Q1 2025 Columbia Sportswear Co Earnings Call

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Operator: Greetings. Welcome to the Columbia Sportswear first quarter 2025 financial results At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Speaker Change: Greetings and welcome to the Columbia Sportswear first quarter 2025 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone cable.

Operator: Please note, this conference is being recorded.

This conference is being recorded.

Andrew Burns: I would now turn the conference over to your host, Andrew Burns. You may begin. 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 a detailed CFO commentary and financial review presentation explaining our results. This document is also available on our investor relations website, Investor.Columbia.com.

Andrew Burns: I would now turn the conference over to your host Andrew Burns you may begin.

Speaker Change: Good afternoon, and thanks for joining us to discuss Columbia sportswear company's first quarter results.

Speaker Change: In addition to the earnings release 8-K, indicating a detailed CFO commentary and financial review presentation, explaining our results. This document is also available on our Investor Relations website, Investor got Colombia Dot com.

Andrew 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 Bragdon.

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 General Counsel Peter Bragdon. This conference call will contain forward looking statements regarding columbia's expectations anticipations beliefs about the future.

Timothy Boyle: This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations, or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement is subject to many risks and uncertainties, and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Columbia's SEC filings. We caution that forward-looking statements are inherently less reliable than historical information.

Speaker Change: 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.

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

Timothy Boyle: 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.

Timothy Boyle: I'd also like to point out that we, during the call, we may reference certain non-GAAP financial measures, including constant currency net sales. For further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures, please refer to the Supplemental Financial Information section and financial tables included in our earnings release and the appendix of our CFO Commentary and Financial Review.

Speaker Change: I'd also like to point out that during the call we may reference certain non-GAAP financial measures.

Speaker Change: Constant currency net sales for further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures. Please refer to the supplemental financial information section and financial tables included in our earnings release and the appendix of our CFO.

Speaker Change: Commentary financial review.

Andrew Burns: Following our prepared remarks, we will host a Q&A period during which we will limit each caller to two questions so we can get to everyone by the end of the hour.

Jim Swanson: Following our prepared remarks, we will host a Q&A period during which we will limit each caller to two questions. So we can get to everyone by the end of the hour now I'll turn the call over to Jim.

Timothy Boyle: Now, I'll turn the call over to Tim. Thanks, Andrew. Good afternoon, everyone. First quarter net sales and earnings exceeded our guidance range. Globally, our wholesale business was better than planned, driven by late season demand for winter products and early spring product ship. Our business outside of North America, which represents approximately 40% of annual sales, remains strong. During the quarter, we generated healthy growth in nearly all of our international markets with double-digit percent growth in the LAAP region and high single-digit percent constant currency growth in the EMEA region. Before the April 2nd tariff increases were announced, our solid first quarter performance put us on track to achieving our 4-year target.

Jim Swanson: Thanks, Andrew and good afternoon, everyone.

Jim Swanson: First quarter net sales and earnings exceeded our.

Jim Swanson: Her guidance range globally, our wholesale business that doesn't plan driven by late season demand for winter products and early spring product shipments.

Jim Swanson: Business outside of North America, which represents approximately 40% of annual sales remained strong during the order in January and healthy growth in nearly all of our international markets with double digit percent growth.

Jim Swanson: L. A P region and high single digit percent constant currency growth in the EMEA region.

Jim Swanson: Before the April 2nd tariff increases were announced our solid first quarter performance.

Jim Swanson: On track to achieving our targets.

Timothy Boyle: I'd like to begin this call by outlining our view on global trade and our plans to mitigate the impacts associated with the recent U.S. tariff increase. Let me start by stressing the unprecedented level of public policy uncertainty that our industry is facing in the United States. We have been in business since 1938 and have navigated successfully through many incredibly challenging environments. But our industry has never faced a period when the rules and regulations around trade with the United States are simply unknown and unknowable. I've never been more excited than I am today about our brands, our strategies, and the overall strength of our company.

Jim Swanson: I'd like to begin this call by outlining our view on global trade and our plans to mitigate the impacts associated with our recent U S tariffs increases.

Jim Swanson: Let me start by stressing the unprecedented level of public policy uncertainty that our industry is facing in the United States.

Jim Swanson: We have been in business since 1938.

Jim Swanson: Navigated successfully through many incredibly challenging environments.

Jim Swanson: Our industry is never finished the period with the rules and regulations around trade with the United States are simply unknown and unknowable.

Jim Swanson: I've never been more excited than I am today about our brands our strategies and the overall strength of our company.

Timothy Boyle: We have a diversified supply chain and a team of experts with deep international trade experience. We began this year with a Fortress Balance Sheet, healthy inventories, and building momentum in the Columbia brand's Accelerate Grocery. These strikes give me confidence in our ability to emerge from this period as a stronger company with an improved position in the market. When the rules around trade are unknown. It's impossible for any company to predict with confidence what the cost of U.S. products will be, what the returns on certain investments in the U.S. will be, and ultimately, how the U.S.

Jim Swanson: We have a diversified supply chain and a team of experts with deep international trade experience.

Jim Swanson: We began this year with a fortress balance sheet.

Jim Swanson: The inventory is building momentum and the Columbia brands accelerate growth strategy.

Jim Swanson: These strengths give me confidence in our ability to emerge from this period as a stronger company.

Jim Swanson: Great position in the marketplace.

Yeah.

Jim Swanson: When the rules around trade right now than it's.

Jim Swanson: It's impossible for any company to predict with confidence what's the cost of U S products will be.

Jim Swanson: What's the returns on certain investments in the U S will be and ultimately how the U S marketplace will be impacted overall.

Timothy Boyle: marketplace will be impacted overall. Quite simply, companies are unable to confidently plan and invest in their U.S. businesses until there's clarity with respect to U.S. trade policy. History has shown that tariffs are designed to raise the price of imported goods. In the U.S., well over 90% of all apparel and footwear is imported and is already heavily taxed under legacy trade laws. The additional 10% universal tariff is on top of already existing high duties. The magnitude of the additional proposed country-specific tariffs has the potential to profoundly impact our industry and significantly raise prices to U.S. consumers.

Jim Swanson: Quite simply companies are unable to confidently plan and invest in their U S businesses until Theres clarity with respect to U S trade policy.

Jim Swanson: History has shown that tariffs or decide to raise the price of imported goods.

Speaker Change: In the U S well over 90% of all apparel footwear is important it is.

Jim Swanson: Already heavily tax under legacy trade laws.

Jim Swanson: The additional 10% Universal tariff is on top of already existing high duties.

Jim Swanson: The magnitude of the additional what goes country specific tariffs has the potential to grow.

Jim Swanson: Our industry is significantly raise prices to U S consumers.

Timothy Boyle: For many consumers, the affordability of apparel and footwear will increasingly become a household issue. This would be further exacerbated if higher tariff rates go into effect.

Jim Swanson: For many consumers the affordability of apparel and footwear will increasingly become a household issue.

Jim Swanson: This will be further exacerbated if higher tariff rates go into effect.

Timothy Boyle: Today, we have taken several Prior to the April 2nd tariff declarations, we domesticated all on-hand U.S. inventory through our own foreign trade zone distribution centers, saving us millions in potential tariffs. For products that are impacted by the reciprocal tariffs, we are accelerating shipments to the extent possible in order to receive products during the 90-day tariff clause. Because it's not practical at scale nor affordable, we do not intend to utilize air freight as a solution to accelerate inventory receipts. China remains a strategically important country for us, and we intend to continue leaning into opportunities for increased product creation and manufacturing in China, not only for our China Direct business, but for other markets around the globe.

Jim Swanson: To date, we have taken several actions.

Speaker Change: Gloria vehicles second tariff declarations, we domesticated all on hand U S inventory to our own foreign trade zone distribution centers saving us millions of potential tariff costs.

Speaker Change: So the products that are impacted by the cyclical cherubs youre accelerating shipments to the extent possible in order to receive products during the 90 day too.

Speaker Change: Because it's not practical at scale more affordable, we do not intend to utilize airfreight is a solution to accelerate inventory sheets.

Speaker Change: Hi, there remains a strategically important country for us and we intend to continue to lean into opportunities for increased product creation and manufacturing in China now.

Speaker Change: Not only for our China direct business, but for other markets around the globe.

Timothy Boyle: We have very little direct exposure to tariffs on products from China. A low single digit percent of our finished good products imported into the US are manufactured in China. Given the exorbitant tariffs on these goods, we will be diverting the vast majority of this product to other markets where it can be sold profitably. While much of our Fall 25 product has been ordered and sold, we are rationalizing inventory buys where possible to reduce the risk of excess inventory in a challenging environment. We're also taking actions to restrain discretionary spending, and where appropriate, pausing capital investments in the U.S.

Speaker Change: We have very little direct exposure to tariffs on products from China.

Speaker Change: Low single digit percent of a finished good products imported into the U S are manufactured in China, given the exorbitant tariffs on these goods, we will be devoting the vast majority of this product to other markets, where it can be sold profitably.

Speaker Change: Well once you won't fall 25 product has been ordered and shows we are rationalizing inventory buys where possible to reduce the risk of an excess in the jewelry in a challenging environment.

Speaker Change: But we're also taking actions to miss.

Speaker Change: Strained discretionary spending.

Speaker Change: Appropriate pause in capital investments in the U S until we have clarity.

Timothy Boyle: until we have clarity. fall 25, we're focused on maximizing our marketplace opportunity. We're working with our retail partners to deliver value to consumers and keep inventory and dealer margins healthy. As a result, we expect to absorb much of the incremental tariff costs in 2025 at the current incremental 10% universal rate.

Speaker Change: For fall 'twenty five.

Speaker Change: Just on maximizing our marketplace opportunity.

Speaker Change: We're working with our retail partners to deliver value to consumers.

Speaker Change: Inventory at the dealer.

Speaker Change: Origins healthy.

Speaker Change: As a result, we expect to absorb much of the incremental tariff costs in 2025 at the current incremental 10% Universal right.

Timothy Boyle: for 2026 for contemplating strategies to offset the impact of higher U.S. tariffs on our business. We have a team of experts exploring possibilities to mitigate the impact of increased tariffs, including redesign, redevelop, resource, and reprice products, among other mitigation factors. Overall, we're taking a multi-pronged approach to managing the business during this period of uncertainty. On the one hand, we're taking decisive actions to preserve capital and to mitigate the impact of IRA-U.S. tariffs. On the other, we believe that our brands and strong financial position can enable us to gain market The Columbia brand's exceptional value will be a competitive advantage in this period of rising prices for U.S.

Speaker Change: For 2026, we're contemplating strategies to offset the impact of higher U S tariffs on our business we.

Speaker Change: We have a team of experts exploring possibilities to mitigate the impact of increased tariffs, including a redesign.

Speaker Change: Delek resource and re priced products above other mitigation tactics.

Speaker Change: Overall, we're taking a multi pronged approach to managing the business during this period of uncertainty.

Speaker Change: On the one hand, we're taking decisive actions to preserve capital and to mitigate the impact of higher U S tariffs.

Speaker Change: We believe that our brands and strong financial position and enable us to gain market share.

Speaker Change: The Columbia brand's exceptional value will be a competitive advantage in this period of rising prices for U S consumers.

Timothy Boyle: consumers. As part of the Columbia brand's Accelerate Growth strategy, we remain committed to increasing our investment and demand creation to bring our new, highly differentiated marketing campaign and enhanced product assortment to life. We have a long history on the board of the irreverent, daring, and downright hilarious brand. often featuring Gert herself. Columbia's marketing has always been distinctive from the rest of the outdoor category. In recent years, that has been less present in our market. With the Columbia Accelerate Growth Strategy clearly defined, this is the moment to embrace our roots and write a new chapter for our iconic brand.

Speaker Change: As part of the Columbia brands accelerate growth strategy.

Speaker Change: We remain committed to increasing our investment in demand creation.

Speaker Change: Our new highly differentiated marketing campaigns and enhanced product assortments to life.

Speaker Change: We have a long history of irreverent dairy and downright hilarious brand me every day.

Speaker Change: Often featuring Gert herself.

Speaker Change: Colombia is marketing has always been distinctive from the rest of the outdoor category.

Speaker Change: In recent years that has been less present in our markets.

Speaker Change: With the Columbia accelerate growth strategy really define.

Speaker Change: This is the moment to embracing routes and write a new chapter for <unk> for our iconic brand. Starting this August we will begin to roll out our new global marketing platform that will be the Columbia brand character and voice for years to come.

Timothy Boyle: Starting this August, we will begin to roll out our new global marketing platform that will be the Columbia brand character and voice for years to come. We will scale our new distinctive voice through a full-funnel strategy. greater emphasis on a consistent year-round share of voice in the market. Not only are we planning to invest more in marketing, we're also leveraging modern digital and social first strategies to be more efficient and effective with our demand creation investments.

Speaker Change: We will scale, our need to sneak the voice through a full funnel strategy.

Speaker Change: With greater emphasis on a consistent return of share of voice in the market.

Speaker Change: Not only are we ready to invest more in marketing. We're also leveraging modern digital and social first strategies to be more efficient and effective with our demand creation investments.

Timothy Boyle: In this period of tariff turmoil, we have the opportunity to set ourselves.

Speaker Change: In this period of terrorists turmoil, we have the opportunity to set ourselves apart.

Timothy Boyle: turning to our to our financial Given the heightened uncertainty regarding tariff rates and the impact this will have on product cost and consumer demand, we are withdrawing our full year 2025 outlays. With that said, I'd like to provide some details on how we're approaching the balance of the year. Prior to the tariff increases, we were on track to deliver on a full year of financial For the second quarter, we anticipate net sales to grow 1 to 5% year over year. This is in line with the first half net sales outlook we provided in February. As of the date of this release, the incremental 10% universal tariff and the higher tariffs for China are in effect.

Speaker Change: Turning to our financial outlook.

Speaker Change: Given the heightened uncertainty regarding tariff rates and the impact this will add one product costs and consumer demand.

Speaker Change: We're withdrawing our full year 2025 outlook.

Speaker Change: With that said I'd like to provide some details on how we're approaching the balance of the year.

Speaker Change: Prior to the tariff increases we were on track to deliver on our full year financial targets.

Speaker Change: For the second quarter, we anticipate net sales to grow one 5% year over year. This is in line with the first half net sales outlook, we provided in February.

Speaker Change: As of the date of this release, the incremental 10% universal tariffs and the higher tariffs with China are in effect.

Timothy Boyle: Applying these tariff rates to the product that we have yet to receive in the U.S. for the fall 25 season would add between $40 to $45 million to the cost of sales as the underlying inventory is sold. Given our focus on delivering exceptional value to consumers and maximizing the marketplace opportunity, we do not expect to offset these higher tariff costs in 2025. Our tariff mitigation strategy will evolve in response to trade policy changes. We continue to make progress on our profit improvement. have identified cost savings and profit-enhancing opportunities beyond the $150 million three-year target we established in 2024.

Speaker Change: Applying these tariff rates to the product that we have yet to receive in the U S.

Speaker Change: All 25 season would add between $40 million to $45 million to the cost of sales as the underlying inventory is sold.

Speaker Change: Given our focus on delivering exceptional value to consumers and maximizing the marketplace opportunity.

Speaker Change: We do not expect to offset these higher tariff costs in 2025.

Speaker Change: Our tariff mitigation strategy will be all.

Speaker Change: In response to trade policy changes.

Speaker Change: We continue to make progress on our profit improvement plan and have identified cost savings and process enhancing opportunities.

Speaker Change: On the $150 million three year target.

Speaker Change: In 2024.

Timothy Boyle: We expect the U.S. market to be challenging in the back half of the year. Consumers will be paying higher prices for many of the goods they buy, and we expect this to negatively impact consumer demand. Our fall order book has not meaningfully changed since our call in February, but we anticipate retailers will be cautious with their inventory intake in this uncertain environment. As a result, we're planning our U.S. business considerably to minimize inventory risk and preserve profitability. We haven't seen a meaningful change in trends in most of our international businesses, which were quite healthy in the first quarter.

Speaker Change: We expect the U S market to be challenging in the back half of the year.

Speaker Change: Tumors will be pig iron prices when they need it with the budget and we expect this didn't negatively impact consumer demand.

Speaker Change: Our fall order book has not meaningfully changed since our call in February, but we would anticipate retailers will be cautious with their inventory intake in this uncertain environment.

Speaker Change: As a result, we're planning our U S business concerns relate to minimize inventory risk and preserve profitability.

Speaker Change: We haven't seen any meaningful change in trends in most of our international businesses, which were quite healthy in the first quarter.

Timothy Boyle: It's not possible to predict the extent to which U.S. tariff actions will impact international economic growth and consumer demand for our products globally.

Speaker Change: It's not possible to predict the extent to which U S tariff actions will impact international economic growth and consumer demand for our products globally.

Timothy Boyle: I'll now quickly review first quarter financial performance. Net sales increased 1% year over year to $778 million. Also, net sales increased 2% while direct-to-consumer. Gross margin expanded 30 basis points to 50.9% and SG&A expenses increased 1%. This performance resulted in diluted earnings per share of $0.75, up 6% year-over-year.

Speaker Change: I will now quickly review the first quarter financial performance net sales increased 1% year over year to $778 million.

Speaker Change: Wholesale net sales increased 2% while direct to consumer.

Speaker Change: Yeah.

Speaker Change: Gross margin expanded 30 basis points to 59% and SG&A expenses increased 1%.

Speaker Change: Okay.

Speaker Change: This performance resulted in diluted earnings per share of 75 cents up 6% year over year.

Timothy Boyle: Looking at net sales by geography, U.S. net sales decreased 1%. U.S. wholesale business was relatively flat. Spring 25 shipments were up modestly. During the quarter, winter weather boosted late season fall product sales, but hindered early spring season sales. In addition to weather, challenging outdoor category trends, and consumer uncertainty that weigh on spring season demand. U.S. DTC net sales declined low single-digit percent. U.S. e-commerce net sales were down high single digits. We had an excellent winter clearance sale in February, but it was not enough to offset challenging market conditions. U.S. brick-and-mortar net sales were up low single-digit percent driven by contribution from new stores.

Speaker Change: Looking at net sales by geography U S net sales decreased 1%.

Speaker Change: U S wholesale business was relatively flat spring twenty-five shipments were up modestly.

Speaker Change: During the quarter wonder whether boosted late season fall product sales, but in the early spring season sell through.

Speaker Change: In addition to weather challenging outdoor category trends and consumer uncertainty it weighed on spring season demand.

Speaker Change: U S. DTC net sales declined low single digit percent.

U S E Commerce net sales were down high single digit loosen.

Speaker Change: We had an excellent winter clearance sale in February, but it was not enough to offset challenging market conditions.

Speaker Change: U S brick and mortar net sales were up low single digit percent driven by contribution from new stores.

Timothy Boyle: We exited the quarter with eight temporary clearance locations down from 28 exiting the fourth quarter.

Speaker Change: We exited the quarter with eight temporary clearance locations down from 28.

Speaker Change: If it works for them.

Timothy Boyle: For my review of first quarter year over year net sales growth in international geographies, I will reference constant currency growth rates to illustrate underlying performance in each market. LIAP net sales increased 14%. China Netsu increased low teens percent led by strong e-commerce growth. Through our product offerings, marketing activations, and marketplace strategies, we're working to create a more premium Columbia brand experience for Chinese consumers. building off the prior season success of our transit line. We continue to expand our localized product offering designed to meet the unique needs of younger Chinese consumers and the growing This quarter we opened our first high street store in China on Waihai Road in Shanghai.

Speaker Change: But my review of first quarter year over year net sales growth in international geographies I will reference constant currency growth rates illustrate underlying performance in each market.

Speaker Change: L. A P net sales increased 14%.

Speaker Change: China net sales increased low teens percent led by strong e-commerce growth.

Speaker Change: So our product offerings marketing activations and marketplace strategies, we're working to create a more premium Columbia brand experience for Chinese consumers.

Speaker Change: Building off the prior season and success of our transit line, we continue to expand our localized product offerings designed to meet the unique needs of younger Chinese consumers and they're growing.

Great.

Speaker Change: This quarter, we opened our first high Street store in China on why I wrote in Shanghai. This celebrates Columbia's deep heritage and drove consumer engagement through both online impressions and in store events, we remain committed to investing in our business in China.

Timothy Boyle: This celebrates Columbia's deep heritage and drove consumer engagement through both online impressions and in-store events. We remain committed to investing in our business in China. Japan net sales increased mid teens percent benefiting from strong demand for late season winter product with growth across our all channels Our localized product in Japan blends style, functionality, and performance to create wear-anywhere products. Our team in Japan has done a great job building successful franchises that resonate with consumers. Some local product highlights from this quarter include our Sapland Winter Boots, Hawthorne Waterproof Footwear, and Backpack Offerings to support the back-to-school season.

Speaker Change: Yes.

Speaker Change: Japan net sales increased mid teens percent benefiting from strong demand for late season winter product with growth across all channels.

Speaker Change: Our localized product in Japan blend style functionality and performance to create where anywhere product.

Speaker Change: Our team in Japan has done a great job building successful franchises that resonate with consumers.

Speaker Change: Local product highlights from this quarter include our sandblast leather boots.

Speaker Change: Our waterfront footwear and backpack offerings to support the back to school season.

Timothy Boyle: In May, we'll be opening a Columbia High Street location in the center of Harajuku, a premier retail area in Tokyo. I'm excited to see this premium expression of the brand come to life. Korea Net Sales increased low single-digit percent aided by late winter weather. LAP distributor markets were up well 20% primarily reflecting robust spring 25 order growth. In both our LNAP and EMEA distributor markets, OmniMax Sportwear has continued to be an incredible success story, demonstrating the power of great product, marketing activations, and retail presentation. Columbia Breed is strong and our partners are investing in retail door expansion.

Speaker Change: It may well be opening our Columbia ICEE relocation in the center of Aaron Juku Premier retail areas and Tokyo.

Speaker Change: I'm excited to see this premium expression of the brand to come to life.

Speaker Change: Okay.

Speaker Change: Korea net sales increased low single digit percent aided by late winter weathers.

Speaker Change: L. A P distributor markets were up low twenty's percent, primarily reflecting robust spring 'twenty by water growth.

Speaker Change: In both our L. A P in EMEA distributor markets on the next point, where it has continued to be an incredible success story.

Speaker Change: Administration of our great product marketing Activations and retail presentation.

Speaker Change: The brand is strong and our partners are investing in retail door expansion.

Timothy Boyle: in EMEA Net Sales Increased Service. Europe direct net sales increased high single digit percent with growth across all channels led by DTC Sport. For Spring 25, URF's key marketing campaign positions Columbia as the leader in hype. The team is focused on bringing young, active consumers into the brand through local activations like the Columbia Hike Society, as well as social content with hike influence. across the European marketplace. Our team is doing a great job evaluating the consumer experience with in-store marketing and brand-managed spaces in concert with strategic partners. Our EMEA distributor business was down slightly despite strong spring 25 orders, as the timing of shipments is more heavily weighted to the second quarter.

Speaker Change: Maybe that's EMEA net sales increased 7%.

Speaker Change: Europe direct net sales increased high single digit percent with growth across all channels led by DTC stores.

We're spending 25, Europes key marketing campaigns positions, Colombia is the leader in height.

Speaker Change: The team is focused on bringing young active consumers into the brand to local observations.

Speaker Change: The Columbia Heights Society, as well as social content with Ikea Influencers.

Speaker Change: Across the European marketplace, our team is doing a great job evaluating the consumer experience.

Speaker Change: In store marketing and brand manage basis in concert strategic partners.

Speaker Change: Our EMEA distributor business was down slightly despite strong spring 'twenty five orders as the timing of shipments is more heavily weighted to the second quarter.

Timothy Boyle: Canada net sales were down 2% in the quarter with sales down modestly across wholesale and DTC.

Speaker Change: Canada net sales were down 2% in the quarter with sales down modestly across wholesale and DTC.

Timothy Boyle: Looking at first quarter performance by brands. Columbia Net Sales increased 3% product front, we introduced our lightest shoe ever. OmniMax Chronos Featherweight, designed to perform on the trail and in the city with adaptive cushioning, flexible support, and grippy outsole. The incredible versatility of this product is being highlighted to consumers with a new footwear marketing campaign. Every surface is a trail. Marketing efforts to promote Columbia's new running shoes include title sponsorship of the Beauty Trail Race Series in Sedona, Arizona. The event draws unique runners from across the southwest and provides our teams with the opportunity to engage with this important at the grassroots level.

Speaker Change: Looking at first quarter performance by brand.

Speaker Change: Columbia net sales increased 3% on.

Speaker Change: On the product front, we introduced our latest shoe ever.

Speaker Change: The omni Max Kronos better way designed to perform on the trail ended the city with adaptive cushioning flexible support rippey outsole.

Speaker Change: The incredible versatility of that product is being highlighted to consumers with the Newport, where marketing campaign. It resurface as a trail.

Speaker Change: Marketing efforts to promote Columbia's new running shoes include tightening title sponsorship of Daily Trail race series is the dominant Arizona.

Speaker Change: You then drop draws elite runners from across the southwest and provides our teams with the opportunity to engage with this important effort.

Speaker Change: Rich level.

Timothy Boyle: Our new Rain No Shine Jacket was a rewarded Condé Nast Traveler's Best Overall Pick for Lightweight Race Shows. This jacket is designed to keep you dry in the wettest conditions and features our OutDry Xtreme waterproof breathable membrane in a new map. In March, Columbia partnered with KIPP and Japanese clothing brand South 2 West 8. to create a custom, outdoor-inspired... Each piece blends Kent and south to west-southwest with Columbia's utility and outdoor function. Our popular PFG fishing line had several collabs and collections this spring. Our PFG Artist Series featured popular South Florida artist Ben This limited edition collection highlights original work inspired by Miami's graphic artists and its local fish species.

Speaker Change: Our new range no shying Jackup was awarded <unk> Nast travellers best overall pick for lightweight ratios. This jacket has decided to keep some dry weather conditions and features our outdoor extreme waterproof breathable memory and a new map finish.

Speaker Change: In March Columbia partnered with Kip and Japanese clothing brand sounds to west eight.

Create custom outdoor inspired collection.

Speaker Change: Each piece blends kit and south to West States on the west.

Speaker Change: Colombia is utility and outdoor functionality.

Speaker Change: Our popular PFG fishing line at several co labs and collections the sprite.

Speaker Change: Pier G artist series Ctrip popular South Florida.

Speaker Change: Great.

Speaker Change: This limited edition collection highlights original work inspired by Miami's graphic artists and its local fish species.

Timothy Boyle: We activated this collection with a Bubba Wallace in-store event at Dix-Forty Goods House of Sport in Miami. For the Homestead, Miami NASCAR race, we wrapped bonus car in PHE Graphics, inspired by During the quarter, we also partnered with Columbia brand ambassadors, Luke and Nicole Combs, to create their own collection. collaborated with Nicole to create a PHE Specialized Edition of apparel and accessories designed to take her from the boat to the beach and beyond. and work with Luke to create a Ph.D. special edition turkey. featuring a premium field leather, featuring premium field ready, featuring premium field ready.

Speaker Change: We activated this collection with a bubble Wallace in store event at <unk>.

Speaker Change: Excluding this house in sport in Miami.

Speaker Change: Homestead, Miami NASCAR race car.

Speaker Change: Kurt Phe ethics.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: During the quarter, we also partner with Columbia brand ambassadors look into call combs to create their own collections, we collaborated with Nicole to create a phe specialized addition.

Speaker Change: Apparel and accessories designed to take her from the vote each and beyond.

Let's move to create a Phd specialization, Turkey, I mean collection, featuring a premium yield with it.

Speaker Change: Premium yield ready features.

Timothy Boyle: Dance Tech, and his favorite, Mauricio Greenleaf-Kennedy. These incredibly successful collections and collaborations validate Columbia Brand's authenticity and allow the brand to reach new consumers.

Speaker Change: <unk> Tec and his favorite Marshfield screen, but we cannot book.

Speaker Change: He is incredibly successful collections and collaborations validate Columbia brands. Additionally, it allowed the brand to reach new consumers.

Timothy Boyle: I'd also like to congratulate the Columbia team for earning the top apparel and footwear brand score in Newsweek's America's Best Loyalty Program survey. Newsweek takes input from thousands of Boyle program members. to uncover which offerings consistently deliver the most rewarding experience. It measures customer satisfaction, perceived value, customer support, trust, and overall benefit. Columbia's Greater Reward Program delivers a meaningful portion of our DTC sales and is an important complement component of our overall consumer retention strategy. Well done team.

Speaker Change: I'd also like to congratulate the Columbia team for earning the top apparel and footwear brand score in Newsweek's America's Best loyalty program Survey.

Speaker Change: Usually it takes input from thousands of oil program members.

Speaker Change: Uncover which offerings consistently deliver the most rewarding experiences.

Speaker Change: Measures customer satisfaction perceived value customer support trust and overall benefits.

Speaker Change: He is greater reward program delivers a meaningful portion of our DTC sales and is an important complement component of our overall consumer retention strategy.

Jamie: All right Jamie.

Timothy Boyle: Shifting to our emerging brand. Mountain Hardware net sales decreased 14% in the first quarter. While full price selling was healthy across channels, we had lower closeout sales compared to elevated PFRAS clearance activity last year. We remain committed to investing in the Mountain Hardwear brand, including elevating our presentation at wholesale.

Speaker Change: Shifting to our emerging brands now.

Jamie: Mountain hardware net sales decreased 14% in the first quarter.

Jamie: Well well full price selling was healthy across channels, we have lower closeout sales compared to elevated.

Jamie: Clearance activity last year.

Jamie: We remain committed to investing in the mountain hardware brands, including elevating our presentation at wholesale.

Timothy Boyle: For Spring 25, we open a handful of branded retail environments in this specialty outdoor channel. Initial sell-through trends have been promising at these locations, and we plan to open more for fall. Frontend net sales decreased 10% in the quarter, reflecting challenging e-commerce performance. in part due to lower clearance activity compared to elevated levels in the prior year.

Jamie: <unk> 25, we opened a handful of branded retail environments in the specialty outdoor channel.

Jamie: Initial sell through trends have been promising at these locations and we plan to open more than football.

Jamie: <unk> net sales decreased 10% in the quarter, reflecting challenging e-commerce performance.

Jamie: As far as being a lower clearance activity compared to elevated levels in the prior year.

Timothy Boyle: I remain excited about Prada's product and marketing direction. As we head into the fall season, new product collections and refreshed brand imagery will be increasingly evident to consumers. During the quarter, Colorado refreshes its Boulder, Colorado, retail location to better highlight key product franchises and elevate brand storage. The immediate lift in store performance indicates that Prana's improved product assortment and presentation at retail is resonating.

Jamie: I remain excited about problems product marketing direction.

Jamie: As we head into the fall season, new product collections and refreshed brand damaging.

Jamie: It will be increasingly evident to consumers.

Jamie: The order.

Jamie: Thats Boulder Colo retail location, the better highlight key product franchises and elevate brand storytelling.

Jamie: The immediate with the store performance indicates that promised improved product assortment and presentation.

Jamie: Retail is resonating with consumers.

Timothy Boyle: Surround Net Sales decreased 80%. The team is making great progress refreshing the product line with new styles like the Ona Avenue Sneaker and the Roman Clog, which have the potential to become important product franchises in the seasons to come. Sorel's evolution will continue into the fall season with new women's styles, an expanded men's collection, high-energy co-labs, and refreshed branding.

Jamie: Sorel net sales decreased eight personal the team is making great progress refreshing the product line with new styles like the older Avenue sneaker and the enrollment clogs, which have the potential to become an important product franchises in the seasons to come.

Jamie: So Ross evolution will continue into the fall season, with new women's styles and expanded men's collection high energy coal labs, and refreshed brand image.

Timothy Boyle: In closing, Columbia Sportswear is a strong company that has weathered many challenges. We have an amazing portfolio of brands, decades of international trade experience, and a fortress balance sheet. I'm confident we have the strength to navigate near-term uncertainty and unlock significant long-term growth opportunities. We remain committed to investing in our strategic priorities to accelerate profitable growth. create iconic products that are differentiated, functional and innovative. drive brand engagement with increased focus demand creation investments. Enhance consumer experiences by investing in capabilities to delight and retain consumers. Amplify Marketplace Excellence that is digitally-led, omnichannel, and global, and empower talent that is driven by our core values.

Jamie: In closing Columbia Sportswear is a strong company has weathered many challenges.

Jamie: We have an amazing portfolio of brands.

Jamie: Decades of international trade experience and a fortress balance sheet.

Jamie: Im confident we have the strength to navigate near term uncertainty and unlock significant long term growth opportunities.

Jamie: We remain committed to investing in our strategic priorities to ask.

Jamie: To accelerate profitable growth.

Jamie: Great iconic products that are differentiated functional and innovative.

Jamie: Brian brand engagement with increased focused demand creation investments.

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

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

Jamie: And then power talent that is driven by our core values.

Timothy Boyle: That concludes my prepared remarks.

Jamie: That concludes my prepared remarks, we will open it.

Operator: You're welcome to get questions for the remainder of the hour. Operator, could you help us with that?

Speaker Change: Questions for the remainder of the hour operator could you help us with that.

Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.

Operator: Next time, we will be conducting a question-and-answer Question-and-Answer If you would like to ask a question, please press star 1 on your telephone or press star 1 on your telephone. Confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. 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.

Speaker Change: Pressing the star Keys, one moment, please while we poll for questions. Once again. Please press star one if you have a question or comment.

Operator: Once again, please press star 1 if you have a question or a comment.

Laurent Vasilescu: Our first question comes from Laurent Vasilescu with Exane BNP Paribois. Please proceed. Afternoon. Thank you very much for taking my question. And thank you, Tim, for all your thoughts on the tariff situation. It sounded from the prepared remarks that your fall order book did not meaningfully change, if I heard correctly. I know, Tim and Jim, I know you're not guiding for today, but should we assume that wholesale for two ages? Similar to what you expected in early February, which I think was somewhere in the up-low single digit. and Lauren Turwin. Yes, sorry. And maybe second part of that question is just longer term, I believe there's a lot of private label offering in the US that comes from China.

Speaker Change: Our first question comes from Laurent <unk> with Eczema BNP Paraguay. Please proceed.

Speaker Change: Good afternoon. Thank you very much for taking my question and thank you Ted for all your thoughts on the tariff situation.

Speaker Change: It sounded from the prepared remarks that your fall order book did not meaningfully change if I heard correctly.

Speaker Change: I know, Tim and Jim I know youre, not youre not guiding for today, but should we assume that wholesale for <unk> sure.

Speaker Change: Similar to what you expected in early February, which I think was somewhere and up low single digits.

Speaker Change: And yes, you're right Michael.

Michael: Yes, sorry.

And then second part of that and our first question is just longer term I believe there is a lot of private label offering in the U S that comes from China are there any opportunities to take market share near term.

Timothy Boyle: Are there any opportunities to take market share near term and longer term just because of the situation? Thank you. Certainly. Well, again, you know, under the category of headwinds, we really don't know what the consumer is going to be doing. on the tailwinds. You know, there's so much product that comes from China, both from private label and from smaller brands, where we believe there's an opportunity for the company to gain market share. And we'll be focusing on making sure that as it's available to us, we are going to take advantage of it. We think that there'll be an opportunity for us to grow the business from a market share perspective.

Michael: And then longer term just because of the situation. Thank you.

Michael: Certainly well again.

Michael: The category of headwinds are we really don't know what the consumer is going to be doing.

Michael: In the back half of the year.

Michael: On the tailwind.

Michael: There's so much product that comes from China, both private label and from smaller than others.

Michael: We believe there is an opportunity for the company and gain market share.

Michael: And we'll be focusing on making sure that as it's available to US we were able to take advantage of and we think that there'll be an opportunity for us to grow the business from a market share perspective.

Jim Swanson: Just based on what you pointed out as it relates to China's shortfall in deliveries to the US. And Laurent, as it relates to the fall order book, you know, as we took that through February and March, there were no surprises in the wrap up of that order book relative to what we reported in February. And as Tim noted, we've not seen any meaningful cancellations today. Thank you, Tim and Jim. And then I appreciate that I know it's hard in this volatile environment, but I appreciate that you called out 40 to 40, I think $45 million of incremental COGS based on the tariff rates, tariff rates as of today.

Michael: Just based on.

Michael: What you pointed out as it relates to China's shortcoming shortfall and deliveries to the U S.

Michael: As it relates to the ball on the book, we took that through February and March there were no surprises in the wrap up of that order book relative to what we reported in.

Michael: In February and as Tim noted, we've not seen any meaningful cancellations to date.

Michael: Okay. Thank you, Tim and Jeff and then I appreciate that I know it's hard.

Michael: Volatile environment, but I appreciate that you called out 40 to 45, I think $45 million of incremental Cogs based on the tariff rate tariffs rates as of today.

Jim Swanson: Should we assume that that kind of splits between 3Q and 4Q? And clearly, I think you called out that you're not offsetting that with pricing for fall order books. But could you raise pricing starting for spring 2026? And if that's the case, how much would you raise pricing globally or just in the US? Thank you very much. Certainly.

Michael: Should we assume that that kind of split between <unk> and clearly I think you'd called out theyre not offsetting that with pricing for fall order books, but but.

Michael: Could you could you raised pricing starting for spring 2026, and if that's the case like how how much would you raise pricing globally or just in the U S. Thank you very much.

Jim Swanson: Well, I think our plans for spring 26, which are in flux right now, because we really don't know what we're likely to pay for things in fall 25, let alone spring 26. But again, we will be surgically viewing the business When when the opportunity arise for us to either take market share by keeping existing pricing or offering some incentives We'll be doing that on an almost ad hoc basis as it begins, as we begin to take orders for the season. And then Laurent, as it relates to the $40 to $45 million in tariffs, by and large, we would expect that to be in the second half of the year.

Michael: Certainly well I think our plans for spring 'twenty, six which are in flux right now because we really don't know what we're likely to pay for things in fall 25, let alone spring 'twenty six but again, we will be surgically viewing that the.

Michael: Business add.

Michael: When when the opportunities arise for us to even take market share by keeping existing pricing or operate some incentives.

Michael: We will be doing that on a almost AD hoc basis as it begins as we began to take orders for the season.

Michael: Airlines were Lora Lora answer as it relates to the $40 million to $45 million and tariffs by and large we would expect that to be in the second half of the year. We don't ship a lot of the very little of the fall merchandise during the second quarter, there may be a little bit that goes out.

Laurent Vasilescu: We don't ship a lot of the, or very little of the fall merchandise here in the second quarter. There may be a little bit that goes out. And then that $40 to $45 million, that's incurred or realized through our P&L, that underlying inventory sold. So there's the potential that you would see some of that cost actually out into 2026, to the degree we haven't shipped it or sold it through our own D2C channels at the end of the year. Very, very helpful. Last housekeeping question here, just the midpoint of guidance for 2Q reps. Appreciate that you're giving that to us tonight.

Michael: And then that $40 million to $45 million incurred are realized through our P&L underlying inventory sold so there's the potential that you would see some of that cost actually out into 'twenty six to the degree we haven't shipped yet.

Michael: Through our own DTC channels at the end of the year.

Michael: Very very helpful. My last housekeeping keeping question here just the midpoint of guidance for <unk> I appreciate that youre, giving that to us tonight, but the 3% any color around how we should think about that by.

Laurent Vasilescu: But the 3%, any color around how we should think about that by the key markets that you report? And if you're seeing anything in terms of near term sentiment in China, because you've done very well over the last several quarters in China. So just love to get some color there. Thank you very much. Yeah, I mean, from an overall from an overall standpoint, the guidance range that we provided a one to five, the 5% would essentially align with the prior outlook that we provided back in February. And keep in mind that from a wholesale standpoint, we had an order book for the spring season that we last reported on that contemplated a mid single digit rate of growth.

Michael: The key markets that you report.

Michael: If youre seeing anything in terms of near term sentiment sentiment in China, because you've done very well over the last several quarters in China. So just love to get some color there. Thank you very much.

Michael: I mean from an overall from an overall standpoint, the guidance range that we provided of one to five 5% essentially in line with the prior outlook that we provided back in February and keep in mind that from a wholesale standpoint, we had an order book for the spring season that we had last report on the contemplated a mid single digit rate of growth. So this is.

Laurent Vasilescu: So this is generally consistent with that barring anything significant changing from a wholesale customer standpoint, which we've not seen to date. Aside from that, Laurent, you know, we're assuming that the trends that we've more recently seen in the business, which include, you know, our international businesses continue to be healthy. So our outlook would contemplate that continue to be the case across Europe and China, and then continue some slowness that we've seen in our US direct consumer business. Thank you very much and best of luck.

Michael: Generally consistent without barring anything significant changing from a wholesale customer standpoint.

Michael: We've not seen to date aside from that we're on.

Michael: Assuming that the trend that we bought recently into the business which include.

Michael: Our international businesses continue to be healthy so our outlook would contemplate that continuing to be the case.

Michael: Across Europe, and China and then.

Michael: Continued slowness that we've seen in our U S direct to consumer business.

Speaker Change: Okay. Thank you very much and best of luck.

Peter Mcgoldrick: Next question comes from Peter McGoldrick with Stiefel. Thanks for taking our question. You pointed to opportunity to take market share in the current environment, and I was hoping you could elaborate on those comments.

Speaker Change: The next question comes from Peter Mcgoldrick with Stifel. Please proceed.

Peter Mcgoldrick: Alright, thanks for taking our question.

Peter Mcgoldrick: You pointed to opportunity to take market share in the current environment and I was hoping you could elaborate on those comments, if that's a global consideration and given the level of consumer uncertainty could you share your internal expectations for market performance and the various regions you participate.

Timothy Boyle: If that's a global consideration, and given the level of consumer uncertainty, could you share your internal expectations for market performance in the various regions you participate in? Certainly, well, let me let me ask the first one, as it relates to market share, you know, Many of the companies that we compete with, and as Laurent mentioned, many of our customers that have Private label businesses that are centered in China. We'll have a difficult time importing products at all, maybe paying very high prices for it. We see opportunities to take share from those smaller brands and also take share, but potentially from our customers' private That's the primary.

Peter Mcgoldrick: Certainly well, let me let me answer the first one as it relates to market share.

Peter Mcgoldrick: Yes.

Peter Mcgoldrick: So many of the companies that we compete with.

Peter Mcgoldrick: As Leroy mentioned many of our customers that have.

Peter Mcgoldrick: Private label businesses that are centered in China.

Peter Mcgoldrick: We will have a difficult time imported products at all maybe paying very high prices for when we see opportunities to take share from those smaller.

Peter Mcgoldrick: Brands and also take share, but potentially frontline customers private label.

Peter Mcgoldrick: <unk>.

Peter Mcgoldrick: But that's the primary.

Timothy Boyle: Why do we feel confident that there's going to be an opportunity for us? Just based on our balance sheet, and the fact that, frankly, we have a very structured, well-established expertise in navigating tariffs globally. Well, it's a crazy time right now for tariffs. We navigate tariffs around the world. quite good at. So the opportunities for us to be successful when others are not should be quite good.

Peter Mcgoldrick: While we feel confident that there's going to be an opportunity for us just based on our balance sheet and the fact that frankly, we have a very structured.

Peter Mcgoldrick: Well established expertise in navigating tariffs globally.

Peter Mcgoldrick: The U S.

Peter Mcgoldrick: Well, it's a crazy time right now for tariffs, we navigate tariffs around the world.

Peter Mcgoldrick: And quite good and so the opportunities for us to be successful when others are not should be quite good.

Timothy Boyle: Thank you for that.

Peter Mcgoldrick: Thank you for that and then.

Timothy Boyle: And then I was hoping you could talk about your, your plans to support demand creation, previous guidance had considered a step up to six and a half percent of sales, I recognize that you're no longer you've withdrawn guidance, but I was hoping you could talk about your level of commitment to growing demand creation and relative to the prior outlook. Yeah, we intend to continue to spend at a higher level than we have in the past. on. projects. Campaigns starting really in August of this year. And we think that it's going to be quite good for the company for a couple of reasons.

Speaker Change: Hoping you could talk about your.

Speaker Change: Plans to support demand creation previous guidance had considered a step up.

Speaker Change: Six 5% of sales I recognize that you're no longer you've withdrawn guidance, but I was hoping you could talk about your level of commitment to growing demand creation and relative to the prior outlook.

Speaker Change: Yes, we intend to continue this then.

Speaker Change: At a higher level than we have in the past.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Projects.

Speaker Change: Yeah aims starting really in August of this year, and we think that it's going to be quite good for the company for a couple of reasons first of all we're going to spend more second of all we're going to be more efficient.

Jim Swanson: First of all, we're going to spend more. Second of all, we're going to be more efficient with our spend. We're changing strategically how we spend the money. And lastly, the campaigns created very different We'll have an opportunity to show you that in an artist when you'll see. much more of the company's marketing assets being distributed. But I think that those three things will give us a very big leg up, especially in a time when competitors will not be able to be investing as heavily as we will. And Peter, while we're not providing a full year outlook, you'll note in the CFO commentary that we've published, if you look at the SG&A analysis that's in there, our marketing spend is a percentage of sales for the first quarter with 6.4%.

Speaker Change: And we're changing strategically how we spend the money and lastly.

Speaker Change: The campaigns created very different.

Speaker Change: Well have an opportunity to show you that.

Speaker Change: I guess, we will see.

Speaker Change: Much more of the Companys marketing.

Speaker Change: Assets being distributed.

Speaker Change: Those three things will give us a very big leg up, especially in a time when competitors will not be able to investing as heavily as well.

Speaker Change: Peter while we're not providing a full year outlook you'll note in the CFO commentary that we published if you look at the SG&A analysis in there our marketing spend as a percentage of sales for the first quarter was six 4%. So that's somewhat indicative of that intent that we've got in terms of putting more dollars behind marketing and.

Jim Swanson: So that's somewhat indicative of that intent that we've got in terms of putting more dollars behind marketing and the Accelerate strategy.

Speaker Change: The accelerated strategy.

Peter Mcgoldrick: I appreciate the perspective and I look forward to the advertising campaign.

Speaker Change: I appreciate the perspective, and I look forward to the advertising campaign.

Christa Zuber: This question comes from John Kernan with TD Cowen. Good afternoon. This is Christa Zuber on for John. Thank you for taking our question. First on the SG&A cost saves, on the last call, you really spoke to achieving sort of the $90 million in cost saves for 2024, and you're now tracking, I believe, the 8K suggested roughly $150 million annualized for fiscal 25. What have you since identified in your cost structure review of potential areas? that's driving this spend reduction. And ultimately, kind of what do you view with the optimum SG&A rate longer term for the company, excluding this.

Speaker Change: Next question comes from John Kernan with TD Cowen. Please proceed Jon.

Speaker Change: Good afternoon. This is Christian Zubair on for John Thank you for taking our questions. Just first on the SG&A cost saves on the last call you really spoke to achieving the $90 million in cost savings for 2024, and you are now tracking I believe.

The 8-K suggested a roughly $150 million annualized for fiscal 'twenty five what have you since identified in your cost structure.

Speaker Change: Potential areas.

Speaker Change: And that's driving this spend reduction and ultimately kind of what what do you view as the option on the SG&A rate longer term for the company. Excluding this I don't even know if you can exclude the current period, but.

Jim Swanson: I don't even know if you can exclude the term period, but... in a rosier picture, I guess. Thank you.

Speaker Change: And are in a rosier picture I guess thank you.

Jim Swanson: Yeah, Krista, this is Jim. Yeah, so what we described, the $150 million, keep this in mind, those are annualized cost reduction plans that we've got that encompass both what we set out and what we achieved in FY24, so the $90 million, and then the incremental amount that we intend to execute on this year that would bring the cumulative amount up to the $150 million by the time that we exit this year. There's automation efforts that are ongoing. We did execute a reduction in force last year. Certainly, that's on the table in terms of factors that we need to be considering for the balance of this year as well, and then, in addition to that, all forms of other spend, and whether that's capital spend, as we're pulling back on that a bit in the U.S.

Speaker Change: Yes, Chris this is Jim.

Speaker Change: So what we what we described $150 million keep that keeps us in mind those are annualized cost reduction.

Speaker Change: Plans that we've got that encompass both what we set out and that we achieved in FY 'twenty for the $90 million and then the incremental amount that we intend to execute on this year that would bring the cumulative amount up to $150 million by the time, we exit this year by and large it's reflective of the.

Speaker Change: Components that we've described up to this point in terms of operational cost savings. We've described some work that's going on within our supply chain.

Speaker Change: Compass distribution costs, and whether that would be third party logistics.

Speaker Change: Distribution savings that we achieved in the last year it was labor optimization.

Speaker Change: Automation efforts that are ongoing we did execute a reduction in force last year certainly that that's on the table in terms of factors, we need to be considering for the balance of this year as well. So and then in addition to that all forms of other spend and whether that's capital standards report back on that a bit.

Jim Swanson: given the uncertainty of the trade environment that we're operating in, and all other forms of discretionary spend, so we feel like we've got a good beat in this year. On achieving that $150 million as we exit this year, to your question regarding the longer-term goal here, without getting down to the specifics on this, certainly, our expectation would be that we make progress towards driving leverage in our FG&A and pushing that back in the direction where it has historically been, as well as, in the case of our operating margin, and seeing our operating margins return into the double-digit and beyond zone, but it's going to take time given the uncertainty of the environments that we're operating in here today.

Speaker Change: In the U S. Given the uncertainty of the trade environment.

Speaker Change: We're operating in and all other forms of discretionary expense. So we feel like we've got a good beat on achieving that $150 million as we exit this year to your question regarding the longer term.

Speaker Change: Our goal here without getting down to the specifics on this.

Speaker Change: Certainly our expectation would be that we that we made progress towards driving leverage interest G&A and getting pushing that back in the direction, where it has historically been as well as in the case of our operating margin and our operating margins return into the double digit.

Speaker Change: <unk> zone, but it's going to take time, given the uncertainty of the environment that we're operating in here today.

Jim Swanson: Got it.

Speaker Change: Got it thank you for that and just one my second question just on China, you know the turnaround in your business. There has been very encouraging and why youre seeing just like to get some insight into what you're seeing there.

Jim Swanson: Thank you for that.

Jim Swanson: And just one, my second question, just on China, you know, the turnaround in your business there has been very encouraging. And what you're seeing, just like to get some insight into what you're seeing there, you know, you were up low teens, I believe, constant currency in Q1. Can you talk more to the recent trends, you know, the positive outdoor category trends, the elevation that you've really been able to achieve in that market, and kind of how that's shaping your view, more or less, for the balance of this year and the longer term opportunity in the market?

Speaker Change: Low teens I believe constant currency in Q1 can you can you talk more to the recent trends.

Speaker Change: Outdoor category trends the elevation that you've really been able to achieve in that market and kind of how that shaping your view.

Speaker Change: More or less for the balance of this year and the longer term opportunity in the market. Thank you.

Timothy Boyle: Yeah, so I mean, it's good to remember that we are quite small in China, but compared to many of our competitors, so the opportunity for us to grow rapidly is quite is there. The expansion opportunities are are good as well because there's an established retail operation there with not only our own stores but stores that our customers would operate for all intents and purposes under a franchise agreement. So Outdoor is strong there, the brand is strong, and we're seeing lots of opportunity for expansion. We're also going to be continuing to invest there in localized design and production, which we believe can give us a leg up against many of our competitors.

Speaker Change: Yes, so I mean, it's good to remember that.

Speaker Change: We are quite small in China compared to many of our competitors. So the opportunity for us to grow rapidly is quite is there the expansion opportunity.

Speaker Change: Are good as well because there's an established.

Speaker Change: Retail operation, there with with not only our own stores the stores that our customers would operate.

For all intents and purposes under our franchise agreement.

Speaker Change: So.

Speaker Change: Outdoor is strong there the brand is strong and we're seeing lots of opportunity for expansion. We're also going to be continuing to invest there.

Speaker Change: <unk> design and production, which.

Speaker Change: Which will believe Kevin can give us a leg up against many of our competitors.

Timothy Boyle: Thank you.

Speaker Change: Thank you.

Speaker Change: Yeah.

Mitchel Kummetz: This question comes from Mitch Kummetz with Seaport Global. Please proceed. Yes, thanks for taking my questions. Tim, as you think about the consumer or maybe some of your wholesale partners, have you seen any preemptive buying, any pullback in the spending? And then also maybe just from a top, well, as far as sales and margins, what is your, you know, kind of FX outlook? How has that changed, given what we've seen with the dollar over the last, you know, since you guys last reported? Yeah, I can take the FX portion of that, Mitch.

Speaker Change: The next question comes from Mitch <unk> with Seaport Global Please proceed.

Mitch: Hi, yes, thanks for taking my questions.

Speaker Change: Tim as you think about the consumer or maybe some of your wholesale partners have you seen any preemptive buying any pullback in spending.

Speaker Change: And then also maybe just from a top well as far as sales and margins. What is your kind of opex outlook, how has that changed given what we've seen with the dollar over the last since you guys last reported.

Speaker Change: Yeah, I can take the FX portion of that Mitch, we're not providing a full year outlook.

Jim Swanson: We're not providing a full year outlook here today. I mean, in terms of what's embedded in our Q2 outlook that we provide, I think it's on the conservative end of the range, knowing that the dollar's weakened a fair amount. So, you know, that should be a bit more of a benefit relative to what we anticipated coming into the year.

Speaker Change: Here today in terms of what's embedded in our in our Q2.

Speaker Change: That we've provided because on the conservative end of the range knowing that the dollar has weakened.

Speaker Change: A fair amount so.

Speaker Change: That should be a bit more of a benefit relative to what we anticipated coming into the year, but speaking good any further than that on the full year.

Timothy Boyle: But speaking to it any further than that on the full year, I'd hold back my comments at this stage. Yeah, I think for us, even though we're what, a month or so into this Terrace. I don't even know how to describe it. Tariff world. Our customers, as it relates to the retail customers. looking to us for guidance on what. And unfortunately, we're not going to be able to do much other than tell them, you know, the company's strong, you can rely on the balance sheet perspective, that we will be stronger than many of your vendors, and we'll provide as much information as we can.

Speaker Change: At my comments at this stage.

Speaker Change: Yes, and I think for us, even though the well.

Speaker Change: Once or so into this.

Speaker Change: Tariffs.

Speaker Change:

I don't even know how to describe it tariff world.

Speaker Change: Our customers.

Speaker Change: Yes.

Speaker Change: The retail customers.

Speaker Change: Looking to us for guidance and much of this stuff and unfortunately, we're not able to do much.

Speaker Change: So the company is strong you can rely on us.

Speaker Change: From a balance sheet perspective that we will be stronger than many.

Speaker Change: Of your vendors.

Speaker Change: I'll provide as much information as material.

Timothy Boyle: Frequently, I was in touch with virtually every one of our major customers. a high level to tell them, you know, here's our approach. We don't know much, but as we know, we will be filling you guys in.

Speaker Change: We believe I was in touch with virtually every one of our major customers.

Speaker Change: That's at a high level to tell them here's our approach.

Speaker Change: I don't know much but as we know we will be filling those in and.

Timothy Boyle: And again, we think there's an opportunity to take market share from weaker competitors. The consumer, I think, clearly is spooked on what's going on. And we've seen that across all different commodities.

Speaker Change: Again, we think there's an opportunity to take market share from weaker competitors, the consumer I think clearly as spooked.

Speaker Change: On what's going on and we've seen that across all different kinds of commodities. So.

Timothy Boyle: So Again, it's just too difficult to be spectacular.

Speaker Change: Again, it's just too difficult.

Speaker Change: We speculate.

Speaker Change: Yes.

Mitchel Kummetz: And then as a follow-up, you guys mentioned that there hasn't been any change to the order book, but Tim, I think you said that you expect retailers to be cautious. Are you going to be building to the order book? Are you going to be pairing that back, assuming that there are some cancellations? might hit. And how are you thinking about, you know, your willingness to hold inventory? Are you more likely to kind of pack and hold, knowing that, you know, stuff that you have in inventory now, you've bought it maybe at a lower cost than you might down the road?

Speaker Change: And then.

Speaker Change: A follow up.

Speaker Change: You guys mentioned that there hasn't been any change to the order book.

Speaker Change: But Tim I think I think you said that you expect retailers to be cautious or are you going to be building through the order book are you going to be paring that back assuming that there are some cancellations.

Speaker Change: And how are you thinking about you know your willingness to.

Hold inventory or are you more likely to kind of pack and hold knowing that you know.

Speaker Change: Stuff that you have in inventory now you bought it maybe at a lower cost than you might down. The road is there more willingness to kind of hold onto thanks, especially if it's kind of like you know basically kind of carryover product.

Jim Swanson: Is there more willingness to kind of hold on to things, especially if it's kind of like, you know, basic kind of carryover products?

Timothy Boyle: Yeah, so, you know, we sold the bulk of this inventory November of last year. We bought it, but we have not received it all. So depending on when the merchandise actually shows up, I think we think we've got something like half of our products received some of the new tariffs, but basically half of our inventories in the U.S. is here in-house. And we're going to continue to receive inventory. Hopefully, it'll be at some reasonable tariff charge. But between a shortage, a potential shortage from other vendors and our strong balance sheet, we believe we can be a provider of product.

Speaker Change: Yeah. So.

Speaker Change: We sold the bulk of this inventory November of last year.

Speaker Change: We bought it but we have not received it all so depending on when the merchandize actually shows up I think we think we've got something like half or more products.

Speaker Change: You're seeing some of the new tariffs, but basically half of our inventories.

Speaker Change: In the U S is here in house.

Speaker Change: And we're going to continue to receive inventory.

Speaker Change: Okay.

Speaker Change: It'll be at a.

Speaker Change: Some reasonable tariff charge.

Speaker Change: But.

Speaker Change: Between shorted, a potential shortage of other vendors and our strong balance sheet. We believe we can provide.

Speaker Change: Provider of product.

Jim Swanson: as it's required to our retail partners and to consumers to our own DTC business beyond where others will be able to provide that.

Speaker Change: It's just required to our retail partners, let's say consumer through our own DTC business.

Speaker Change: Where others will be able to just provide that I'm.

Jim Swanson: Yeah, and just a couple added remarks related to that. So for the fall 25 season, we've purchased a lion's share of our inventory. It's in the 85, 90 plus percent range of fall 25 that have been bought. So certainly, you know, these final buys that we're making as we finish up the season, we're rationalizing those inventory purchases relative to any given number of scenarios from a demand standpoint. And then with regard to holding inventory, you know, we've had a strong preference in the past to ensure that we do that in the least disruptive way and profitable way of leveraging the fleet of outlet stores that we have.

Speaker Change: And then maybe just double added remarks related to that so it was all 25 season.

Speaker Change: We purchased a lion's share of our inventory is $85 90 plus percent range of fall 25 have been bought so certainly you know these final buys that we're making as we finish off the season, we're rationalizing those inventory purchases relative to any given number of scenarios from a from a demand standpoint, and then with regard to holding in the.

Speaker Change: Tori.

Speaker Change: We've got a strong preference in the past to ensure that we do that in the least disruptive way and profitable way and leveraging the sleeve outlet stores that we have so that'll be that'll be top of mind as we get to that point when you take those.

Jim Swanson: So, you know, that'll be that'll be top of mind as we get to that point when you make those decisions in the latter part of the year.

Speaker Change: In the latter part of the year.

Timothy Boyle: Yeah, I might have a global business. And so to the extent we can move product around the world, to take advantage of markets that don't have crazy tariff implications, we'll Great, thanks again.

Speaker Change: Yes, yes.

Speaker Change: Yes.

Speaker Change: We are a global business and so to the extent, we can move product around the world too.

Speaker Change: [noise] advantage of <unk>.

Speaker Change: Markets that don't have them crazy tariff implications, we'll do that.

Speaker Change: Great. Thanks again.

Paul Lejeuse: This question is from Paul Lejeuse with Citigroup. Paul, please. Hey, thanks, guys.

Paul: Next question is from Paul <unk> with Citigroup Paul. Please proceed.

Paul: Hey, Thanks, guys.

Paul Lejeuse: On that $40 to $45 million of tariff pressure that you talked about in the second half, I'm curious if that already considers the sharing of some of the burden by your vendors, or if that's an opportunity to work that $40 to $45 million lower.

Paul: That 40% to $45 million of of tariff pressure that you talked about in the second half I'm curious if that already considers the sharing of some of the burden by your vendors or if that's an opportunity to work that 40% to $45 million lower and then second can you just remind.

Timothy Boyle: And then second, can you just remind us of your top three customers and what percent of sales they represent within the wholesale business? Yeah, so as it relates to our vendors, you know, we have a well established a large vendors to the company. We consider them to be part who worked together to the extent possible to mitigate as much of this additional tariff cost as we can. It may not be through discounts. It may be through some other help that they may give us on where we're shipping merchandise or shipping merchandise over a longer period of time, etc.

Paul: As of your top three customers and what percent of sales they represent within the wholesale business.

Speaker Change: Yeah, so as it relates to our vendors, we have a well established.

Paul: Moving.

Paul: Large vendors to the company.

Paul: We consider them to be partners.

Paul: We will work together to the extent possible to two.

Paul: Ooh mitigate as much of this additional tariff question. We can it may not be as you. Just you just got so it may be through some other.

Paul: Help that they may give us where we're shipping merchandise.

Paul: Shipping merchandise over a longer period of time et cetera. So.

Timothy Boyle: So we consider the fact that we have these strong relationships with our that can weather storms like this.

Paul: We consider the fact that we have these strong relationships with vendors to be another example of high quality company with a great balance sheet.

Paul: It can weather storms like this and as it relates to our customers. We don't really provide top customers. We do not have a 10% customer we have customers all over the globe.

Timothy Boyle: And as it relates to our customers, we don't really provide top customers. We do not have a 10% customer. We have customers all over the globe. So we think we're quite well set to weather this storm.

Paul: So we think we are quite well set to weather this.

Paul: The storms.

Timothy Boyle: Thank you. Just to be clear, the $40 to $45 million, that already includes some vendor sharing that in a tariff burden or not? No, that's the direct tariff cost to us on the universal 10% incremental tariff for the fall 25 season. In the USA. We don't really know if it goes to 175%. Every country in the world, it may be different. And do you think that you'll have some success with getting the vendors to share in some of that burden? Well, I'll get it. These are partners of ours. We will work together to do what we can.

Paul: Okay.

Paul: $40 million to $45 million that already includes some vendor I'm sharing.

Paul: Burden or for now.

Paul: That's the direct tariff cost to us on the universal 10% incremental tariffs first of all.

Paul: All 25 season, mainly USA.

Speaker Change: Don't really know what it is if it goes to 175%.

Paul: On every country in the world It may be a different number.

Speaker Change: And do you think that you'll see a success with getting the vendors to sharing some of that burden.

Paul: Well again.

Paul: These are partners of ours, we will work together to do what we can deliver that.

Timothy Boyle: moving in order to a different time, moving in order to a different shift to location in a country that's not the USA. Discaldo. There's all these myriad ways we can work together to help together. move through this stormy period.

Paul: Moving in order to a different time moving in order to a different.

Paul: Ship to location in a country that is not the USA.

Paul: Okay.

Paul: Discount or if theres all these myriad ways, we can work together to.

Paul: To help.

Paul: Together.

Paul: Move through this extraordinary period.

Paul: Yeah.

Paul: Got it. Thank you good luck.

Timothy Boyle: Thank you. Good luck.

Paul: Okay.

Jonathan Komp: This question is from Jonathan Komp with RW Baird. Yeah, hi, good afternoon. If I could just follow up to ask further on the China, the US sourcing, it sounds like you're shifting a lot of that product. So essentially, you don't have exposure on that piece, China, the US this year. Can I just ask, will that also be the case going forward? Or is that just unique to the fall period? And then, you know, any any risk from that that you see in terms of suboptimal assortments, or any, any potential shortages here in the US based on some of those shifts?

Speaker Change: Next question is from Jonathan Komp with R. W. Baird Jonathan Please proceed.

Jonathan Komp: Yes, hi, good afternoon.

Jonathan Komp: If I could just follow up to ask further on the China to the U S sourcing and it sounds like Youre shifting a lot of that product. So essentially you don't have exposure on that east China. The U S. This year could I could I just ask will that also be the case going forward or is that just unique to the fall period.

Jonathan Komp: And then.

Any any risk from that that you see in terms of suboptimal assortments Ernie any potential shortages here in the U S based on some of those shifts.

Timothy Boyle: No, you know, we the company for years has been moving from China You know, for a number of different reasons, not the least of which China has for a while been the least competitive sourcing operation for products that we sell. So we were able to reduce the company's intake into the U.S. from China to a very low single digit. We were able to further reduce that this year because we moved product around the globe so that we would keep the orders in our factories there and still provide profitable sales around the world. I don't see any impact on the company's ability to provide high quality products across our offering.

Jonathan Komp: No. We the company for years has been moving from China.

Jonathan Komp: So for a number of different reasons, not the least of which China is.

Jonathan Komp: For a while been the least.

Jonathan Komp: Competitively sourcing operation good products that we sell.

So we were able to reduce the companys.

Jonathan Komp: Intake into the U S from China to a very low single digit.

Jonathan Komp: We will further reduce that this year because of the new product around.

Jonathan Komp: The globe, so that we would keep the orders in our factories there.

Jonathan Komp: And still provided.

Jonathan Komp: Profitable sales around the world.

Jonathan Komp: I don't see any impact.

Jonathan Komp: The ability to provide high quality products across our offerings.

Timothy Boyle: from areas outside of China. But we will continue to produce products in China for local China production and for consumption around the world where China's products are considered to be not heavily tariffed.

Jonathan Komp: Areas outside of China, but we will continue to produce products in China for local China production and food for consumption around the world.

Jonathan Komp: With China's products are.

Jonathan Komp: Consider that would be not every appearance.

Jonathan Komp: Okay, great. That's really helpful.

Jonathan Komp: Okay, Great. That's really helpful. And then and then one more follow up just on the.

Jim Swanson: And then one more follow up just on the The unmitigated exposure of the 40 to 45 million this year, you know, it looks like effectively that's more than a 300 basis point hit in the second half to your U.S. gross margin structure. Are there any other potential offsets you're contemplating, you know, for this year? Is that sort of a one-time step down or... Are you thinking about looking to recapture some of that next year, depending on all the scenarios? Just trying to get to how you're thinking about that margin impact this year. Right. Well, that's that's based on an assumption that the that the president does not increase the size of the current 10% additional tariff.

Jonathan Komp: Mitigated exposure of about 40% to $45 million this year.

Jonathan Komp: Yes, it looks like effectively about more than 300 basis point hit in the.

Jonathan Komp: It has to your U S gross margin structure.

Jonathan Komp: Are there any other potential offsets.

Jonathan Komp: <unk> for this year is that sort of a one time step down or.

Jonathan Komp: Are you thinking about looking to recapture some of that your next year, depending on all of the scenarios just just trying to get.

Jonathan Komp: How youre thinking about that margin impact this year.

Jonathan Komp: Right well, that's that's based on an assumption that the.

Jonathan Komp: The president does not increase the size of that curve.

Jonathan Komp: 10% additional tariff so that's our assumption that's how we're modeling the business.

Jim Swanson: So that's our assumption. That's how we're modeling the business. Who knows? The guy made. Wake up tomorrow and the whole world is changed. providing you the information we need to facilitate that. And John, we believe that in the end, one time, you know, we're absorbing the lion's share of that $40 to $45 million this year. Our blatant expectations we plan for next year is premature in terms of all the steps, but Tim touched on all the different levers that we have available to us. And if we begin that planning for next year, certainly, you know, we would look to make various decisions to absorb and recover, you know, any incremental tariffs that were then occurring.

Jonathan Komp: <unk>.

Speaker Change: Who knows the Guy made.

Speaker Change: Wake up tomorrow, and it's the whole world has changed.

Speaker Change: With regard to you.

Speaker Change: <unk>.

Speaker Change: And John that we believe that would be a onetime we're absorbing the lion's share of that $40 million to $45 million. This year are our belief and expectation as we plan for next year. It is premature in terms of all of the steps that Tim touched on all the different levers that we have available to us and we begin that planning for next year, certainly we would look to make.

Speaker Change: <unk> decisions too.

Speaker Change: Well absorbed and recover.

Speaker Change: Any.

Speaker Change: Incremental tariffs that were doesn't correct.

Speaker Change: Okay.

Jonathan Komp: Okay, great.

Speaker Change: Okay great.

Jonathan Komp: Best of luck. Thanks again.

Speaker Change: Good luck thanks again.

Paul Kearney: Next is Paul Kearney with Barclays. Hey, good afternoon. Thanks for taking my question. You mentioned that you're pulling in inventory during the pause period and rationalizing buys for the back half. Can you clarify if that is on a dollar basis? And can you talk about your expectations on the cadence of ending inventory for Q2 through Q4? And any detail on region would be helpful. Well, it relates to rationalizing inventory. That is, you know, looking at that both in dollars and in units. And of course, we're not providing specifics on that. And as it relates to pulling in inventory, certainly what we're seeking to achieve there is knowing that July 9th and the risk of these incremental tariffs then becoming in place, we want to pull forward as much as we can from a production standpoint, being able to receive that inventory and pay the duties at the current known universal 10% incremental rate.

Speaker Change: Up next is Paul Kearney with Barclays. Please proceed.

Paul Kearney: Hey, good afternoon, Thanks for taking my question.

Paul Kearney: You mentioned that you are pulling in inventory during the pause period and rationalizing buys for the back half can you clarify if that is on a dollar basis and can you talk about your expectations on the cadence of ending inventory for Q2 through Q4 and any detail on region would be helpful.

Well as it relates to rationalizing inventory that is looking at that both in dollars and units and of course, we're not providing.

Paul Kearney: Specifics on.

Paul Kearney: On that and then as it relates to pulling in inventory certainly.

Paul Kearney: We're seeking to achieve there knowing that July 9th and the risk of these incremental tariffs then becoming in place we want to pull forward as much as we can from a production standpoint being able to receive that inventory and pay the duties at the current known universal 10% incremental rate so to the us.

Jim Swanson: So, to the degree we can work closely with our factory partners, with our logistic partners, we're doing everything we can to pull that inventory in from that vantage point.

Paul Kearney: We can work closely with our factory partners with our logistic partners. We're doing everything we can to pull that inventory in from that from that vantage point.

Paul Kearney: Okay.

Timothy Boyle: Great. Thank you. And then, with regards to pricing, obviously, you're making the decision to not take pricing up for the fall. Are you seeing other non-private label competitors take up prices, or do you anticipate that they will in the fall? And is that potentially an opportunity to take further share? Thanks. Yeah, I mean, again, I think we're one of the first reporting companies. But we know that many small competitors that we deal with, and also many of our customers' private label products emanate from China. So those products we believe will be, if they're successfully imported into the United States.

Speaker Change: Great. Thank you and then with regards to pricing, obviously, youre, making the decision to not take pricing up for the fall are you seeing other non private label competitors take up prices or do you anticipate that they will in the fall and is that potentially an opportunity to take further share. Thanks.

Speaker Change: Yes, I mean again I think we're more than the first.

Speaker Change: Reporting companies.

Speaker Change: But we know that many small competitors that we deal with and also many of our customers private label products emanate from China. So those products, we believe will be in there.

Speaker Change: Successfully imported in United States, which has a question.

Timothy Boyle: Scrooges, question. We believe we can easily compete with them and our expectations that we'll be taking share I don't know what's wrong with that. Yeah, there's very little known today in terms of what either our competitors or customers private label, what everybody's doing with their own pricing.

Speaker Change: We believe we can easily compete with them.

Speaker Change: Our expectation is that we'll be taking share.

Speaker Change: Looking at.

Speaker Change: Yes, there is very little known today in terms of what either our competitors or our customers private label, what everybody is doing with their own pricing. So TBD.

Timothy Boyle: So, TBD. All right.

Timothy Boyle: Thank you very much. Best of luck. Thank you.

Speaker Change: Alright, Thank you very much best of luck.

Speaker Change: Thank you.

Alexander Perry: We have Alex Perry with Bank of America, please proceed, Alex. Hi, thanks for taking my questions here. I guess.

Speaker Change: We have Alex Perry with Bank of America. Please proceed Alex.

Alex Perry: Alright, thanks for taking my questions here.

Speaker Change: Yes.

Jim Swanson: to ask sort of in a different way, the decision to pull guidance, was that more of a factor of the uncertainty in the demand environment or cost environment? Like, are you seeing volatile in particular, you know, that make it hard to predict, it sounds like the wholesale business. you know, relatively stable and http://TheBusinessProfessor.com I would just say this, Alex, you know, what we're indicating to you, and we've provided a Q2 outlook that, by and large, is maintaining the prior first half outlook that we would have. Pulling the portfolio guidance, nobody knows. You know, there's so many uncertainties with regard to how the consumer and the retailer behaves and acts in the second half of the year.

Speaker Change: Just to ask sort of a different way and the decision to pull guidance was that more of a factor of the uncertainty in the demand environment and cost environment like are you seeing volatile trends in DTC in particular.

Speaker Change: That makes it hard to predict it sounds like the wholesale businesses realm.

Speaker Change: Relatively stable and.

Speaker Change: With a similar view is the last time, we got it but what's what's sort of going on in the demand environment that makes it hard to predict.

Joe: Well I mean, Joe I would just I would just say this Alex.

Joe: Indicating to you than we've provided in our Q2 outlook by largest maintaining the prior first half outlook.

Joe: We would add half pull.

Joe: Pulling the full year guidance nobody knows there's so many uncertainties with regard to how the consumer and the retailer behaves and acts in the second half of the year for that reason we are we've made the decision.

Jim Swanson: And for that reason, we've made the decision to withdraw the guidance, not to mention the numerous variables when you think about it from an overarching earnings standpoint. But we're not seeing anything today in the trend of our U.S. business, either from a wholesale or D2C business perspective, that would suggest a downtrend, if you will. Yeah, that's really helpful.

To withdraw the guidance.

Joe: Not to mention the numerous variables when you think about it from a from an overarching earnings standpoint, but we're not seeing anything today in the trend.

Joe: Our U S business either from a wholesaler D to C business perspective, there was that one.

Joe: Suggest a downtrend if you will.

Joe: Yeah, that's really helpful.

Jim Swanson: Um, and then can you just sort of remind us of sourcing penetration by country and where you have the most exposure, you know, as it stands today, just as we're, you know, sort of thinking about reciprocal tariffs. Obviously, there's the ability to shift, but, you know, as it stands today, you know, where do you have the most exposure? Yeah. Yeah, I just recommend, Alex, you look to our 10k. It's pretty, you know, we just filed that a month or two ago, and it's got all of the relevant data points that are in there. Obviously, we've provided quite a bit of clarity here on the call that relates to our China exposure, specifically.

Joe: And then can you just sort of remind us of sourcing penetration by country and where you have the most exposure.

Joe: As it stands today, just as we're sort of thinking about risk typical tariffs.

Joe: Obviously, there is the ability to shift by it.

Joe: As it stands today, where do you have the most exposure.

Peter Mcgoldrick: Yes, I would just recommend Alex you looked at our 10-K, it's pretty.

Joe: We just filed that.

Joe: About the two ago and it's got all of the relevant data point, they are and Theyre, absolutely provided quite a bit of clarity here on the call as it relates to our China exposure specifically.

Timothy Boyle: Yeah, Alex, I would just point out that we believe we're among the most distributed So we have resourcing from many, many countries and we're quite adept at moving production around the world to take advantage of tariffs and specialties in certain markets. Perfect. Really helpful.

Joe: Yes, Alex I would just pointed out that we believe were among the most distributed.

Joe: Okay.

Joe: So companies so we have.

Joe: We're sourcing from neighboring countries.

Joe: Quite adept at moving production around the world to take advantage of those tariffs and specialties in certain markets.

Joe: Perfect really helpful Best of luck going forward.

Alexander Perry: Best of luck going forward.

Joe: Okay.

Mauricio Cerna: Next question comes from Mauricio Cerna with UBS. Great. Good afternoon. Thanks for taking my question.

Speaker Change: Next question comes from <unk> <unk> with UBS. Please proceed.

Speaker Change: Great. Good afternoon, Thanks for taking my question.

Jim Swanson: I joined a little bit late, so pardon me if I ask something that you may have already answered. But first on the guidance for Q2, I know it implies the first half is you're keeping the guidance stable. I just want to understand for Q1, does that mean there was some type of pull forward that happened there? And then on gross margin on Q1, I see it was up 30 basis points. Was that in line with your expectations? Was there anything that surprised you to the upside or downside?

Speaker Change: I joined a little bit late so pardon me if I ask something that you may have already answered, but first on the guidance for <unk>.

Speaker Change: Q2.

Speaker Change: And that implies like the first harvest.

Speaker Change: You're keeping the guidance stable and just want to understand like for Q1 does that mean, there was like some type of pull forward that happened there and then on gross margin.

Speaker Change: Q1, I see it was up 30 basis points was that like in line with your expectations or was there anything that surprised you to the upside or downside.

Jim Swanson: Thank you. Got it.

Speaker Change: Yes, as it relates to the guidance for the for the second quarter. So first half with more or less held we've widened the range given the risks associated with what's going on from a trade standpoint. There was our Q1 beat was a combination of things. There is a there is some pull orders we delivered slightly.

Earlier on our spring 'twenty five wholesale orders relative to what was in our outlook at the time and then to an extent. We also had some favorable cold weather in many geographies that helped aid and the topline. So that gives you a bit of overview on that and then as it relates to the Q1 gross margin. It was only up 30 basis points for the.

Speaker Change: For the quarter.

Speaker Change: More or less in line with where we thought it would come in maybe maybe slightly under there is no significant you know driver one way or the other and there are several items that are that are.

Speaker Change: That has contributed to the improvement there so nothing significant.

Speaker Change: Call out.

Speaker Change: Got it and then a quick follow up.

Jim Swanson: And then just a quick follow-up, you know, just thinking about, you know, the guidance that you provided for the first half, you only talked about like the um sales outlook just wondering like given that you know like the tariff it looks like a second half impact why not like give like a like a full EPS guide for for the set for the first half uh and with that in mind I mean should it still be fair that to see like a better growth margin in fact growth margin expansion in q2 relative to q1 just given the much easier comparison you have Yeah, I don't want to get into a ton of details on that, but suffice to say that the reason we haven't given first half or Q2 earnings is there's far too many variables once you start getting down into the P&L, and whether that's tariff costs that you incur.

Speaker Change: Just thinking about the guidance you provided for the first half you only talked about.

Speaker Change: Sales outlook I was just wondering given that you like.

Speaker Change: Like the tariff it looks like a second half impact why not give like Oh well.

Speaker Change: Like a full EPS guide for <unk> for the set for the first half.

Speaker Change: And with that in mind, I mean should it still be fair that to see light.

Speaker Change: A better gross margin and gross margin expansion in Q2 relative to Q1, just given the much easier compares that you have.

Speaker Change: Yes, I want to get into a ton of details on that but suffice to say that the reason we haven't given first half. Our Q2 earnings is there's far too many variables. Once you start getting down into the P&L and whether that tariff costs that you incur.

Jim Swanson: There's a lot of unknowns with regard to the health of the retailer, the deeper we get into this, and whether there's downstream bad debt risk that we need to book provisions on. I think, you know, there's just countless variables and outlook for any period of time right now that I would caution, you know, that's the reason we haven't done it, and we'll, you know, we'll provide updates along the way to the group again, but there's just too much risk out there right now and too many uncertainties. No, it makes sense. Understood. And then very lastly, you said like 40, 45 million dollars impact.

Speaker Change: There's a lot of unknowns with regard to the health of the retailer the deeper we get into this and whether there is downstream.

Speaker Change: Bad debt risk that we need to book provision Dawn.

Speaker Change: Countless variables.

Speaker Change: And outlook for any period of time right now that I would caution that the reason we haven't done it.

Speaker Change: And.

Speaker Change: Paul will provide updates along the way.

Speaker Change: I agree with Cam, but there's just too much risk.

Speaker Change: Out there right now too many uncertainties.

Speaker Change: Makes sense understood and then last week, you said like 40 $45 million impact.

Jim Swanson: Tom Kost on second half. So is it fair to assume that first half of next year, that number should just be lower? Because by that point, you're implementing some mitigation strategies, right? Just wanna, so. Well, we've been very focused on July the 9th, I think it is, wasn't it? When the pause lapses, but we have no idea what July the 10th is going to be or July the 11th for that matter. Yeah, it's very different to me. projecting a large global business. Honest.

Speaker Change: Tom cost on second half so is it fair to assume that first half of next year that number should just be lower because when you're implementing some mitigation strategies right just wondering okay.

Speaker Change: Well, we've been very focused on July 19th I think it is one of them.

Speaker Change: When the pause offices, but we have no idea. What July is the attempt is going to be a July 11th for that matter. So it's.

Speaker Change: It's very different.

Speaker Change: Projecting a large global business results.

Operator: Thank you so much. We have no further questions in queue.

Speaker Change: Understood. Thank you so much and best of luck.

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

Timothy Boyle: I'd like to turn the floor back to management for any closing.

Timothy Boyle: Thank you.

Timothy Boyle: Well, listen, thank you for joining us today. We faced many challenges during the company's 87 year history and every time we persevered and become stronger. I'm confident we can weather this storm and emerge with an improved position in the market.

Speaker Change: Thank you well listen thank you for joining us today.

Speaker Change: We faced many challenges during the Companys 87 year history is every time, we persevered and become stronger.

Speaker Change: I'm confident we can weather the storm and emerge with an improved position in the marketplace.

Timothy Boyle: So we look forward to talking to you next quarter.

Speaker Change: Look forward to talking 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.

Speaker Change: You for your participation.