbia Sportswear Co Earnings Call

Operator: Greetings. Welcome to the Columbia Sportswear first quarter 2024 financial results conference call.

Greetings and welcome to the Columbia Sportswear first quarter 2024 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.

Operator: 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 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Andrew Burns.

Zero on your telephone keypad. Please.

Please note this conference is being recorded.

I will now turn the conference over to your host Andrew Burns.

Andrew Shuler Burns: Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's first 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.

Andrew Shuler Burns: You may begin.

Andrew Shuler Burns: Good afternoon, and thanks for joining us to discuss Columbia sportswear company's first quarter results. In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary on financial review presentation, explaining our results. This document is also available on our Investor Relations website, Investor Dot Columbia Darko.

Speaker Change: 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, and General Counsel Peter Bragdon.

Andrew Shuler Burns: 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 and General Counsel Peter Bragg. This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations, or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement is subject to many risks and uncertainties, and actual results may differ materially from what is predicted.

Speaker Change: This conference call will contain forward looking statements regarding columbia's expectations anticipations or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward looking statement is subject to many risks and uncertainties and actual results may differ materially from what is projected.

Andrew Shuler Burns: 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. 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.

Andrew Shuler Burns: Many of these risks and uncertainties are described in Columbia's SEC filings, we caution that forward looking statements are inherently less reliable the historical information, we do not undertake any duty to update any of the forward looking statements. After the date of this conference call for the forward looking statements actual results or to changes in our expectations.

Andrew Shuler Burns: I'd also like to point out that during the call. We may reference certain non-GAAP financial measures, including constant currency net sales for further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures. Please refer to the supplemental financial.

Andrew Shuler Burns: For further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures, please refer to the Supplemental Financial Information section and financial tables included in our earnings release and the appendix of our CFO Commentary and Financial Report. 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,

Andrew Shuler Burns: All information section and financial tables included in our earnings release, and the appendix of our CFO commentary and financial review.

Andrew Shuler Burns: 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.

Timothy P. Boyle: Thanks, Andrew, and good afternoon. I'm pleased to report that 2024 has started out broadly in line with our expectations. We are reiterating our full-year net sales outlook while modestly raising our diluted earnings-per-share range. In this challenging environment, we continue to take a disciplined approach to expense management, and our commercial teams are working to maximize sales across all channels. Our Fortress Balance Sheet enables us to take a thoughtful approach to unlocking the long-term growth and profit improvement opportunities we see across the business.

Tim: Thanks, Andrew and good afternoon I'm pleased to report that 2024 has started out broadly in line with our expectations.

Tim: We are reiterating our full year net sales outlook, while modestly raising our diluted earnings per share range.

Tim: In this challenging environment, we continue to take a disciplined approach to expense management and our commercial teams are working to maximize seamless across all channels.

Tim: Fortress balance sheet enables us to take a thoughtful approach to unlocking the long term growth.

Tim: Profit improvement opportunities, we see across the business during the quarter, we made meaningful progress on our top priorities.

Timothy P. Boyle: During the quarter, we made meaningful progress on our top priority. Our Inventory Reduction Plan has yielded substantial benefits. Inventory was down 37% year-over-year at the end of the quarter.

Tim: Our inventory reduction plan has yielded substantial benefits inventory was down 37% year over year in the quarter.

Timothy P. Boyle: I'm proud of our team's efforts to navigate the supply chain challenges of the last several years while generating healthy gross margins. We are now shifting our focus towards longer-term supply chain goals, including improving inventory terms and enhancing the speed and efficiency of our operation. Growth is vital to our success.

Tim: I'm proud of our team's efforts to navigate the supply chain challenges of the last several years, while generating healthy gross margins.

Tim: We are now shifting our focus towards longer term supply chain goals, including improving inventory churns and enhancing the speed and efficiency of our operations.

Tim: Roku is vital to our success, we are implementing strategy across the portfolio to accelerate the business.

Timothy P. Boyle: We are implementing strategies across the portfolio to accelerate the business. For Columbia, we're focused on bringing younger active consumers into the brand through a reinvigorated product line that further emphasizes innovation, performance, and style. On the marketing front, we're targeting a more balanced, full-funnel approach to drive consideration from new customers. We are also focused on elevating our product assortment and enhancing our in-store retail presentations across all channels. We have several proof points across the globe that this strategy is successful.

Tim: For Colombia.

Tim: Focused on bringing younger consumers into the brand through a reinvigorated product one that further emphasizes innovation performance on style on.

Tim: On the marketing front, we're targeting a more balanced portfolio approach to drive consideration from new customers.

Tim: We are also focused on elevating our product assortment and enhancing our in store retail presentations across all channels.

Tim: We have several proof points across the globe with this strategy is successful we have driven meaningful growth in recent years in China and several markets across our Europe direct and distributor businesses.

Timothy P. Boyle: We've driven meaningful growth in recent years in China and several markets across our Europe Direct and distributor business. We know that when we target the right consumers with our innovative products, we win in the market. In our emerging brands, we have new leaders at Sorrell and Prana formulating the brand and product strategies to fuel their next phase of growth. Mountain Hardwear has strong momentum from its recent brand refresh, and the team is thinking bigger as they map out paths to meaningfully scale the business.

Tim: We know that when we target the right consumers with our innovative products.

Tim: Win in the marketplace.

Tim: And our emerging brands, you have new meters that Sorel and prana formulated in our brand and product strategies to fuel the next phase of growth.

Tim: Mountain hardware it has strong momentum from its recent brand refresh and the team is thinking there.

Tim: Napa paths to meaningfully scale the business.

Timothy P. Boyle: Turning to our profit improvement program, we're on track to deliver between $125 and $150 million in savings by 2026, including $75 to $90 million in cost savings this year. We are eliminating expenses associated with carrying excess inventory and driving cost efficiencies throughout our supply chain. We've also begun utilizing indirect spending savings. For example, during the quarter, we completed a reduction in force. It's never easy to lose valued members of our team who have contributed to our company during their tenure.

Tim: Turning to our profit improvement program, we are on track to deliver between 125 and $150 million in savings by 2026, including $75 million to $90 million in cost savings this year.

Tim: We are eliminating expenses associated with carrying excess inventory and driving cost efficiencies throughout our supply chain.

Tim: We've also begun realizing indirect spend and savings.

Tim: During the quarter, we completed a reduction in force.

Speaker Change: It's never easy to leave valued members of our team.

Speaker Change: Who have contributed to our company during my tenure.

Timothy P. Boyle: Our teams handled this process with respect and thoughtfulness, consistent with our core values. We remain confident that our fortress balance sheet, differentiated brand portfolio, and strategies position us to reaccelerate growth and capture market share over time. I will now review our first quarter financial results. Net sales decreased 6% year over year to $770 million.

Tim: Teams handled this process with respect and thoughtfulness.

Tim: With our core values.

Tim: We remain confident that our fortress balance sheet differentiated brand portfolio and strategies position us to reaccelerate growth.

Tim: Capture market share over time.

Tim: I will now review first quarter financial results.

Tim: Net sales decreased 6% year over year to $770 million.

Jim A. Swanson: This exceeded the high end of our guidance range, primarily driven by earlier times of spring pool surf ship. Direct-to-consumer net sales increased 3%, led by Brecht and Mortar Road. E-commerce sales declined as we anniversary last year's promotional activity. Our wholesale business declined 14% year-over-year, primarily reflecting lower spring 2024 orders. Gross Margin expanded to 190 basis points, lower inbound freight costs, and favorable channel mix more than offset promotion length. SG&A expenses were essentially flat, as higher DTC expenses were offset by lower supply chain and variable demand creation spending. Unit earnings per share decreased 4% to 71%.

Tim: This exceeded the high end of our guidance range, primarily driven by earlier timing of spring wholesale shipments.

Tim: Direct to consumer net sales increased 3% led by Brett.

Tim: Mortar rose <unk>.

Tim: E Commerce sales decline as we anniversary last year's promotional activity.

Tim: Our wholesale business declined 14% year over year, primarily reflecting lower spring 'twenty four orders.

Tim: Gross margin expanded 190 basis points as lower inbound freight costs and favorable channel mix more than offset promotional activity.

Tim: SG&A expenses were essentially flat.

Tim: <unk> expenses were offset by lower supply chain and variable demand creation spending.

Tim: Diluted earnings per share decreased 4% to 71 cents.

Jim A. Swanson: I'll now review first quarter year-over-year net sales growth by region. For this review, I'll reference constant currency growth rates. Overall, North America remains our most challenging market. We are facing several headwinds in this market, including consumers continuing to grapple with inflationary pressures, which is impacting soft goods demand. Traditional outdoor category trends are weak, particularly in footwear, and retailers are taking a cautious approach to placing future season orders. Outside of North America, we have stronger trends in several markets, including China, Japan, and our Europe Direct business.

Speaker Change: I will now review first quarter year over year net sales growth by region.

Tim: Give you a reference constant currency growth rates.

Tim: Overall, North America remains our most challenging market.

Tim: We're facing several headwinds in this market, including consumers continue to grapple with inflationary pressures, which is impacting soft goods demand.

Tim: Traditional outdoor category trends are weak, particularly in footwear and retailers are taking a cautious approach in placing future season orders.

Tim: Outside of North America, we have stronger trends in several markets, including China, Japan, and our Europe direct businesses.

Jim A. Swanson: In the U.S., net sales decreased 8%, driven by a mid-teens percent decrease in wholesale sales, resulting from lower spring 2014 orders. USDTC net sales were down slightly. Across all channels, we experienced strength in January, fueled by favorable winter weather, followed by softer trends in February and March.

Tim: In the U S. Net sales decreased 8% driven by mid teens percent decrease in wholesale sales, resulting to lower spring 'twenty four orders U S. DTC net sales were down slightly.

Tim: Across all channels, we experienced strength in January fueled by favorable winter weather, followed by softer trends in February and March.

Jim A. Swanson: USDTC e-commerce net sales were down midteen percent, Sorrell.com was particularly hard hit in the first quarter, and the overall e-commerce environment remains challenging. Since late last year, we have been proactively managing promotional activity on Columbia.com to help establish the site as the best expression of the brand. We know that our site is already an important destination for our younger, active consumers. We want to ensure that when they visit Columbia.com...

Tim: U S. DTC E Commerce net sales were down mid teens percent.

Tim: Sorel Dotcom was particularly hard hit in the first quarter.

Tim: Overall e-commerce environment remains challenging.

Tim: Since late last year, we have been proactively managing promotional activity on Columbia Dot com to help establish the site is the best expression of the brand.

Tim: We know that our site is already an important destination for our younger active consumers, we want to ensure that when they visit Columbia Dot com, they see our latest products and innovations with enriched brand storytelling.

Jim A. Swanson: They see our latest products and innovations with enriched brand storage. U.S. DTC brick-and-mortar sales increased by high single-digit percentage driven by the contribution from temporary clearance locations, new stores opened over the last year, and to a lesser extent, improved store productivity. In 2023, we used our fleet of outlet stores and temporary clearance locations to profitably liquidate excess inventory. This year, we will continue to leverage these stores to manage inventory levels, including PFAS inventory, and to drive sales as consumers seek out value in the market. Latin America, the Asia Pacific region, or LAAP net sales increased 7%.

Tim: U S DTC brick and mortar sales increased high single digit percent driven by the contribution from temporary clearance locations.

Tim: New stores opened over the last year and to a lesser extent improve store productivity.

Tim: 2023, we used our fleet of outlet stores and temporary class locations.

Tim: <unk> will liquidate excess inventory.

Tim: This year, we will continue to leverage these stores to manage inventory levels, including PSA as inventory.

Tim: To drive sales as consumers seek out value in the marketplace.

Tim: Latin America Asia Pacific region, or AEP net sales increased 7%.

Jim A. Swanson: China net sales increased by high 20% led by exceptionally led by exceptional e-commerce performance across our platform partners. In fact, the team was proud to receive special recognition from TikTok this quarter as one of the fastest-growing outdoor brands on the platform. The Spring 24 Transit line, a premium China-specific collection, is outpacing last year's sell-through and clearly resonating with younger Chinese consumers. We expect China to continue being one of the fastest growing parts of our business in 2024.

Tim: China net sales increased high 20%.

Tim: Led by exceptionally.

Tim: Led by exceptional e-commerce performance across our platform partners. In fact, the team was probably received special recognition Boucek dropped this quarter as one of the fastest growing outdoor brands on the platform.

Tim: The spring 2000 Ford Transit line of premium charter specific collection.

Tim: Outpacing last year sell through is clearly resonating with younger Chinese consumers.

Tim: China to continue being one of the fastest growing parts of our business in 2024.

Jim A. Swanson: Japan net sales increased low double-digit percent sales benefit from increasing foreign tourist activity, which is helping to offset softer domestic consumer spending, re-enact sale of the coin mid-single-digit percent. LAP distributor markets decreased by 20%, reflecting a greater portion of spring 2024 orders, tripping in the fourth quarter of last year, compared to the first quarter, excluding the impact of shipment timing. Distributor sales were relatively flat.

Tim: Japan net sales increased low double digit percent sales benefits from increasing foreign tourist activity, which is helping to offset softer domestic consumer spending.

Tim: We didn't have sales declined mid single digit percent.

Tim: L. A P distributor markets decreased 20%.

Tim: Selecting a greater portion of spring 'twenty four orders shipping in the fourth quarter of last year compared to the first quarter.

Tim: The impact of shipment timing L. A P distribute yourself or relatively flat.

Jim A. Swanson: Europe, Middle East, and Africa region or EMEA net sales decreased six, but Europe Direct net sales were essentially flat as healthy DTC growth offset the impact of lower spring 24 wholesale. Columbia Brand continues to perform well in the marketplace, measured by healthy DTC and wholesale sales rates, despite economic and geopolitical conditions. This quarter, we extended our Popular Hike Society program into France following its successful launch in the UK last year. As a reminder, we have Columbia Hike Society programs across several European and Asian direct markets.

Tim: Europe, Middle East and Africa region, or EMEA net sales decreased 6%.

Tim: Europe direct net sales were essentially flat as healthy DTC growth offset the impact of lower spring 'twenty for wholesalers.

Tim: Columbia brand continues to perform well in the marketplace measured by healthy DTC and wholesale sell through despite economic and geopolitical pressures.

Tim: This quarter, we extended our popular hydrogen society program into France. Following its successful launch in the U K last year.

Tim: As a reminder, we have Columbia Heights Society programs across several European and Asia direct markets.

Jim A. Swanson: This series of events allows young hikers to meet like-minded people, to explore the outdoors, and learn about the Columbia brand's technology. To further strengthen Columbia's presence in the important height category, we're continuing our exclusive partnership with Megamodels. This year, it includes a series of 23 hiking events that take place across Germany, Austria, and Switzerland, with each event typically fielding over 1,000.

Tim: This series of events allows young heifers to meet Likeminded people to explore the outdoors and learn about the Columbia brands technologies.

Tim: The British Columbia's presence in the important high category, we're continuing our exclusive partnership with Mega model.

Tim: This year. It includes a series of twenty-three hiking events that take place across Germany, Austria, and Switzerland with each of them typically fielding over 1000 participants.

Jim A. Swanson: Our EMEA distributor business declined by a low 40%, reflecting a greater portion of spring 24 orders shipping in the fourth quarter of last year compared to the first quarter. Excluding the impact of shipment timing, EMA and distributor sales were down only slightly, despite several markets being impacted by geopolitical conditions. Canada net sales declined 11% as lower spring 24 wholesale orders were partially offset by modest DTC growth.

Tim: Our EMEA distributor business declined low, 40%, reflecting a greater portion of spring 'twenty four order shipping in the fourth quarter of last year compared to the first quarter.

Tim: Excluding the impact of shipment timing.

Tim: Distributor sales were down only slightly despite several markets being impacted by geopolitical conflicts.

Tim: Canada net sales declined 11% as lower spring 'twenty four wholesale orders.

Tim: Actually offset by modest DTC growth.

Timothy P. Boyle: Some U.S. and Canadian consumers are seeking out value in the marketplace, which is driving healthy performance at our outlets. Looking at performance by brand, Columbia brand net sales decreased 6%, reflecting lower spring orders, partially offset by DTC brick and mortar growth. The delivery of our spring shipments is well underway, and we're excited for consumers to gain access to our newest product innovation. Our industry-leading cooling and sun protection innovations, like Omni Freeze and Omni Shade Sun Deflector, differentiate Columbia from the competition. This spring, we launched OmniShade broad-spectrum airflow, offering exceptionally breathable sun protection with Omni WIC evaporation for fast drying next to skin.

Tim: Similar to the U S. Canadian consumers are seeking out value in the marketplace.

Tim: Which is driving healthy performance at our outlet stores.

Tim: Looking at performance by brand Columbia brand net sales decreased 6%, reflecting lower spring orders, partially offset by DTC brick and mortar growth.

Tim: Delivery of our spring shipments is well underway.

Tim: Excited for consumers to gain access to our newest product innovations.

Tim: Our industry, leading cooling and Sun protection innovations like omni freeze and omni shade Sun Deflector differentiate Colombia from our competition.

Tim: This spring, we launched omni shade broad spectrum airflow operating exceptionally breathable Sun protection with omni with evaporation for fast growing next the skin comfort.

Timothy P. Boyle: We're also focused on re-energizing PFG with new products like the PFG Uncharted Collector. This new assortment features a younger, more active fit, Tech Pack Performance, and New Fabrication. In footwear, we launched the OMNIMAX system, which combines versatile cushioning, enhanced stability, and increased traction. OmniMax is available in a variety of hiking, trail running, and fishing styles.

Tim: We're also focused on re energizing PFG with new products like the PFG Unchartered collection.

Tim: This new assortment features a younger more active.

Tim: Check back performance and new fabrications.

Tim: In footwear.

Tim: Once the omni Max system, which combines versatile cushioning enhanced stability and increased traction.

Tim: New matches available in a variety of IGT trail running an efficient styles.

Timothy P. Boyle: In our DTC stores, we supported the launch with in-store and window displays, helping to drive encouraging sell-throughs of higher price point Omniac styles like the Kono. I'm encouraged by the consumer response to several of the new footwear and apparel offerings that I referenced. These are early indications that the Columbia brand strategies to attract new consumers and drive long-term growth are on the right track. We look to build on these successes in the coming seasons and years as we expand our consumer base.

Tim: Our DTC stores, we supported the launch with in store and window displays helping to drive encouraging sell throughs.

Tim: Our price point Omnia styles like the Kronos.

Tim: I'm encouraged by the consumer response to several of the new footwear and apparel offerings.

Tim: Reference these are early indications that the Columbia brand strategies to attract new consumers and drive long term growth are on the right path.

Tim: We look to build on these successes in the current seasons and years as we expand our consumer base.

Timothy P. Boyle: In February, Columbia's innovative spirit was on full display as our OmniHeat Infinity technology helped protect Intuitive Machines' lunar lander on its historic mission to the moon. Columbia Sportswear is a proud scientific partner of Intuitive Machines, and its Thermal Reflective Technology helped protect the NOVA lunar lander from the extreme temperatures of outer space.

Tim: In February Colombia's innovative spirit was on full display as our omni heat Infinity technology helped project intuitive machines lunar Lander score mission for the Moon.

Tim: What's worse I'm proud scientific partner of intuitive machines.

Tim: Our thermal reflective technology helped protect the Nova sea lunar lander from the extreme temperatures of outer space. This partnership brings Columbia technology full circle.

Timothy P. Boyle: This partnership brings Columbia's technology full circle. We're sending a product to the moon that was inspired by NASA spaceflight. The mission was featured in hundreds of media outlets, creating billions of impressions worldwide. We are proud to share that we've signed on to Intuitive Machines' next mission, scheduled for later this year. In April, we partnered with Academy Sports and Outdoors to host a special Bubba Wallace Meet and Greet in Dallas ahead of the NASCAR race at Texas Boater's B-Way.

Tim: We're selling a product to the moon that was inspired by NASA space blankets.

Tim: The mission was featured in hundreds of media outlets, creating billions of impressions worldwide.

Tim: We are proud to share that we've signed onto intuitive machines next mission scheduled for later this year.

Tim: In April we partnered with Academy sports and outdoors.

Tim: Host a special mobile wallets meet and greet in Dallas, the head of the NASCAR race at Texas Motor Speedway.

Timothy P. Boyle: Both Columbia PFG and Academy have a long history with NASCAR, and this event created a unique opportunity to further connect Bubba's energetic fan base with our brand. The week was capped off with Bubba driving an Academy and P.H.E. wrapped car on his way to a 7th place finish.

Tim: Both Columbia, PFG and Academy have a long history with NASCAR and this event created a unique opportunity to further connect others energetic fan base with our brand.

Tim: Weak was capped off with other driving Academy Phe Rep card honest way to seven members.

Timothy P. Boyle: As we have mentioned before, the Wholesale Channel is a top priority for the Columbia brand, and we're excited to leverage our ambassadors to create brand heat with our key strategic partners. This spring, we launched our latest collaboration with New York-based Boutique Kiff, featuring apparel, accessories, and footwear designed for outdoor camping. The collection blends functionality with style, while appealing to a younger audience, shifting to our emerging brands. As a reminder, our emerging brand portfolio sale next is predominant in North America, which is our most challenged market. The headlines we outlined earlier on the call are Evan and our emerging brands performance. Sorrel brand net sales decreased 24% with challenging trends across DTC and wholesale.

Tim: As we have mentioned before the wholesale channel remains a top priority for the Columbia brand and we're excited to leverage our ambassadors to create brand heat with our key strategic partners.

Tim: This spring we launched our latest collaboration with New York based boutique yeah.

Tim: Feature of apparel accessories, and footwear designed for outdoor camping the collection blends functionality of style, while appealing to a younger audience.

Tim: Shifting to our emerging brands as a reminder, our emerging brand portfolio sales mix is predominantly in North America, which is our most challenged market the headwinds we outlined earlier on the call.

Tim: And our emerging brands performance.

Tim: Sorel brand net sales decreased 24% with challenging trends across DTC and wholesale.

Timothy P. Boyle: With new leadership now in place, the Sorrell team is focused on revitalizing the brand, building a compelling product range, and driving long-term sustainable growth. I remain confident in the future of the Sorrell brand. Mountain Hardware is building on the momentum from its recent brand refresh. In the quarter, net sales increased 17 percent, reflecting earlier timing of spring shipments and DTC growth. The product line and brand positioning are on track, and the team is focused on accelerating growth. Croninet sales decreased 4% with declining wholesale partially offset by modest DTC growth.

Tim: With new leadership now in place the Sorel team has focused on revitalizing the brand building a compelling product.

Tim: And driving long term sustainable growth.

Tim: I remain confident in the future of the Sorel brand.

Tim: Mountain hardware building on our momentum from its recent brand refresh in the quarter net sales increased 17%.

Tim: Reflecting earlier timing of spring shipments and DTC growth.

Tim: The product line and brand positioning are on track.

Tim: Team is focused on accelerating growth.

Tim: Prana net sales decreased 4% with a decline in wholesale partially offset by modest DTC growth.

Jim A. Swanson: The product team remains focused on building brand awareness, refining the product assortment, and unlocking the brand's growth potential. They were encouraged by fall 24 orders and the potential to return to growth in the second half of the year. I'll now review our 2024 financial. 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. Looking to fall 24, our teams are continuously working to minimize any shipment delay resulting from disruptions in the Red Sea. At this time, delays appear manageable.

Tim: Our team remains focused on building brand awareness with.

Tim: Winning the product assortment.

Tim: Walking the brands growth potential.

Tim: We're encouraged by all 24 orders and the potential to return to growth in the second half of the year.

Tim: I will now review, our 2024 financial outlook.

Tim: This outlook and commentary include forward looking statements. Please see our CFO commentary and financial review presentation for additional details and disclosures related to these statements.

Tim: Looking to fall 2000, and for our teams are continuously working to minimize any shipment delay, resulting from disruptions in the red Sea at.

Tim: At this time delays appear manageable the vast majority of our product line is expected to be delivered on time.

Jim A. Swanson: The vast majority of our product line is expected to be delivered on time and in full. We are reiterating our net sales outlook of a 2 to 4% decline. While there are modest changes across our portfolio, our overall net sales expectations have not meaningfully changed; gross margin is now expected to expand approximately 80 to 120 basis points to 50.4 to 50.8 percent. We are expecting modestly higher clearance and liquidation activity as consumers seek value.

Tim: Paul.

Tim: We are reiterating our net sales outlook over 2% to 4% decline while there are modest changes across our portfolio. Our overall net sales expectations has not meaningfully changed.

Tim: Gross margin is now expected to expand approximately 80 to 120 basis points.

Tim: 54% to 58%.

Tim: We're expecting modestly higher class and liquidation activity as consumers seek value and we will continue to opportunistically work down inventory levels.

Jim A. Swanson: And we will continue to opportunistically work down inventory levels and maximize sales. SG&A is expected to be 43 to 43.4% of net sales, leading to an operating margin of 7.7 to 8.5%. For diluted earnings per share, Outlook has increased modestly to $3.65 to $4.05, driven by higher interest income, licensing income, and a lower share count.

Tim: <unk> sales.

Tim: SG&A is expected to be 43 to 43, 4% of net sales leading to an operating margin of 778, 5%.

Tim: Our diluted earnings per share outlook has increased modestly to $3 65 to $4 <unk>.

Tim: Driven by higher interest income licensing income and a lower share count.

Andrew Shuler Burns: We expect strong output and cash flows of at least $350 million in the year. 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 are investing in our strategic priorities to accelerate profitable growth, create iconic products that are differentiated, functional, and innovative, drive brand engagement with increased focus on demand creation investments, and enhance consumer experiences by investing in capabilities to delight and retain consumers.

Tim: We expect strong operating cash flows of at least $350 million in the year.

Tim: 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.

Tim: We are investing in our strategic priorities to accelerate profitable growth.

Tim: Create iconic products that are differentiated functional and innovative.

Tim: Drive brand engagement with increased focused demand creation investments.

Tim: Enhanced consumer experiences by investing in capabilities to delight and retain consumers.

Andrew Shuler Burns: Amplify Marketplace Excellence that is digitally-led, omni-channel, and global, and Empowered Talent is driven by our core values. That concludes my prepared remarks. We welcome your questions for the remainder of the hour. Operator, could you help us with that?

Tim: Amplify marketplace excellence that is digitally led omnichannel and global.

Tim: Powered talent, that's driven by our core values.

Speaker Change: That concludes my prepared remarks.

Speaker Change: We welcome your questions for the remainder of the hour operator could you help us with that.

Speaker Change: Absolutely. Thank you at this time, we will be conducting a question and answer session.

Operator: 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 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up their handsets before pressing the star key. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. And the first question comes from Bob Drbul with Guggenheim. Please proceed.

Speaker Change: 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.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment. Please while we poll for questions. Once again. Please press star one if you have a question or comments on the first question comes from.

Speaker Change: Bob <unk> with Guggenheim. Please proceed.

Speaker Change: Yeah.

Robert Scott Drbul: Hi, good afternoon. I guess, Tim, on my two questions, the first one is: inventory is down. What is it, 37%? What's the leanest that you've run inventories, you know, heading into a fall season? And you just talk about sort of your comfort level with the composition and sort of how you're positioned for the rest of the year. And I guess the second piece is, can you talk a little bit more about the European business, you know, the order book, the trends, you know, just the health of the business in Europe and what you're seeing and expecting in that region specifically? Thanks. [inaudible]

Bob: Hi, good afternoon.

Speaker Change: Okay.

Bob: I guess to the Oh my two questions. The first one is inventories down whereas at 37%.

Bob: Is this the leanest that you've run inventories you now and heading into our fall season, and can you just talk about sort of your comfort level with the composition and sort of how you're positioned for the rest of the year and I guess the second piece is can you talk a little bit more around the European business you know the the order book the trends I'm just.

Bob: On the business in Europe, and what Youre seeing and expect.

Bob: In that region specifically.

Timothy P. Boyle: The 37% reduction, we're very proud of that, especially in relation to the gross margin we were able to achieve, and that was a function of three, utilizing our outlet store fleet, to help us to get the inventories down in the right areas. We think, frankly, there's still more room for us to improve on our inventory legalizations. We'd like to get our inventory terms up to about three, and we've seen great opportunities with, frankly, the automation we have in place now around estimating our demand and actualizing demand according to the plan. So more to come, and again, we think there's way more opportunity for us to be better at inventory management. It's close to the best we've done, but there's still more room to improve.

Bob: Yeah I think this.

Bob: The 37% reduction, we're very proud of that especially in relation to Germany.

Bob: The gross margin, we were able to achieving that was okay.

Bob: Really utilizing our outlet store fleet.

Bob: To help us get the inventories down.

Bob: And in the right area, we think frankly, there's still more room for us to improve our inventory Utilizations you got to get our inventory turns up to about three and four.

Bob: We see great opportunities.

Bob: With friends in the automation, we have in place now around estimating.

Bob: Estimating.

Speaker Change: Oh man.

Bob: Actualized the demand according to the pointed out so.

Bob: More to come in and again.

Bob: We think there's way more opportunity recipe better inventory management.

Bob: This is close to the best we've done there's still more room to improve.

Timothy P. Boyle: European business has been good. I'm headed over there to this company at the end of June to celebrate the company's 30th anniversary of doing business in Europe. You know, we occasionally hear from our partners and from our team members in Europe that the brand is not well known in Europe. But frankly, I'm just thrilled with the exposure we're getting as it relates to some of these global marketing efforts, including the Hike Society and the Lunar Lander. And I think there's a great opportunity for us in Europe, and we'll continue to grow there, I think rapidly.

Bob: European business has been good.

Bob: <unk> had it over there and this is kind of at the end of June to celebrate the company's 30th anniversary of doing business in Europe.

Bob: We occasionally.

Bob: Here.

Bob: Partners and from our team members in Europe that the brand is not well known in Europe, but frankly, I'm just thrilled with the exposure we're getting as it relates to some of these globally.

Bob: Marketing efforts, including the hikes is a.

Bob: Lunar lander.

Bob: Theres great opportunity in Western Europe, and we will continue to grow there I think rapidly.

Operator: Thank you very much.

Speaker Change: Great. Thank you very much Tim.

Laurent Andre Vasilescu: Okay, the next question comes from Laurent Vasilescu with BNP. Please proceed.

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

Laurent Andre Vasilescu: Oh, good afternoon. Thank you very much for taking my question. I wanted to ask about the 1Q, the top line beat. January, I think you'll all ask.

Laurent: Oh, good afternoon, and thank you very much for taking my question I wanted to ask.

Laurent: About the one Q Uh huh.

Laurent: Top line beat.

Laurent: January I think last call you commented right Jonny had good favorable weather, but I think then the weather kind of kind of very challenging for the outdoor category in February and March. So I'm, just curious I know it was there and maybe.

Laurent Andre Vasilescu: you commented, right, Jen, you had good favorable weather, but I think then the weather kind of got very challenging for you

Laurent Andre Vasilescu: challenging for the outdoor category in February and March. So I'm just curious to know, was maybe a, what was the upside surprise versus your guide when you got it in February? Was there something on the international side that we should consider? Was there a pull forward from 2Q into 1Q? Anything that you can share on that front would be very helpful. Thank you.

Laurent: What was the upside surprise versus your guide when you guided in February was there something like on on the international side that we should consider was there a pull forward from <unk> into <unk> or anything that you can share on that front would be very helpful. Thank you.

Timothy P. Boyle: Yeah, the improvement and, for me, the bit of a surprise was the January winter weather in North America. You know, we just came off a very warm winter, the third and fourth quarter of last year. And the fact that the weather was nicely appropriate in the fourth quarter, given the first quarter of January was, I don't want to say a surprise, but we were very glad to see it. You know, our business is much more weather dependent than it is economically dependent. So when the weather's appropriate, our business is exceptional. It's vastly impacting.

Speaker Change: The improvement is trying to get a bit of a surprise was the January winter weather in North America.

Laurent: We've just come off the very warm winter.

Laurent: Right.

Laurent: Third and fourth quarter of last year, and the fact that the weather was nicely.

Laurent: Appropriate in the fourth quarter excuse me in the first quarter of January was I don't Wanna say a surprise, but.

Laurent: We were very glad to see it.

Laurent: Our him business.

Laurent: It is much more weather dependent than it is economically dependent so when the weather's appropriate business is exceptional.

Laurent: You know it's it's if it is it is vastly impacting so.

Jim A. Swanson: So that's where the numbers really were a bit of a surprise in January. Yeah, and Laurent, I might add, when we had our earnings call in February, we indicated that the upside that we were seeing from a weather standpoint through the month of January was reflected in our Q1 outlook. So when you look at the quarter, we're about $17 million better, I think, on the top line relative to the high end of our outlook.

Laurent: That's where the numbers really were that it was surprising.

Laurent: I might add when we had our earnings call in February we indicated.

Laurent: The upside that we're seeing from a weather standpoint through the month of January that was reflected in our Q1 outlook. So when you look at the quarter.

Laurent: We're about $17 million better I think on the top line relative to the high end of our outlook and you can attribute most of that too.

Jim A. Swanson: And you can attribute most of that to slightly earlier shipments in the U.S. business. We don't want that to be an upside. Most of the quarter, I think, was right in line with where we thought it would be in shifts of just days, not anything of any meaningful nature, at least at this stage.

Laurent: Slightly earlier shipments in the U S. We don't so that would be an upside most of the quarter I think it was right in line with where we thought it would be in either shifts. So just days not anything of any meaningful nature at least at this stage.

Tien Tsin: Okay, Tien tsin that that's super helpful. And then because as you mentioned tend to you know.

Laurent Andre Vasilescu: Okay, Tim and Jim, that's super helpful.

Laurent Andre Vasilescu: As you've mentioned, Tim, that, you know...

Laurent: It is weather dependent because there was a better weather became weight, but it did it did derive.

Laurent Andre Vasilescu: I don't know if you have any comments about what your order book on the U.S. wholesale side looks like.

Tien: How do we think about that in the context of the U S business guided down mid single digits. I don't know if you have any comment about what your order book on the U S wholesale side.

Laurent Andre Vasilescu: and the whole sales side. Wow, it's shaping up in terms of maybe, you know, reorders, and cancellations. I mean, it looks like you are calling for the US business to be kind of flattish in the back half. Any comment there would be super helpful.

Laurent: Is it shaping up in terms of maybe Reorders cancellations I mean, it looks like you are calling for the U S business to be kind of flattish on the back half.

Laurent: Any comment there would be super helpful.

Timothy P. Boyle: Yeah, remember, we take our order book primarily in November, December, and to a certain extent in January. So it reflects the mood of our retail partners in that period. You will have some additional inventory in the event that the weather is much colder than a normal early winter. But for all intents and purposes, we've based this on average winter weather.

Speaker Change: Yeah, well remember we took our order book primarily.

Speaker Change: November December to a certain extent January so it reflects the mood of our retail partners in that period. It will have some additional inventory in the event that.

Speaker Change: That the weather as much.

Speaker Change: Colder than normal early winter.

Speaker Change: But for all intents and purposes.

Laurent: We base this on an average winter.

Jim A. Swanson: And Laurent, maybe just to add in a couple extra points. For our U.S. business, we contemplate that being down mid-single-digit percent year-over-year for the full year. That's not different than where we thought we would be 90 days ago. And when you look at the wholesale business, the wholesale business will still be down in the second half of the year. That's more than by and large, or partially offset, I should say, by the direct-to-consumer business through a combination and really led by our brick-and-mortar business as we continue to annualize new stores that have opened, coupled with these temporary clearance stores that have been operating.

Laurent: Weather year.

Laurent: Yes.

Laurent: And then a couple extra points.

Laurent: Our U S business, we contemplate that being down mid single digit percent year for the full year, that's not different than where we thought we would be 90 days ago.

Laurent: When you look at the wholesale business wholesale business will still be down.

Laurent: In the second half of the year and that's more of a dozen by enlarge were partially offset I should say.

Laurent: By the direct to consumer business through a combination that really led by our brick and mortar business that we continue to annualize new stores that have opened coupled with these temporary declared searches have been operating.

Laurent Andre Vasilescu: Excellent, that's very clear. Then, maybe, my last question.

Speaker Change: Excellent that's very clear and then maybe my last question to type two part question sorry, but.

Laurent Andre Vasilescu: Jim, can you comment on, I know you kind of tweaked down the gross margins for the year, but can you kind of give us a kind of range of where the 2Q gross margins should shake out and then on the 75 to 90 million dollars?

Laurent: Jim can you comment about I know, you've kind of tweaked down the gross margin for the year, but can you kind of give us a kind of a range of where that gross margin should shake out and then on the $75 million to $90 million of savings.

Laurent Andre Vasilescu: of savings. How do we think about that over the course of

Laurent: How do we think about that over the course of the quarters I don't I don't know if you recognize anything in the first quarter, but then it could it be equal tranches across the next in the next two quarters on that savings.

Jim A. Swanson: I don't know if you recognized anything in the first quarter, but could it be equal tranches across the next, you know, next three quarters on that savings?

Jim A. Swanson: Yeah, Laurent, in the CFO commentary that we published, we did provide some detail on our Q2 outlook. So, we do contemplate our Q2 gross margin being down 190 to 230 base points. That's by and large a reflection of a year-on-year comparative difference with some sales and inventory-related provisions that were one-time in nature and favorable last year that we're anniversarying against. If you set those aside, our gross margins in the second quarter are going to be essentially even with where we were last year.

Laurent: Yeah.

Laurent: The CFO commentary that we published we did provide some detail on our Q2 outlook. So we do kind of later Q2 gross margin being down 190 to 230 basis points, that's by and large are reflection of our your comparative difference with some sales and inventory related provisions that were one time in nature and favorable.

Laurent: Last year, they were anniversarying against if you set those aside our gross margins in the second quarter.

Laurent: <unk> essentially even to where we were last year and then as it pertains to our profit improvement program from an overarching standpoint.

Jim A. Swanson: And then, as it pertains to our profit improvement program, from an overarching standpoint, we're making great progress on that. You know, first and foremost, I'd say with the great work that our operations and supply chain team, and just collectively across the business, that we have had in terms of getting our inventories back down into a more normalized level, that's certainly going to benefit the elevated carrying costs we incurred a year ago. In fact, our U.S. distribution and third-party logistics costs for the next quarter, Q1, were down $10 million.

Laurent: Making great progress on that.

Laurent: First and foremost I'd say with the great work that our operations and supply chain team has collectively across the business that we've had in terms of getting our inventory back down into a more normalized level, that's certainly going to benefit the elevated carrying costs, we incurred a year ago.

Laurent: Our U S distribution and third party logistics costs next quarter Q1 were down $10 million.

Laurent: We took some actions that Tim referred to in the prepared remarks with regard to our reduction in force that was executed late in the order late March. So we would anticipate beginning to see the benefits of that until Q2, but you know we're very much on track in terms of being able to achieve that $75 million to $90 million that are built in.

Jim A. Swanson: We took some actions that Tim had referred to in the prepared remarks with regard to a reduction in force. That was executed late in the quarter, late March. So, we wouldn't anticipate beginning to see the benefits of that until Q2. But, you know, we're very much on track in terms of being able to achieve that $75 to $90 million that's built into our outlook.

Laurent Andre Vasilescu: Very clear. Thank you very much, Jim, for all the car trouble.

Laurent: Our outlook.

Speaker Change: Very clear thank you very much Jim for the car.

Operator: The next question comes from Jim Duffy with Stifel. Please proceed.

Speaker Change: Uh huh.

Speaker Change: The next question comes from Jim Duffy with Stifel. Please proceed.

James Vincent Duffy: Thank you for taking my questions. I want to start on the US market. Your comments on the US remain quite sober. Can you speak to what you're seeing from US consumer activity early in the spring season? As spring begins in earnest, and certain US reasons, are there any signs of life to be hopeful about? And then I'm curious how all this kind of relates to the outdoor category as a whole in the US. Are we getting any indications that the COVID hangover is easing?

James Vincent Duffy: Thank you for taking my questions I wanted to start on the U S market your comments on the U S remain quite sober.

James Vincent Duffy: Can you speak to what you're seeing in terms of the U S. Consumer activity early in the spring season as you see spring begin in earnest in certain U S reasons or are there any signs of life to be hopeful and then I'm curious how all of this kind of relates to the outdoor category as a whole in the U S or are we getting any indications that the COVID-19.

James Vincent Duffy: Hangover is lessening.

Timothy P. Boyle: Yeah, I think, you know, there's a number of brands in the marketplace today, and we're competing with many of those. I think there may have been just too much exuberant expansion of the business. And frankly, with our balance sheet as strong as it is, we're obviously gonna be here when the dust settles. I think that consumers today are anxious to get back outdoors. And again, as I said, the weather is impactful on how our business functions. We do a significant amount of our business on Father's Day and for Father's Day gifts. And so there's all the expectation that those kinds of activities will continue and be more robust.

Speaker Change: Yes, I think.

Speaker Change: Theres a number of brands in the marketplace today, and we're competing with as many of those.

James Vincent Duffy: I think the demand.

James Vincent Duffy: Just two.

James Vincent Duffy: Too exuberant and expansion.

James Vincent Duffy: The business and frankly with our balance sheet.

James Vincent Duffy: As it is we're obviously in a theater.

James Vincent Duffy: When the dust settles I think that the consumers today are.

James Vincent Duffy: Just to get back out the doors again as I said the weather was impactful on how our business is what it is.

Speaker Change: Thanks, Don.

Speaker Change: We do a significant amount of our investments in part of your father's day gifts and theirs.

Speaker Change: There's there's all the expectation of wells that that those kinds of.

Speaker Change: Activities will continue in <unk>.

Speaker Change: Or robust as well.

Timothy P. Boyle: And then, Tim, I'm interested in your efforts to bring new and younger consumers to the brand. The Hike Society Initiative in Europe seems like something you're really pleased with and getting good traction with. Can you comment on, you know, evidence of progress with bringing the younger consumer to the brand in the United States?

Don: And then Tim I'm interested in your efforts to bring new and younger consumers to the brand. The hikes Society initiative in Europe. It seems like you're something we're really pleased with getting good traction with can you comment on it.

Don: Evidence of progress with bringing the younger consumer into the brand in the United States.

Timothy P. Boyle: Certainly. Well, you know, it's interesting. Our PFG styles, which are by far the youngest part of our business, have traditionally been quite generous in their sizing, and we have added some of these new components to our PFG line, which is a much more active fit. The uptake there has been, quite frankly, surprising. And so it looks like we've got other people certainly approaching the PFG styles in a better way and more robust way.

Timothy P. Boyle: Certainly well.

Timothy P. Boyle: It's interesting our Rps cheese styles, which you're by far the youngest part of our business.

Timothy P. Boyle: That's traditionally been.

Timothy P. Boyle: Quite.

Timothy P. Boyle: Generous and Theyre sizing and as we add some of these new components to our PFG line will share much more.

Timothy P. Boyle: It fits.

Timothy P. Boyle: The uptake there has been quite.

Timothy P. Boyle: Quite frankly surprising and.

Timothy P. Boyle: So it looks like you've got younger people certainly approaching the PFG styles.

Timothy P. Boyle: Weigh in more robust way and then our footwear as we.

Timothy P. Boyle: And then our footwear, as we begin to have styles which are, you know, trail running and really designed for a more active person, we're getting a very good lift on that stuff, so I think the opportunities there and the expectations are that we'll continue to define and design styles in those areas.

Timothy P. Boyle: Well begin to as well.

Timothy P. Boyle: Styles, which are.

Timothy P. Boyle: Right.

Timothy P. Boyle: And really designed for more active version that we're getting a very good lift on that stuff. So I think the opportunities there and our expectations are that we'll continue to.

Timothy P. Boyle: They're buying and design styles in those in that area.

James Vincent Duffy: And should we expect Hike Society to come to the U.S.?

Timothy P. Boyle: And should we expect hikes society to come to the U S.

Timothy P. Boyle: I think it's definitely likely. I mean, it's been a really sort of a global uptake. We have high society across Asia, and the European uptake was super, and it's certainly a candidate for inclusion in our marketing effort.

Timothy P. Boyle: I think it's definitely likely I mean, it's been it's been a really sort of a pan of global uptake, we have a society across Asia and our European uptake was was similar and this is.

Timothy P. Boyle: Julie.

Timothy P. Boyle: A candidate for inclusion in our marketing efforts.

James Vincent Duffy: Great. Thank you guys for your perspectives.

Speaker Change: Great. Thank you guys for your perspective.

Speaker Change: Thanks, Jeff.

Operator: The next question comes from Jonathan Komp with Baird. Please proceed.

Speaker Change: The next question comes from Jonathan Komp with Baird. Please proceed.

Jonathan Robert Komp: Yeah, good afternoon. Thank you.

Jonathan Robert Komp: Yeah. Good afternoon. Thank you can I just follow up on the gross margin I wanted to ask about the competitive environment and I may have missed.

Jonathan Robert Komp: Um, can I just follow up on gross margin? I want to ask about the competitive environment, and I may have missed the reasons to take down the gross margin guide slightly for the year, just given the progress you've made on inventory. Could you share a little more perspective there, just related to that?

Jonathan Robert Komp: The reasons to take down the gross margin guidance slightly for the year just given the progress you've made on inventory could do.

Speaker Change: Sure a little more perspective there.

Speaker Change: Just related to that can.

Jim A. Swanson: Yeah, I can start and then let Tim jump in and add some color. As it relates to our full-year outlook and the revision we've made to the gross margin, there are some puts and takes in terms of our revenue, and we've held the revenue constant with our prior outlook, but when you get into the underlying composition of it, there are some shifts in parts of the business. We took down our Sorrel outlook slightly, we took down our e-commerce business slightly, and the area of our business that we took up was in the case of our brick-and-mortar stores with our outlet and clearance stores.

Speaker Change: Can you comment on the temporary stores I think you're up to 44 in.

Speaker Change: In the U S anyway to size up how much volume that's driving.

Speaker Change: This year or last year, just to give more perspective there.

Speaker Change: Yeah, I can start and then let Tim jump in and add some color as it relates to our full year outlook and the revision we've made to the gross margin. There are some puts and takes in terms of our revenue and it was held the revenue concept with our prior outlook, but when you get into the underlying composition of it there's been some shift.

Timothy P. Boyle: And parts of the business.

Timothy P. Boyle: We took down our Sorel outlook slightly we took down our e-commerce business down slightly.

Timothy P. Boyle: Area of our business that we took up with in the case of our brick and mortar with our outlet and clearance stores. We continue to operate those through the balance of the year and so as a result of that change in the mix of our business and with an increased dependence on outlet locations, that's effectively what's driving.

Jim A. Swanson: We continue to operate those through the balance of the year, and so as a result of that change in the mix of our business and with an increased dependence on those outlet and clearance locations, that's effectively what's driving a portion of the margin coming down. And then as it relates to the temporary stores you saw in the quarter, we're operating about 44 stores. We're operating at just under 2% of sales, I think, in the quarter. And then for the year, it'll be a similar amount.

Timothy P. Boyle: A portion of the <unk>.

Timothy P. Boyle: Margin coming down and then as it relates to the 10th surge we saw in the quarter were operating about 44 stores were operating at just under 2% of sales I think of the quarter and then for the year it'll be a it'll be a like a mountain to be slightly above that 2% sales in.

Timothy P. Boyle: Overall profitability standpoint.

Timothy P. Boyle: These stores are contributing very little to the overall.

Timothy P. Boyle: Operating margins, but there are obviously, a great vehicle for us to liquidate inventory at a much more profitable vehicle less disrupted than going through the wholesale closeout or value channel.

Timothy P. Boyle: Yeah, our typical method of selling on price merchandise would be to sell it to PJ Maxx or Marshalls, and those channels were frankly flooded with inventory. And so the best approach for us was to take it and sell it ourselves in these temporary stores. As soon as that inventory has come down at a decent margin, certainly by comparison to what the other liquidation methods were, we will begin to close those temporary stores up and go back to our standard method of operating the stores.

Timothy P. Boyle: Our typical method.

Timothy P. Boyle: Selling off price merchandise would be to sell through.

Timothy P. Boyle: Did you have an accident.

Timothy P. Boyle: And those channels, where frankly glutted was inventory so the best approach for us was to take that.

Timothy P. Boyle: Take it and selling it ourselves in these temporary torch Lewis as the inventory has come down.

Timothy P. Boyle: At <unk>.

Timothy P. Boyle: Decent margin certainly by comparison to what the other liquidation message board, we will begin to close those temporary storage hub.

Timothy P. Boyle: Back to our standard method.

Timothy P. Boyle: Operating in storage so.

Timothy P. Boyle: So I think it really gave us an opportunity to flesh out the inventory, and it didn't have the kind of broad impact on the marketplace that something with a big, big discount in our e-com business would have had.

Timothy P. Boyle: I think it really gave us an opportunity that to flush the inventory.

Timothy P. Boyle: It didn't have the kind of broad impact on the marketplace that something.

Timothy P. Boyle:

Timothy P. Boyle: That's a big discount in our E comm business would have done.

Jonathan Robert Komp: Makes sense. Looks like a good brand move there.

Speaker Change: It makes sense it looks like a good brand move there just one follow up on the your Columbia brand for the year of the revenue.

Jim A. Swanson: Just one follow-up on the year, Columbia brand for the year, revenue was about flat globally. Could you just comment? It looks like you're assuming something positive, maybe mid single digits in the back half. So I'm hoping you could, maybe. Share the visibility that you see and maybe the key drivers as we think about Columbia and whether you're squeezing benefits from some of the newer growth initiatives or if those have a longer tail. Thank you.

Timothy P. Boyle: Of about flat globally could you just comment it looks like you're assuming.

Timothy P. Boyle: Something positive maybe mid single digits in the back half so I'm, hoping you could maybe.

Speaker Change: Sure the visibility that you see and maybe the key drivers as we think about Colombia.

Timothy P. Boyle: And whether you are baking in.

Timothy P. Boyle: Benefits from some of the newer growth initiatives or if those have a longer tail. Thank you.

Jim A. Swanson: Yeah, as it relates to the outlook itself, on a full-year basis, John, that's right, we're about flat, and looking at the second half in particular, we do contemplate growth in the brand. I would say that that leans more towards the apparel category. Footwear, I think, as Tim touched on, the outdoor footwear trends remain challenged, so I'd expect to continue to see some challenges there, at least in the near term

Speaker Change: Yeah, Yeah as it relates to the outlook itself on a on a full year basis, John that's right, where we're about we're about flat.

Speaker Change: And looking at the second half in particular, we do contemplate a growth in the brand.

Speaker Change: That leans more towards the apparel category footwear, I think as Tim touched on you know the outdoor footwear trends remained challenged so I would expect them to continue to seize them.

Speaker Change: There at least in the near term, but longer term you know we've got a lot of confidence in the direction that we're taking from a footwear standpoint, and then that growth that we've that we're planning for in the in the back half of the year. Some of that's based on our wholesale order book and for Columbia apparel. The wholesale order book for the Baltimore worthy than we're anticipating modest grow.

Jim A. Swanson: Longer term, we've got a lot of confidence in the direction we're taking from a footwear standpoint, and then that growth that we're planning for in the back half of the year, some of that's based on our wholesale order book. And for Columbia Apparel, the wholesale order book for the Fall 24 season, we're anticipating modest growth out of the wholesale business, so that's encouraging. And I think there is the benefit of the brand continuing to perform well from an international standpoint, and certainly that'll be the brand when we look at the brick-and-mortar side of the business with our store fleet and additional stores that'll see the most benefit from that part of the business.

Speaker Change: With that as a wholesale business. So that's that's encouraging and I think there is the benefit of the brand continues to perform well from an international standpoint, certainly that'll be the brand when we look at the brick and mortar side of the business with our store fleet and additional stores that'll pay the most benefit from that part of the business.

Jonathan Robert Komp: Okay, great. Thanks again.

Speaker Change: Okay, great. Thanks again.

Operator: Okay, the next question comes from Mitch Kummetz with Seaport Research. Please proceed.

Mitchel John Kummetz: Okay. The next question comes from Mitch commits with Seaport Research. Please proceed.

Mitchel John Kummetz: Yeah, thanks for taking my questions. I guess my first question is just on the order book. I think when you guys reported 4Q, you mentioned that fall orders were down low to mid-single digits. I'm wondering if there's any change in that now that we're a little bit further into that process, and then also on the Sorrell guide change. I'm just wondering if that's order book related, or are you changing other assumptions around Sorrell? And I would follow up.

Mitch: Yeah, Thanks for taking my questions.

Mitch: I guess my first question just on the order book I think when you guys reported for Q, you mentioned that fall orders were down low to mid single digits I'm wondering if there's any change in that now.

Mitch: We're a little bit further into that process and then also on the on the Sorel Guide changed I'm. Just wondering if that's order book related or are you changing other assumptions around sharelle I have a.

Speaker Change: A follow up.

Jim A. Swanson: Yeah, the biggest change in the case of Sorrell is more a reflection of what we saw in the e-commerce business in the first quarter, where the business was down a bit more sharply than we had anticipated. And so with that in mind, it's, you know, it's been a tough environment.

Speaker Change: Yes, the biggest change in the case of Sorel more a reflection of what we saw in the E Commerce business in the first quarter in which the business has been down a bit more sharply than we are.

Mitch: I had anticipated and so with that in mind as you know it's been a tough environment.

Jim A. Swanson: You know, we revised the outlook down to the reflecting down mid-20s. Obviously, we've got the order book in hand for fall 24, and that would also be indicative of those declines. And, you know, we've got new leadership in place and are looking forward to the updates that they will make to the brand, the product line, and really looking forward to, you know, reinvigorating growth. But it's going to take some time, and obviously, it will be challenging in the near term.

Speaker Change: The outlook down to the reflecting down mid twenties Hudson, We got order book in hand for fall 'twenty or that would be also be indicative.

Speaker Change: Those are those declines as you know we've got new leadership in place and looking forward to the updates that they make to the brand the product line and really looking forward to.

Speaker Change: Invigorated growth, but it's going to take some time, let's say challenging in the near term.

Jim A. Swanson: And then, is the order book, the consolidated order book, still in that low to mid-single digit range? Has that changed at all?

Speaker Change: And then as the order book.

Speaker Change: Solid order books still about down low to mid single digit range does that change at all.

Speaker Change: I think.

Speaker Change: So on a global basis, our order book for the volatile a morphine is contemplated to be down low single digit percent. So all of the 1% to 2% range.

Jim A. Swanson: I think, on a global basis, our order book for the fall 24 season is contemplated to be down a low single-digit percent. So, you know, call it the 1 to 2 percent range.

Speaker Change: Okay.

Speaker Change: And then just a second question on the.

Mitchel John Kummetz: Okay, and then just a second question on gross margin. So you guys showed a nice gross margin in the first quarter, but you expect to be down pretty substantially in 2Q. From a kind of puts and takes standpoint, what's the main reason for that big swing? The biggest one is what I...

Speaker Change: On the gross margin.

Speaker Change: Sure Nice gross margin in the first corner.

Speaker Change: But do you expect to be down pretty substantially in two Q from it from a kind of puts and takes standpoint, what's what's the main reason for that big swing.

Speaker Change: The biggest one is what I was referring to I can't remember, who asked a question a little bit earlier, but Q2 of last year, we had some exceptional.

Jim A. Swanson: The biggest one is what I was referring to. I can't remember if I asked the question a little bit earlier, but in Q2 of last year, we had some exceptional provisions related to sales and inventory that benefited the gross margin. So, there were one-time adjustments last year that were favorable. We don't have those same things this year.

Speaker Change: Provisions related to sales and inventory that benefited the gross margin. So if there were one time adjusted last year were favorable we don't have the same thing. This year. If you take those aside were basically neutral on margin in Q2.

Jim A. Swanson: If you take those aside, we're basically neutral on margin in Q2. And then, Mitch, as you think about the back half of the year, we've planned our gross margin up. And by far, in a way, the thing that's going to drive gross margin in the latter part of the year is the healthier inventory position that we have. And even though we continue to operate the additional outlet and clearance locations, the assortment of merchandise that we'll have available within those stores to sell is a better assortment that we expect to drive a better margin that's planned in that outlook.

Speaker Change: And then Mitch if you think about the back half of the year, we planned our gross margin I've been by far in a way the thing that's going to drive gross margin a latter part of the year is to help our healthier inventory position that we have.

Speaker Change: And even though we continue to operate.

Speaker Change: The additional outlet and clearance locations the assortment of merchandise that we'll have available within those stores to sell is a is a better assortment that will that we expect to drive a better a better margin that's planned in that outlook.

Operator: Okay, the next question comes from John Kernan with TD Cowan. Please proceed.

Mitch: Okay understood. Thanks.

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

Alexander Laurence Douglas: Hi, this is Alex Douglas on behalf of John. Thank you for taking our questions. So, my first one was on some of the fiscal 24, one of the fiscal 24 gross margin puts and takes, specifically the lower inbound freight costs. I know that's something you guys have commented on on the last couple earnings calls. So, I was just wondering when you guys will start lapping those lower freight costs? And, you know, would it maybe be fair to assume that by the end of the year, that impacts either Earth Flat or Inflexible Ahead? Thank you.

Mitch: Hi, This is Alex on for John Thank you for taking our questions.

Alex: So my first one was on some of the fiscal 'twenty four one of the fiscal framework gross margin puts and takes specifically.

Alex: Specifically, the lower inbound freight costs I know you've got something you guys have commented on on the last couple earnings calls. So I was just wondering what what's the timing for when you guys will start lapping those lower freight costs and when it may be fair to assume.

Speaker Change: By the end of the year.

Speaker Change: You know that that that impacts either flat or in fact still a headwind.

Jim A. Swanson: Thank you. Well, the more meaningful impact that we've experienced each of the last several quarters as it relates to inbound freight is coming off the highs in terms of what we're seeing in inbound ocean freight charges from over a year ago. And as you look back on our last four quarters, our gross margin has benefited to the tune of, on average, 300 basis points per quarter. Q1 was plus 200 basis points.

Speaker Change: Well, yeah, the more meaningful impact that we've experienced each of the last several quarters as it relates to inbound freight is coming off the highs in terms of what we're seeing in inbound ocean freight charges from over a year ago and if you look back on our last four quarters. Our gross margin is benefited.

Speaker Change: Tuna on average 300 basis points per quarter, Q1 was plus 200 basis points. So as we move forward from here beginning in the second quarter, we would expect that to be far less of a benefit having said that just given.

Jim A. Swanson: So as we move forward from here, at the beginning of the second quarter, we would expect that to be far less of a benefit. Having said that, just given lower overall demand and supply being built, overall, the freight negotiations that we're in currently would indicate to us that there's continued opportunity where we could see those freight rates come down a bit more, but certainly not on the order of magnitude of what we've seen over the course of the last year.

Speaker Change: Lower overall demand and supply being are being.

Speaker Change: Being built.

Speaker Change: For all the.

Speaker Change: The freight negotiations that we're in currently would indicate to us that there's continued opportunity where we'd see those freight rates come down a bit more but certainly not on the order of magnitude of what we've seen over the course of the last year.

Timothy P. Boyle: And then my next question was on one of your comments on inventory terms, just more of a clarifying question. You mentioned the goal of 3 times. Is that more of a long-term goal or an end-of-fiscal 24-month goal? Just if you can help clarify that for modeling purposes, it would be very helpful. Thank you.

Speaker Change: That's very helpful. Thank you and then my next question was on one of your comments on inventory turns just more of a clarifying question.

Speaker Change: You mentioned the goal of three times is that more of a long term goal or end of fiscal 'twenty four goals.

Speaker Change: If you could help clarify that for modeling purposes. It would be very helpful. Thank you.

Jim A. Swanson: Yeah, that will improve our inventory terms over prior periods. But to get to three, which is a good goal for the company and other companies to achieve, we believe it is attainable, but it would be more of a long-term goal.

Speaker Change: Yeah that will improve our inventory turns over prior periods, but to get the three what you said.

Speaker Change: That's a good goal for the company and other companies to achieve this.

Speaker Change: We believe it is attainable, but it would be more of a long term goal yeah, certainly not in 'twenty four I you know our expectation, though would be that and while we don't want to give a specific inventory forecasting at the year. There's a lot of complexities to that our expectation would be to be able to manage inventory down year over year relative to where we exited out of 'twenty three.

Jim A. Swanson: Yeah, certainly not 24. You know, our expectation, though, would be that, and while we don't want to give a specific inventory forecast at the end of the year, there's a lot of complexities to that, our expectation would be that we're able to manage inventory down year-over-year relative to where we exited out of 23. So we'll see that inventory efficiency and that improvement in the turn.

Speaker Change: So we will see that inventory efficiency and that prudent the turns.

Alexander Laurence Douglas: Okay, yeah, that's very helpful. Thank you.

Speaker Change: Okay, Yes.

Speaker Change: That's very helpful. Thank you.

Operator: Okay, the next question comes from Paul Louise with Citigroup. Paul, please proceed.

Speaker Change: Okay. The next question comes from Paul Luis with Citigroup. Paul. Please proceed.

Paul Lawrence Lejuez: Hey, thanks, guys. I'm curious about the USPTC bricks and mortar business. Can you maybe talk about how much of that business is being driven by traffic versus tickets? I don't know if you could share what comps were excluding the additional temporary clearance locations. And just one point of clarification on those. Did you say 2% of total sales in the second quarter? That's what those represented? And then how many?

Paul Lawrence Lejuez: Hey, Thanks, guys I'm curious within the U S DTC bricks and mortar business can you maybe talk about how much of that business is being driven by traffic versus ticket I don't know if you could share what comscore, excluding the additional temporary experienced locations and just one point of clarification.

Speaker Change: On those did.

Speaker Change: Did you say, 2% of total sales.

Speaker Change: In the second quarter, that's what those represented and then how many do you plan to have a knee in the back half. Thanks.

Timothy P. Boyle: And then how many do you plan to have in the back half? Thanks.

Jim A. Swanson: Yeah, we consider ourselves really to be a wholesale company, so we really don't really, you know, release a lot of information on the KPIs around our retail business, but I can tell you, generally, the traffic numbers have been good in those markets where we're operating outlet stores, and the conversion rates have been exceptional. So the brand is in high demand. And really, the focus for us is to use these temporary stores to get our inventories down with high gross margins for the company overall.

Speaker Change: Yeah, we just set ourselves really it'd be a wholesale company. So we really don't we don't.

Speaker Change: We don't release, a lot of information on the Kpis around our retail business, but.

Speaker Change: I can tell you generally the traffic numbers have been good in those markets, where we're operating outlet stores and the conversion rates have been exceptional so grand is in high demand and really the focus for US is to on these temporary stores to get our inventories down with high gross margins for the company overall.

Jim A. Swanson: And then, and then to operate this suite of stores, really in line with what we believe what long-term inventory liquidation plans should be, as we begin and continue to operate at an efficient turn level for our in the. Yeah, then.

Speaker Change: And then.

Speaker Change: And to operate this fleet of stores.

Speaker Change: Really in line with what we believe are long term inventory liquidation plants should be.

Speaker Change: As we begin.

Speaker Change: Continue to operate.

Speaker Change: And inefficient churn level for our inventory.

Paul Lawrence Lejuez: Yeah, and then just a follow-up point. You asked about the comps, and as Tim touched on, we don't provide specific retail APIs for our business. Having said that, in Tim's prepared remarks, we did indicate that the growth from a direct-to-consumer brick-and-mortar perspective was a combination of the temporary new stores, but also included productivity gains that you can take away from that. It's a positive comp, and some of Tim's comments with regard to traffic and conversion helped contribute to that.

Speaker Change: And then just a follow up point on there you'd asked about the comps and as Tim touched on we don't provide specific retail kpis of our business, having said that in Tim's prepared remarks, we did indicate that the growth from a direct to consumer brick and mortar perspective was a combination of the temporary new stores, but also included productivity gains. So you can take away from that but it's a bit of a positive.

Speaker Change: <unk> comp.

Speaker Change: Some of the Tims comments with regard to traffic and conversion helped contribute towards that and then yes. My prior comment was with regard to our temporary clearance stores that those represented just slightly less than 2% of consolidated net sales for the first quarter and on a full year basis we.

Paul Lawrence Lejuez: And then, yeah, my prior comment was with regard to our temporary clearance stores, that those represented just slightly less than 2% of consolidated net sales for the first quarter, and on a full-year basis. We plan for that to be slightly greater than 2%. But again, back to my point, you know, these are modestly profitable. And, you know, if we think out to 2025, we will begin to ramp down and, and exit out as a lion's share of these.

Speaker Change: We are planning for that to be slightly greater than 2%, but again back to my point. You know. These are these are modestly profitable and you know as we think out to 2025, we will begin to ramp down.

Speaker Change: Exit out of the lion's share of these.

Paul Lawrence Lejuez: Got it. Thanks. I just want to follow up. Can you just give us an update on clearing through the PPAS product where you are?

Speaker Change: Got it thanks, and then just one follow up could you just give us an update on clearing through the <unk> product, where we are in that process.

Paul Lawrence Lejuez: product where you are in that process.

Timothy P. Boyle: Yeah, we believe that by the end of this year, we will be virtually out of PFAS products, and it will hopefully be a topic that's in our rear view mirror. Yeah, we did.

Speaker Change: Yeah, we believe that by the end of this year, we will be virtually P fast products.

Speaker Change: And then it will it will hopefully be a topic that's in our rearview mirror.

Jim A. Swanson: Yeah, we've made great progress. You know, we feel good about being able to work through the balance of what inventory we do have, most of which is already sold and allocated to a customer that we intend to sell to our own direct-to-consumer business. And to the degree there's excess that remains there, certainly when you look at the clearance capability we have from an outlet standpoint, this is perfectly saleable, high-quality inventory. We don't anticipate that being a challenge or being able to move through that profitably.

Speaker Change: Yeah. We've made we've made great progress you know we feel good about being able to work through the balance of what inventory. We do have most of which is already sold and allocate it to a customer that we intend to sell through our own direct to consumer business and to the degree there is excess that remains there certainly when you look at the clearance capability that we have from an outlet standpoint. This is <unk>.

Speaker Change: Frankly, salable high quality inventory, we don't envision that being up but a challenge and be able to move through that profitably.

Paul Lawrence Lejuez: Got it. Thank you. Good luck.

Speaker Change: Got it. Thank you good luck.

Operator: Once again, if you have a question or a comment, please press star 1 on your touchtone phone. The next question comes from Alex Perry with Bank of America. Please proceed.

Speaker Change: Thanks, Paul and once again once again, if you have a question or comment. Please press star one on your Touchtone phone. The next question comes from Alex Perry with Bank of America. Please proceed.

Alexander Thomas Perry: Hi, thanks for taking my questions. I wanted to ask about China actually. Can you talk about what's driving the outperformance there versus, you know, a lot of your peers? Is it strong new product reception? Are you doing any distribution expansion there? And then maybe just remind us of how the margins of the China business compared to the other regions. Thank you.

Alexander Thomas Perry: Hi, yes, thanks for taking my questions I wanted to ask about China actually can you talk about what's driving the outperformance there versus you know a lot of your peers is it strong new product reception are you doing any distribution expansion there and then maybe just remind us.

Alexander Thomas Perry: And how the margins of the China's China business compared to the other regions. Thank you.

Timothy P. Boyle: Sure. Well, just as a reminder, we've been doing this in China for about 20 years, operating the business directly ourselves for five, six years. And we underperformed there for many years. Even though we were first in the marketplace, we were underperforming. So when you look at our business by comparison to others, we're smaller. And the fact that we've turned the business around maybe has some outsized results when you compare it with the rest of the business.

Speaker Change: Sure well just as a reminder, we've been doing this China for about 20 years.

Alexander Thomas Perry: Operating.

Alexander Thomas Perry: Our business directly ourselves for.

Speaker Change: Five six years, and we underperformed there for many years.

Speaker Change: Even though we were the first in the marketplace.

Speaker Change: We were underperforming so when you look at our business by comparison to others, where smaller and the fact that we've turned the business around.

Speaker Change: Maybe it is.

Speaker Change: Some outsized results when you compare it with the rest of the business.

Timothy P. Boyle: I would say that the bulk of the improvement is a function of just cleaning up our operations and making them much more relevant to the local market. We haven't really expanded our distribution in a great way, but we've been focusing on improving our monthly performance and store productivity in a number of different ways, including, you know, key retail operations, as well as directly designing merchandise, which has been improved for the local market and more focused on the local market. And lastly, the management team that we have is exceptional and has been really instrumental in making the visits much better.

Speaker Change: I would say that the bulk of the improvement is a function of just cleaning up our operations, making them much more relevant for the local market.

Speaker Change: We haven't really expanded our distribution.

Speaker Change: It's a great way, but we've been focusing on improving our monthly performance and store productivity utilizing a number of different ways.

Speaker Change: Ways, including.

Speaker Change: Key retail operations as well as.

Speaker Change: Directly designing merchandise which is it.

Speaker Change: It has been improved for the local market more focus on local market requirements.

Speaker Change: And lastly, the management team that we have is exceptional.

Speaker Change: Really instrumental in making this much better yeah, I would just double down on Tim's.

Jim A. Swanson: Yeah, I just doubled down on Tim's talking points there. From a distribution standpoint, we're operating no less. In fact, we may be operating a door to less than we were a year ago. So this is all coming through productivity gains within our existing store fleet and online dealers that we work with. And then one other follow-up point to your question, Alex, with regard to the margins in China, we don't provide specifics on that, but I can share that it's among the most profitable parts of our business from an overall contribution perspective, certainly far above the overall corporate operating margin.

Speaker Change: Talking points there from a distribution standpoint, we're operating those lessons that may be operating a door to less than we were a year ago. So this is all coming through productivity gains within our existing store fleet and online dealers that we work with and then one other follow up point to your question Alex with regards to that.

Speaker Change: Margins in China, we don't provide specifics on it but I can share that is among the most profitable.

Speaker Change: Parts of our business from an overall contribution perspective, certainly far above the overall corporate operating margin.

Alexander Thomas Perry: Perfect. That's really helpful. And then I just wanted to parse out the DTC guide a bit more. I think sort of the implied guide for DTC brick and mortar is for it to be up quite a bit. I guess what's the driver there? Is that just a year over year door count? And then I think it implies some acceleration on DTC.com as you move through the year. Can you maybe talk about what would be driving that?

Speaker Change: Perfect. That's really helpful. And then I just wanted to parse out the the D to C guide a bit more I think sort of the implied guide for DTC brick and mortar is for it to be up quite a bit I guess, what what's the driver there is that just year over year door count and then.

Speaker Change: I think it implies some acceleration in D. C dot com as you move through the year can you maybe talk about what would be driving that.

Jim A. Swanson: Yeah, a good question. It relates to the brick and mortar side of the business. The combination of the new stores we opened last year, our plans for this year, combined with those temporary clearance stores. We ramped up those temporary clearance stores throughout last year. So you're going to see the annualized benefit of them being open throughout this year. As a case in point, we had 44 that we operated in Q1 of this year versus eight last year. And so we'll continue to see the annualization associated with that.

Speaker Change: Yeah. Good question, so as it relates to the brick and mortar side of the business. The combination of the new stores. We opened last year are planned for this year combined with those temporary clearance stores, we ramped up those temporary clearance sort of throughout last year, So you're going to see the annualized benefit of them being open throughout this year case in point.

Speaker Change: For that we operated in Q1 of this year versus eight last year and Youll.

Speaker Change: And so we'll continue to see the innovation.

Speaker Change: Associated with that to a lesser degree we are contemplating some improvement from a productivity standpoint keep in mind, given the excess inventory that were flushing through the outlets for most of last year.

Jim A. Swanson: To a lesser degree, we are contemplating some improvement from a productivity standpoint. Keep in mind, given the excess inventory that we've been flushing through the outlets for most of last year, the assortment, size, rounds, and color that we had available to the consumer in those stores was pretty weak at different points in time throughout last year. And as we've got a better assortment in the stores this year, we believe there's opportunity where we left revenue on the table last year, and we can recapture that this year. So that's, by and large, the brick and mortar side of things, not to mention the brick and mortar business we have internationally, particularly in Asia, and our China business, that'll drive growth as well.

Speaker Change: But size around the color that we had available to the consumer in those stores is pretty weak for different points in time throughout last year and as we've got a better assortment in the stores. This year, we believe there's opportunity where we lost revenue on the table last year and we can recapture that this year. So that's by and large the brick and mortar side of things.

Speaker Change: Not to mention the.

Speaker Change: The drinking water business internationally, particularly in Asia.

Speaker Change: China business that that'll drive growth as well.

Jim A. Swanson: And then with respect to the e-commerce business, we do contemplate some degree of improvement on that in the back half of the year. And as Tim touched on, late last year, mid last year, we began making changes, particularly on Columbia.com in the U.S. with regard to the degree of promotions. And so, in the earlier part of the year, we were highly, highly promotional and discounted. As you get into the latter part of the year, we essentially backed off of that to get a better representation of the brand online. So, as we get into the latter part of this year, Alex will be competing against that.

Speaker Change: And then with respect to the E Commerce business, we do contemplate some degree of improvement that in the back half of the year as Tim touched on late.

Speaker Change: Late last year mid last year, we began making changes, particularly on Colombia dot com in the U S with regard to the degree of promotions and so in the earlier part of the year, we were highly highly promotional and discount it as you get into the latter part of the year, we essentially backed off of that to get a better reference deficit.

Speaker Change: You said the brand online so as we get into latter part of this year, Alex we'll be comping against that to the board.

Jim A. Swanson: So, it's more, it's an in-year comparison, if you will, and some of that's also reflected in our outlook. I think the other thing I would mention as well is that we have been, over the course of the past few years, making strategic digital-based investments. And so, we've made enhancements to our membership program, and our digital teams are working on efforts to better personalize their sites for the consumer and how we market to the consumer. So, I think increasingly, as we get in the back half of this year, we're able to begin leveraging and seeing some of the returns on some of those investments.

Speaker Change: Your column, if you will and some of that's also reflected in our outlook, but I think the other thing I would mention as well we have been over the course of the past few years and making strategic digital based investments.

Speaker Change: So we made enhancements to our membership program.

Speaker Change: Our digital teams are working on efforts to better personalize their site for silver and heavily markets. The consumer so I think increasingly as we get into the back half of this year were able to begin leveraging that same type of return.

Alexander Thomas Perry: Perfect. That's all incredibly helpful. Best of luck going forward. Excellent. The next question...

Speaker Change: Those investments.

Speaker Change: Perfect. That's all incredibly helpful best of luck going forward.

Speaker Change: Excellent.

Mauricio Serna Vega: The next question is from Mauricio semi with UBS. Please proceed.

Operator: The next question is from Mauricio Sema with UBS. Please proceed. Mauricio, your line is live.

Mauricio Serna Vega: Okay.

Mauricio: Richard Your line is live.

Mauricio Serna Vega: Hello, sorry about that. I was on mute.

Mauricio: Hello, I'm, sorry about that I was thinking.

Mauricio Serna Vega: Thank you. Thank you for taking our questions. I guess the first question: maybe you could talk about, you know, the sell-through that you've seen in the U.S. and European businesses? That would be super interesting to hear.

Mauricio: Thank you for taking my question I guess, the first question and maybe could you talk about the sell through that you've seen in the U S and European businesses, Oh that would be super interesting for them to hear and then on the sales guidance. Just wanted to reconcile I think you beat the midpoint of our guidance for Q1 by about $30 million by then.

Mauricio Serna Vega: And then on the sales guidance, just wanted to reconcile. I think you beat the midpoint of the guidance for Q1 by about 30 million dollars, but then you're keeping it pretty much stable. So I wanted to just be sure to understand like what drove that outperformance and like where that is being offset in the upcoming quarters. And then, just lastly, I think if you do the math on SG&A, inside SG&A, relative to the previous guide, it's a decline of about 10 million dollars or something like that. I just wanted to understand like what the changes are in the SG&A versus the previous guide, as you are already saying that you're keeping the same in plan. So thank you.

Mauricio: You are keeping at a pretty much stable to wonder I wanted to just make sure to understand like what drove that outperformance and like where is that being offset in the upcoming corners.

Mauricio:

Mauricio: And then just lastly, I think like if you do the math on the SG&A impact SG&A.

Mauricio: I'll get to in a previous guide like it's it's a decline of about $10 million or something like that I. Just wanted to understand like what is like the changes in the SG&A versus our previous guidance.

Mauricio: And you are already like Youre, keeping the savings plan.

Timothy P. Boyle: Yeah, Mauricio, I can tell you that in the North American market, our sell through is about on average where it is on average here. So we're pleased with that. It looks like the liquidations through our stores and our retail partner stores are about average. In Europe, they're slightly ahead of where they would typically be. So we're pleased with how that's performing. It looks like it's going to be a positive course. Yeah, I can jump in.

Speaker Change: Yeah, I wish I could tell you that the in the North America.

Mauricio: Our sell through is about on average.

Speaker Change: It is on an average year.

Speaker Change: So we're pleased with that it looks like the liquidations.

Speaker Change: Our stores are.

Speaker Change: Retail partner stores are about on average in Europe. They are slightly ahead of where they would typically be.

Speaker Change: So we're pleased with how that's with one which looks like it's going to be.

Speaker Change: Positive quarters.

Jim A. Swanson: Yeah, I can jump in on the other couple questions. So first, as it relates to the Q1 revenue beat, that Mauricio, by and large, earlier wholesale shipments, you know, they can be days or within a couple weeks different. So that's just a timing difference between the first quarter and the second quarter. Hence, you're not seeing any changes to our full year outlook. So that came out of Q2. And then with regard to FCNA, you know, there are slight adjustments that we're making in fine-tuning the SG&A forecast.

Speaker Change: Yeah, I can jump in on the other a couple of questions. So first as it relates to the Q1 revenue would be that that marine fuel by a large earlier wholesale shipments.

Speaker Change: It could be days are within a couple of weeks difference. So that's just a timing difference between first quarter and second quarter, and hence you're not seeing any changes to our full year.

Speaker Change: Outlook, so that came out of Q2.

Speaker Change: And then with regard to SG&A.

Speaker Change: Slight adjustments that we're making and fine tuning the SG&A forecast or what brought that down slightly you know I think it's gonna be a reflection of.

Jim A. Swanson: We've brought that down slightly, you know; it's going to be a reflection of the efficiency of what we're capturing from a cost reduction standpoint, and you just have to manage the business with discipline. So nothing of specific note outside of that.

Speaker Change: The efficiency of what we're capturing some.

Speaker Change: Cost reduction standpoint, and you'll be able to manage the business with discipline. So not the specific note outside of that.

Mauricio Serna Vega: Got it and just very quick follow-up on the temporary outlet stores like like you know like essentially you're using them this this year to clear down a lot of there are a lot of merchandise but how is it gonna be like the approach next year as you wind them down is it gonna be like gradual or just like you know I don't know like all out in Q1 just wanted to understand because I guess like from a consumer standpoint I don't know if that would affect like how the consumers perceive the pricing of the companies

Speaker Change: Got it and then just very quick follow up on the temporary outlet stores like like you know like essentially you're using them.

Speaker Change: Year to clear up down a lot of here on a lot of merchandise like how's, it's going to be like the approach next year.

Speaker Change: Wind them down or it can be it's going to be gradual.

Speaker Change: Just like you know I don't know I called out in Q1, just wanted to understand because I guess like from a consumer standpoint, I don't know if that would affect how the consumers perceive.

Speaker Change: <unk>.

Speaker Change: No the company stores.

Timothy P. Boyle: Yeah, the temporary locations are really going to be timed as a function of how effective we are liquidating the inventory. So they're month to month. So I would expect that we'll be gradually closing these stores over the next really year to the point where they'll virtually all be gone, or there may in fact be one or two, some small number, that are converted to permanent stores if we like their performance. But basically, these are set up to help us eliminate that clutter of inventory that we had around 18 months ago.

Speaker Change: Yeah, the temporary locations are really going to be well timed.

Speaker Change: Timing is a function of how.

Speaker Change: Effective we are liquidating the inventory so they're month to month. So I would expect that we will be gradually closing these stores over the next year.

Speaker Change: Year to the point, where the bill virtually all be gone.

Speaker Change: Or is there may in fact be one or two in some small number that are converted to permanent stores. If we like the performance, but basically these are established to help us liquidate that glut of inventory, we had about 18 months ago.

Mauricio Serna Vega: Got it. Very helpful. Thank you so much.

Speaker Change: Got it very helpful. Thank you so much.

Operator: Okay, we have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

Speaker Change: Okay. We have no further questions in queue I'd like to turn the floor back to management for any closing remarks.

Timothy P. Boyle: Well, thank you all for listening in. We're excited about the potential for the business in the future. It looks very bright. We will talk to you next quarter.

Speaker Change: Well. Thank you all for listening and we're excited about the potential for the business and the future looks very bright.

Speaker Change: Talk to you next quarter.

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

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