What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 130 added, 270 removed, 177 unchanged (69% of the section changed)

8 unchanged sentences

Footwear products are provided by our Columbia and SOREL brands.

We sell our products in approximately 90 countries and operate in four geographic segments:

We sell our products in more than 100 countries and operate in four geographic segments:

U.S., LAAP, EMEA, and Canada.

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 18

We are investing in our strategic priorities to:

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Ultimately, we expect our investments to enable market share capture across our brand portfolio, expand gross margin, improve selling, general and administrative expense efficiency, and drive improved operating margin over the long-term.

We seek to bring additional consumer segments to our brands by proactively managing the promotional activity of the brands in the marketplace.

For the Columbia brand, we are working to establish the Columbia.com site as the best expression of the brand through enhancements to the consumer experience as well as generally less promotion and discount activity.

Profit Improvement Program

As part of our strategic priorities, we are implementing a multi-year profit improvement program to accelerate profitable growth and improve the efficiency of our operations.

We are focused on four areas of cost reduction and realignment, including:

• operational cost savings;

• organizational cost savings;

• operating model improvements;

• indirect, or non-inventory, spending.

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

We anticipate these cost savings will ramp up over the course of 2024 and 2025, with the full benefit being realized in 2026.

In 2024, we anticipate realizing approximately $75 million to $90 million in realized cost savings, net of approximately $3 million to $4 million of severance and other costs.

Business Environment and Trends

Economic Environment Impacting Demand | We believe inflationary pressure, increased interest rates and general economic uncertainty are impacting consumer and wholesale customer behavior and demand.

Wholesale customers have been increasingly cautious managing inventory, including placing advance orders.

This cautiousness has been most pronounced in the U.S., but we believe that retailer prudence is spreading to other regions, including Canada and Europe.

Consumer demand, particularly in the U.S and Korea, has been generally soft for apparel and footwear products.

We anticipate these trends will continue to persist through the balance of 2023 and into 2024.

Promotional and Clearance Environment | A surge in consumer demand in late 2021 and continuing through the first half of 2022 resulted in exceptionally low promotional levels which began to normalize in the second half of 2022.

We believe consumers are seeking value and promotions in the marketplace, which has dampened demand in full price channels, particularly in the U.S., including our direct-to-consumer ("DTC") e-commerce sites and branded stores.

In the first nine months of 2023, our promotional levels were on par with or slightly above levels prior to the COVID-19 pandemic.

However, the proportion of older season clearance inventory being marked down and sold through our outlet stores has increased and resulted in lower DTC product margins.

We expect this trend to continue until excess inventories return to normalized levels.

Changing Consumer Expectations and Shopping Habits | Consumer behavior continues to fluctuate.

We believe consumers in the U.S.

are still adjusting shopping habits in a post-COVID pandemic world, including a shift back to brick-and-mortar retail shopping experiences.

A culmination of other factors have and will continue to contribute to shifts in consumer preferences, including increased spending on dining, travel, and entertainment, as well as other discretionary forms of spending.

As a result of these behavior shifts, anticipating future demand is increasingly challenging.

Improved Inventory Receipts | As a result of supply chain disruptions, we received Spring 2022 and Fall 2022 inventory later than expected and realized much higher than normal cancellations from our wholesale customers.

Inventory production and logistics transit times have improved markedly for Spring 2023 and Fall 2023, resulting in earlier production and receipt of inventory, and enabling timely (and even early) shipment of orders to our wholesale customers.

As a result, the year-over-year timing of wholesale shipments has impacted our net sales growth on a quarter-by-quarter basis.

We expect these improved transit times to continue and to be more in-line with our historical experience throughout 2023, assuming there are no significant disruptions to our logistics and distribution operations.

Increasing Competitive Environment | We believe many brands have shifted their strategies to capitalize on the emergence of casual and lifestyle trends.

The versatility of casual and lifestyle products provides consumers the ability to use these products in a variety of settings, including outdoor activities.

This shift has been evident in both the apparel and footwear product categories.

We believe this trend has accelerated because of changes in consumer behavior resulting from the COVID-19 pandemic, which has resulted in an increasingly competitive apparel and footwear marketplace.

Economic Environment Impacting Demand | We believe general economic uncertainty is impacting consumer and customer behavior and demand.

Customers have been increasingly cautious managing inventory and in placing advance orders.

This cautiousness has been most pronounced in the U.S., but we believe that retailer prudence is spreading to other regions, including Canada and, to a lesser extent, Europe.

Consumer demand, particularly in the U.S., has been generally soft for outdoor apparel and footwear products.

We anticipate these trends will persist throughout 2024.

Promotional and Clearance Environment | Since last year, we have been proactively managing promotional activity on Columbia.com to help establish the site as the best expression of the brand.

However, we believe consumers are still seeking value from us, particularly in the U.S.

This has resulted in reduced demand for our direct-to-consumer ("DTC") e-commerce sites and branded stores.

To capture demand associated with value conscious consumers, we have increasingly relied on our fleet of DTC brick-and-mortar stores including our outlet stores and clearance locations, which offer discounted and clearance merchandise.

The use of temporary clearance stores results in lower DTC product margins, increased SG&A expenses and modest operating income.

We believe this method of liquidation results in stronger financial returns to the Company in comparison to wholesale closeout sales channel alternatives and has a less disruptive impact in the marketplace.

We anticipate continuing to utilize temporary clearance locations to assist with inventory liquidation throughout 2024.

Changing Consumer Shopping Habits | We believe consumers in the U.S.

have adjusted shopping habits in a post-COVID pandemic world and have increasingly participated in brick-and-mortar retail shopping experiences.

As a result, we expect our U.S.

e-commerce channel to

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 19

Elevated Inventories | As a result of highly volatile shifts in supply and demand and supply chain challenges, we exited 2022 with elevated inventory.

Improved on-time production throughout 2023 further contributed to an increase in our inventory levels during the first half of the year.

At the end of the third quarter of 2023, our inventory primarily reflected current season inventory and, to a lesser extent, carryover and older season inventory.

To address our elevated inventory levels, we meaningfully reduced purchases of Spring 2023 and Fall 2023 inventory and are taking a cautious approach to future season purchases.

Additionally, we are leveraging our outlet stores and have opened temporary outlet stores to profitably clear excess inventory.

To a far lesser extent, we are selling product through close-out sales to our wholesale customers.

We are continuing to sell carryover and excess inventory during the Fall 2023 selling season and expect our inventory levels to reach more normalized levels by the end of the year.

Distribution Center and Third-Party Capacity Pressure | Elevated inventory levels have resulted in storage and process capacity pressures within our distribution centers and third-party logistics operations.

We began to experience these pressures as we received Fall 2022 inventory and expect this trend to continue through the end of 2023.

We have incurred and expect to continue to incur additional inventory carrying costs throughout 2023 related to incremental outside storage, and other inventory related holding and handling costs, including losses in productivity, as we look to normalize our inventory position.

We expect these pressures and incremental costs to alleviate as our inventory levels normalize at the start of 2024.

China | From 2020 to 2022, government efforts to control the spread of COVID-19 in China severely impacted our business there.

We believe these efforts resulted in lower consumer demand, as well as disruption of our operations, including operations of our owned DTC stores and stores operated by our wholesale customers, and warehousing and fulfillment operations.

Since the change in China's zero-COVID policy in December 2022, our business in China has experienced a surge in consumer demand.

We expect to continue to see favorable results from our China business throughout the balance of 2023.

Pricing | In response to prior supply chain and product input inflationary cost pressures, we implemented product price increases for our Spring 2023 season merchandise, which varied by market and product category.

In the U.S., on average, we increased pricing by a mid-single to high-single-digit percent to mitigate inflationary pressure.

As certain supply chain costs have normalized and product input costs have become stable, we have not implemented additional meaningful product price changes.

Normalized Freight Charges | For the majority of 2022, we experienced elevated ocean freight costs, which had a substantially unfavorable impact on our gross margin.

Beginning in the fourth quarter of 2022, we began to experience significant declines in ocean freight costs and have seen ocean freight container rates return to historical levels.

Our gross margin has realized the benefits of these lower costs and we anticipate these lower ocean freight costs will persist and continue to benefit gross margin throughout the balance of 2023 and into early 2024.

continue to be challenged year-over-year.

We believe this is a transitional trend and that, over time, growth in digital environments will outpace physical retail sales growth.

Distribution Center and Third-Party Capacity Pressure | Elevated inventory levels resulted in storage and process capacity pressures within our distribution centers and third-party logistics operations throughout 2023.

These pressures included additional inventory carrying costs related to incremental outside storage, and other inventory related holding and handling costs, including losses in productivity, as we worked to normalize our inventory position.

We exited 2023 with more normalized inventory levels.

As these storage and process capacity pressures have alleviated, we have begun to realize lower distribution-related expenses and expect to see further benefit in our operating results for full year 2024.

Favorable Freight Cost Environment | Over the past year, we have realized significant declines in ocean freight rates and costs in comparison to prior year elevated levels.

These lower ocean freight rates resulted in substantially lower inbound freight costs which benefited our gross margin.

Looking forward, we expect less of a favorable benefit from lower inbound freight costs.

Worldwide ocean freight rates continue to decline and we expect to achieve additional cost savings and resulting gross margin improvement as we finalize freight contracts which take effect beginning June 1.

We anticipate these lower ocean freight costs will persist and continue to benefit gross margin throughout 2024.

Seasonality | Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns.

Our products are marketed on a seasonal basis, and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year.

In 2022, over 60% of our net sales and over 75% of our operating income were realized in the second half of the year.

Dollar | In 2022, the rapid strengthening of the U.S.

dollar relative to major foreign currencies unfavorably impacted our results.

With the continued strength of the U.S.

dollar in 2023, foreign currency translation has unfavorably impacted net sales and profitability in the first half of 2023.

Beginning in the third quarter of 2023, foreign currency translation was slightly favorable to our results.

We anticipate the translation of foreign currency exchange rates to have a modestly favorable impact on our results for the balance of 2023.

Heightened Geopolitical Risk | We sell our products in approximately 90 countries and our ability to sell in certain markets may be impacted by ongoing geopolitical tensions.

In 2023, nearly 60% of our net sales and nearly 80% of our operating income were realized in the second half of the year.

Heightened Geopolitical Risk | We sell our products in more than 100 countries and our ability to sell in certain markets may be impacted by ongoing geopolitical tensions.

We believe these tensions will remain elevated and have manifested, and will continue to manifest, themselves in certain regions where we operate.

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We expect this trend to continue, and as a result, will impact our expenses, product input costs and ultimately our products, which may in turn impact our revenue.

These regulatory matters at a minimum include regulations related to climate, privacy and product chemistry.

These regulatory matters at a minimum include regulations related to climate, social, privacy, and product chemistry.

For example, in anticipation of the effectiveness of the regulations in California and New York states related to perfluoroalkyl and polyfluoroalkyl substances ("PFAS"), we have been working to eliminate PFAS chemicals across our global product line.

We intend to stop manufacturing any apparel or footwear with PFAS intentionally added prior to our Fall 2024 season.

This transition has the potential to impact the flow of our wholesale business in 2024, as well as our inventory management strategies for existing merchandise.

In addition, these PFAS matters may result in a more promotional environment in 2024 as retailers move through merchandise containing PFAS.

COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 22

We stopped manufacturing any apparel or footwear with PFAS intentionally added prior to our Fall 2024 season.

These PFAS matters may result in a more promotional environment in 2024 as retailers move through merchandise containing PFAS.

RESULTS OF OPERATIONS

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The following discussion includes references to constant-currency net sales, and we provide a reconciliation of this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP below.

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 20

Results of Operations — Consolidated

The following table presents the items in our unaudited Condensed Consolidated Statements of Operations, both in dollars and as a percentage of net sales:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentage of net sales and per share amounts) 2024 2023

6 unchanged sentences

Interest income, net 9.2 1.2 % 3.3 0.4 %

Other non-operating income (loss), net (0.4) — % (0.3) — % 0.4 — % (1.7) (0.1) %

Other non-operating income, net 0.2 — % 0.9 0.1 %

Income before income tax 54.1 7.0 % 60.6 7.4 %

3 unchanged sentences

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 21

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net sales by brand, product category and channel are summarized in the following table:

Three Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentages) Reported

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See "Non-GAAP Financial Measure" above for further information.

Our global net sales increase reflected balanced growth from our DTC and wholesale channels.

Wholesale net sales growth was aided by earlier shipment of Fall 2023 wholesale orders in the third quarter compared to shipment of Fall 2022 orders in the same period of the prior year.

This increase was partially offset by the anniversary of prior year shipments to Russia (for orders that were placed prior to the invasion of Ukraine), as well as a higher portion of Fall 2023 distributor orders shipping in the second quarter of 2023 compared to the timing of Fall 2022 shipments in the prior year.

By brand, Columbia and SOREL brands' net sales benefited from earlier shipment of Fall 2023 wholesale orders.

Footwear growth primarily reflected earlier shipment of Fall 2023 orders and increased clearance product sales.

Our global DTC net sales reflected a 7% increase in brick-and-mortar business partially offset by a 3% decrease in e-commerce business for the three months ended September 30, 2023 compared to the same period in the prior year.

Overall, the decline in global net sales was driven by our US and Canada wholesale and LAAP and EMEA distributor businesses.

The declines in US and Canada wholesale net sales primarily reflected lower Spring 2024 orders, largely for the Columbia brand, while the decline in our distributor businesses' net sales reflected earlier shipment of Spring 2024 orders which shipped in the fourth quarter of 2023.

Lower footwear net sales reflected declines in both our Columbia and SOREL brands.

Footwear demand in the outdoor industry has softened while competitive pressures within the footwear category have amplified.

Our global DTC net sales reflected a 9% increase in brick-and-mortar net sales, partially offset by a 7% decrease in e-commerce net sales for the quarter ended March 31, 2024 compared to the same period in the prior year.

The growth in net sales from our DTC retail store business was driven by contributions from temporary clearance locations and new stores and, to a lesser extent, increased store productivity.

The decline in our DTC e-commerce net sales, which was predominantly focused in the U.S., was attributable to a number of factors, including lower discounts and promotions which fueled demand in the first quarter of 2023, shifts in consumer behavior as consumers seek value in response to continued inflationary pressures, and a more competitive outdoor products marketplace.

Gross Profit.

Gross profit is summarized in the following table:

Three Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentages and basis points) 2024 2023 Change

3 unchanged sentences

• an approximate 190 bps increase related to lower inbound freight costs;

• favorable channel and regional net sales shifts primarily due to lower proportion of distributor sales, which generally carry lower gross margins;

partially offset by

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 22

• an approximate 280 bps decrease of channel profitability resulting from lower wholesale margins reflecting actions to reduce excess inventory and lower DTC product margins due to increased brick-and-mortar clearance and promotional activity, and

• year-over-year changes in inventory provisions.

Selling, General and Administrative Expenses.

SG&A expenses is summarized in the following table:

Three Months September 30,

(in millions, except for percentages and basis points) 2023 2022 Change

Selling, general and administrative expenses $ 351.6 $ 319.0 $ 32.6 10 %

Selling, general and administrative expenses as percent of net sales 35.7 % 33.4 % 230 bps

SG&A expenses growth was comprised of variable expenses incurred to support sales growth, investments to support growth strategies, increased distribution and fulfillment costs related to elevated inventory, and inflationary pressures, including increases in employee salaries and wages.

SG&A expenses increased primarily due to the following factors:

• higher omni-channel expenses of $12.8 million, reflecting higher DTC brick-and-mortar expenses, including increased personnel expenses and costs associated with new and temporary stores;

• higher demand creation expenses;

• higher supply chain expenses, reflecting higher warehousing and fulfillment expenses, as well as increased third-party logistics costs.

Interest Income, net.

Interest income, net is summarized in the following table:

Three Months Ended September 30,

(in millions, except for percentages) 2023 2022 Change

Interest income, net $ 1.9 $ 0.8 $ 1.1 138 %

Interest income, net as a percent of net sales 0.1 % 0.1 %

Interest income, net increased primarily reflecting higher yields on increased levels of cash, cash equivalents and short-term investments.

Income Tax Expense.

Income tax expense and the related effective income tax rate are summarized in the following table:

Three Months Ended September 30,

(in millions, except for percentages) 2023 2022 Change

Income tax expense $ 32.6 $ 34.0 $ (1.4) (4) %

Effective income tax rate 24.0 % 23.3 %

Our effective income tax rates for the three months ended September 30, 2023 and 2022 were impacted by discrete tax items, which lowered the effective income tax rate for each period.

For the three months ended September 30, 2023, our effective income tax rate was primarily impacted by a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.

For the three months ended September 30, 2022, our effective income tax rate was primarily impacted by a non-recurring benefit related to a decrease in accrued foreign withholding taxes.

COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 25

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales by brand, product category and channel are summarized in the following table:

Nine Months Ended September 30,

(in millions, except for percentages) Reported

Adjust for Foreign Currency Translation Constant-currency

% Change Constant-currency

Brand Net Sales:

Columbia $ 2,043.8 $ 25.0 $ 2,068.8 $ 1,903.0 7% 9%

SOREL 220.4 0.7 221.1 204.7 8% 8%

prAna 90.8 — 90.8 110.8 (18)% (18)%

Mountain Hardwear 72.2 0.9 73.1 76.1 (5)% (4)%

Total $ 2,427.2 $ 26.6 $ 2,453.8 $ 2,294.6 6% 7%

Product Category Net Sales:

Apparel, Accessories and Equipment $ 1,853.2 $ 20.5 $ 1,873.7 $ 1,760.6 5% 6%

Footwear 574.0 6.1 580.1 534.0 7% 9%

Total $ 2,427.2 $ 26.6 $ 2,453.8 $ 2,294.6 6% 7%

Channel Net Sales:

Wholesale $ 1,445.1 $ 11.7 $ 1,456.8 $ 1,353.2 7% 8%

Direct-to-consumer 982.1 14.9 997.0 941.4 4% 6%

Total $ 2,427.2 $ 26.6 $ 2,453.8 $ 2,294.6 6% 7%

(1) Constant-currency net sales is a non-GAAP financial measure.

See "Non-GAAP Financial Measure" above for further information.

Our global net sales increase was driven by international sales growth, primarily from our Europe-direct, China and Canada businesses.

In these markets, DTC net sales have been generally strong throughout the year, while wholesale net sales growth was aided, in part, by favorable timing of Fall 2023 wholesale shipments compared to the same period last year.

The timing of 2023 shipments represented more normalized timing compared to timing delays in prior years driven by COVID-19 pandemic related supply chain disruptions.

Columbia brand net sales, in particular, benefited from increased international sales, while its sales in the U.S.

were largely aided by earlier shipment of Fall 2023 wholesale shipments and increased DTC consumer demand.

SOREL brand net sales were driven by earlier shipment of Fall 2023 wholesale shipments and increased clearance product sales, partially offset by a slight decline in DTC sales.

Footwear sales growth reflects earlier shipment of Fall 2023 wholesale orders, as well as increased promotional activity to clear excess inventory.

Our global DTC net sales reflected a 7% increase in brick-and-mortar business, partially offset by a 1% decrease in e-commerce business for the nine months ended September 30, 2023 compared to the same period in the prior year.

Gross Profit.

Gross profit is summarized in the following table:

Nine Months Ended September 30,

(in millions, except for percentages and basis points) 2023 2022 Change

Gross profit $ 1,193.7 $ 1,121.1 $ 72.6 6 %

Gross margin 49.2 % 48.9 % 30 bps

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Gross margin expanded primarily due to the following factors:

• an approximate 210 bps increase related to lower inbound freight costs;

• favorable region and channel net sales mix;

partially offset by

• unfavorable channel profitability reflecting lower DTC product margins and lower wholesale margins.

Lower DTC margins discussed above were primarily driven by higher clearance and promotional activity, including a greater proportion of sales of excess inventory through our DTC outlet stores.

Lower wholesale margins discussed above were primarily driven by actions to reduce excess inventory, partially offset by price increases that more than offset inflationary product costs.

• by lower DTC product margins, which were primarily driven by higher DTC retail store clearance and promotional activity, including sales of excess inventory through our temporary clearance locations and outlet stores.

Selling, General and Administrative Expenses.

SG&A expenses is summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentages and basis points) 2024 2023 Change

1 unchanged sentence

Selling, general and administrative expenses as percent of net sales 45.4 % 42.3 % 310 bps

SG&A expenses growth was comprised of variable expenses incurred to support sales growth, investments to support growth strategies, increased distribution and fulfillment costs related to elevated inventory, and inflationary pressures including increases in employee salaries and wages.

SG&A expenses increased primarily due to the following factors:

• higher omni-channel expenses of $37.6 million, reflecting higher DTC expenses, including variable expenses including personnel expenses and costs associated with new and temporary stores;

• higher supply chain expenses of $33.3 million, reflecting increased global distribution center expenses resulting from elevated inventory levels, including higher warehousing and fulfillment expenses, as well as third-party logistics transition-related costs;

• higher information technology related expenses, reflecting increased personnel expenses to support digital strategies.

• higher omni-channel expenses of $10.8 million, primarily reflecting higher DTC expenses, including personnel expenses and costs associated with temporary clearance locations and new stores;

partially offset by

• lower supply chain expenses, reflecting decreased global distribution center expenses resulting from normalized inventory levels, as well as the non-recurrence of third-party logistics transition-related costs incurred in the comparable period of 2023.

Interest Income, net.

Interest income, net is summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentages) 2024 2023 Change

4 unchanged sentences

Income tax expense and the related effective income tax rate are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentages) 2024 2023 Change

1 unchanged sentence

Effective income tax rate 21.9 % 23.7 %

Our effective income tax rates for the nine months ended September 30, 2023 and 2022 were impacted by discrete tax items, which lowered the effective income tax rate in each period.

For the nine months ended September 30, 2023, our effective income tax rate was primarily impacted by a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.

For the nine months ended September 30, 2022, our effective income tax rate was primarily impacted by a non-recurring benefit related to the finalization of the U.S.

and foreign audits, a non-recurring benefit related to a decrease in accrued foreign withholding taxes and a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.

Our effective income tax rates for the three months ended March 31, 2024 and 2023 were impacted by discrete tax items, which lowered the effective income tax rate in each period.

For the three months ended March 31, 2024, our effective income tax rate was primarily impacted by a benefit related to a non-recurring decrease in foreign withholding taxes.

For the three months ended March 31, 2023, our effective income tax rate was primarily impacted by a non-recurring benefit related to a foreign currency loss resulting from an intercompany transaction.

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 23

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Segment operating income includes net sales, cost of sales, SG&A expenses, and net licensing income for each of our four reportable geographic segments.

Operating income as a percentage of net sales in the U.S.

is typically higher than the other segments primarily due to scale efficiencies associated with the larger base of net sales in the U.S.

and, to a lesser extent, incremental licensing income.

We anticipate this trend to continue until other segments achieve scale efficiencies from higher levels of net sales volume relative to the fixed cost structure necessary to operate the business.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Net sales by geographic segment are summarized in the following table:

Three Months Ended September 30,

(in millions, except for percentage changes) Reported

Adjust for Foreign Currency Translation Constant-currency

% Change Constant-currency

$ 635.4 $ — $ 635.4 $ 607.0 5% 5%

LAAP 115.4 4.6 120.0 115.4 —% 4%

EMEA 129.4 (8.8) 120.6 153.5 (16)% (21)%

Canada 105.5 3.4 108.9 79.1 33% 38%

$ 985.7 $ (0.8) $ 984.9 $ 955.0 3% 3%

(1) Constant-currency net sales is a non-GAAP financial measure.

See "Non-GAAP Financial Measure" above for further information.

Operating income for each reportable segment and unallocated corporate expenses are summarized in the following table:

Three Months Ended September 30,

(in millions) 2023 2022 Change

$ 131.6 $ 145.3 $ (13.7)

LAAP 14.5 11.8 2.7

EMEA 34.2 35.6 (1.4)

Canada 30.2 20.2 10.0

Total segment operating income 210.5 212.9 (2.4)

Unallocated corporate expenses (75.9) (67.6) (8.3)

Operating income $ 134.6 $ 145.3 $ (10.7)

operating income decreased $13.7 million to $131.6 million, or 20.7% of net sales, for the third quarter of 2023 from $145.3 million, or 23.9% of net sales, for the comparable period in 2022.

The decrease was driven primarily by increased SG&A expenses.

net sales increased $28.4 million, or 5%, for the third quarter of 2023, compared to the same period in 2022.

net sales increased primarily in our U.S.

wholesale business for our Columbia and SOREL brands.

Increased U.S.

wholesale net sales reflected earlier shipment of Fall 2023 wholesale orders compared to the same period in the prior year.

DTC net sales increased primarily due to sales growth generated from our retail stores, partially offset by decreased net sales in our e-commerce business.

As of September 30, 2023, our U.S.

business operated 159 retail stores, compared to 148 stores as of September 30, 2022.

In addition, we leveraged temporary outlet stores during the third quarter of 2023 to support excess inventory liquidation efforts.

SG&A expenses increased as a percentage of net sales to 27.6% for the third quarter of 2023 compared to 25.9% for the same period in 2022, primarily driven by increased DTC expenses reflecting increased personnel expenses and costs associated with new and temporary stores, as well as higher warehousing and fulfillment expenses resulting from elevated inventory levels.

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LAAP operating income increased $2.7 million to $14.5 million, or 12.6% of net sales, for the third quarter of 2023 from $11.8 million, or 10.2% of net sales, for the comparable period in 2022.

LAAP net sales were flat (increased 4% constant-currency) compared to the third quarter of 2022.

LAAP net sales primarily reflected increased net sales in China resulting from higher consumer demand, partially offset by decreased net sales in Korea, reflecting challenging market conditions and efforts to reset the business to support long-term growth opportunities, and LAAP distributors due to a higher portion of Fall 2023 shipments in the second quarter compared to the same period in the prior year.

LAAP SG&A expenses increased as a percentage of net sales to 42.5% for the third quarter of 2023 compared to 40.9% for the same period in 2022.

EMEA operating income decreased $1.4 million to $34.2 million, or 26.5% of net sales, for the third quarter of 2023 from $35.6 million, or 23.2% of net sales, for the comparable period in 2022.

The decrease was driven primarily by decreased net sales and increased SG&A expenses, partially offset by increased gross margin.

EMEA net sales decreased $24.1 million, or 16% (21% constant-currency), for the third quarter of 2023, compared to the same period in 2022, driven by decreased net sales in our EMEA distributor business partially offset by increased net sales of our Europe-direct business.

EMEA distributor net sales decreased primarily due to our anniversary of prior year shipments to Russia (for orders that were placed prior to the invasion of Ukraine), as well as a higher portion of Fall 2023 distributor orders shipping in the second quarter compared to the timing of Fall 2022 shipments in the prior year.

Europe-direct net sales increased primarily due to the earlier shipment of Fall 2023 orders in the third quarter compared to the same period in the prior year, and, to a lesser extent, increased DTC net sales.

Gross margin increased primarily due to favorable channel shifts driven by a lower proportion of distributor sales, which generally carry lower gross margins.

SG&A expenses increased as a percentage of net sales to 25.0% for the third quarter of 2023 compared to 19.7% in 2022, primarily driven by channel shifts from a lower proportion of distributor sales, which carry lower SG&A expenses than our Europe-direct business.

Canada operating income increased $10.0 million to $30.2 million, or 28.6% of net sales, for the third quarter of 2023 from $20.2 million, or 25.6% of net sales, for the comparable period in 2022.

The increase primarily resulted from increased net sales.

Canada net sales increased $26.4 million, or 33% (38% constant-currency), for the third quarter of 2023, compared to the same period in 2022, driven by increased net sales in our Canada wholesale business primarily due to the earlier shipment of Fall 2023 orders, and, to a lesser extent, increased DTC net sales.

Canada SG&A expenses decreased as a percentage of net sales to 18.2% for the third quarter of 2023 compared to 21.1% for the same period in 2022.

Unallocated Corporate Expenses

Unallocated corporate expenses increased by $8.3 million to $75.9 million in the third quarter of 2023, from $67.6 million for the same period in 2022, primarily driven by higher personnel expenses.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net sales by geographic segment are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except for percentage changes) Reported

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See "Non-GAAP Financial Measure" above for further information.

COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 29

Operating income for each reportable segment and unallocated corporate expenses are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023 Change

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Operating income $ 44.7 $ 56.4 $ (11.7)

operating income decreased $57.5 million to $268.3 million, or 17.3% of net sales, for the nine months ended September 30, 2023 from $325.8 million, or 21.4% of net sales, for the comparable period in 2022.

The decrease was driven primarily by increased SG&A expenses.

net sales increased $30.6 million, or 2%, for the nine months ended September 30, 2023, compared to the same period in 2022.

net sales increased primarily due to earlier shipments of Fall 2023 wholesale orders and higher DTC consumer demand.

As of September 30, 2023, our U.S.

business operated 159 retail stores, compared to 148 stores as of September 30, 2022.

In addition, we opened and leveraged temporary outlet stores in 2023 to support excess inventory liquidation efforts.

SG&A expenses increased as a percentage of net sales to 32.3% for the nine months ended September 30, 2023 compared to 28.7% for the same period in 2022, primarily driven by increased warehousing and fulfillment expenses resulting from elevated inventory levels and higher DTC expenses reflecting higher personnel and costs associated with new and temporary stores.

LAAP operating income increased $15.2 million to $36.9 million, or 10.7% of net sales, for the nine months ended September 30, 2023 from $21.7 million, or 7.0% of net sales, for the comparable period in 2022.

The increase was driven primarily by increased net sales and decreased SG&A expenses as a percentage of net sales.

LAAP net sales increased $35.2 million, or 11% (18% constant-currency), for the nine months ended September 30, 2023, compared to the same period in 2022.

Increased LAAP net sales was primarily driven by our China and LAAP distributor businesses, partially offset by declines in our Korea business.

Increased China net sales reflects higher consumer demand as we lapped prior year government mandated restrictions to prevent the spread of COVID-19.

LAAP distributor net sales increased due to higher Spring 2023 and Fall 2023 orders compared to the same period in the prior year.

Decreased Korea net sales reflects challenging market conditions and efforts to reset the business to support long-term growth opportunities.

LAAP SG&A expenses decreased as a percentage of net sales to 44.6% for the nine months ended September 30, 2023 compared to 47.9% for the same period in 2022, primarily driven by leveraging of fixed operating expenses.

EMEA operating income increased $18.6 million to $69.6 million, or 20.6% of net sales, for the nine months ended September 30, 2023 from $51.0 million, or 16.7% of net sales, for the comparable period in 2022.

The increase was driven primarily by increased net sales and increased gross margin.

EMEA net sales increased $32.7 million, or 11% (10% constant-currency), for the nine months ended September 30, 2023, compared to the same period in 2022, driven by increased net sales in our Europe-direct business, partially offset by decreased net sales in our EMEA distributor business.

Europe-direct net sales increased primarily due to broad-based growth across our wholesale and DTC businesses, including the earlier shipment of Fall 2023 orders compared to prior year.

EMEA distributor net sales decreased primarily due to our anniversary of prior year shipments to Russia (for orders that were placed prior to the invasion of Ukraine).

Gross margin increased primarily due to favorable channel shifts driven by a lower proportion of distributor sales, which generally carry lower gross margins.

EMEA SG&A expenses increased as a percentage of net sales to 26.5% for the nine months ended September 30, 2023 compared to 26.4% for the same period in 2022.

Canada operating income increased $9.2 million to $41.1 million, or 21.4% of net sales, for the nine months ended September 30, 2023 from $31.9 million, or 20.3% of net sales for the comparable period in 2022.

The increase primarily resulted from increased net sales.

operating income decreased $8.6 million to $73.0 million, or 15.4% of net sales, for the first quarter of 2024 from $81.6 million, or 15.8% of net sales, for the comparable period in 2023.

The decrease was driven primarily by decreased net sales and gross margin, partially offset by lower SG&A expenses.

net sales decreased $43.1 million, or 8%, for the first quarter of 2024, compared to the same period in 2023.

net sales decreased primarily due to lower Spring 2024 wholesale orders, partially offset by an increase in net sales in our DTC brick-and-mortar business.

As of March 31, 2024, our U.S.

business operated 161 retail stores, compared to 156 stores as of March 31, 2023.

In addition, we operated 44 temporary clearance locations as of March 31, 2024 to support inventory reduction efforts, compared to 8 temporary clearance locations as of March 31, 2023.

Lower SG&A expenses were primarily driven by lower supply chain and demand creation expenses, partially offset by higher omni-channel expenses, as discussed above.

SG&A expenses increased as a percentage of net sales to 34.5% for the first quarter of 2024 compared to 33.1% for the same period in 2023.

LAAP operating income increased $3.5 million to $21.8 million, or 15.7% of net sales, for the first quarter of 2024 from $18.3 million, or 13.4% of net sales, for the comparable period in 2023.

The increase was driven primarily by increased net sales and gross margin, partially offset by increased SG&A expenses.

LAAP net sales increased $2.3 million, or 2% (7% constant-currency), for the first quarter of 2024, compared to the same period in 2023.

Increased LAAP net sales were primarily driven by our China business, partially offset by lower LAAP distributor net

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sales increased $34.1 million, or 22% (27% constant-currency), for the nine months ended September 30, 2023, compared to the same period in 2022, driven by increased net sales in our Canada wholesale and DTC businesses, including the earlier shipment of Fall 2023 orders compared to prior year.

Canada SG&A expenses decreased as a percentage of net sales to 25.2% for the nine months ended September 30, 2023, compared to 26.2% for the same period in 2022.

Increased China net sales reflected higher consumer demand benefiting all channels of distribution.

LAAP SG&A expenses increased as a percentage of net sales to 41.7% for the first quarter of 2024 compared to 40.6% for the same period in 2023.

EMEA operating income decreased $1.3 million to $19.1 million, or 18.3% of net sales, for the first quarter of 2024 from $20.4 million, or 18.8% of net sales, for the comparable period in 2023.

The decrease was driven by decreased net sales combined with increased SG&A expenses due to increased headcount to support the business.

EMEA net sales decreased $3.8 million, or 4% (6% constant-currency), for the first quarter of 2024, compared to the same period in 2023, driven by lower EMEA distributor net sales and lower Spring 2024 wholesale orders, partially offset by an increase in our Europe-direct DTC net sales.

EMEA SG&A expenses increased as a percentage of net sales to 31.3% for the first quarter of 2024 compared to 28.0% for the same period in 2023.

Canada operating income increased $0.4 million to $11.2 million, or 21.3% of net sales, for the first quarter of 2024 from $10.8 million, or 18.5% of net sales, for the comparable period in 2023.

The increase primarily resulted from lower SG&A expenses, partially offset by decreased net sales and gross margin.

Canada net sales decreased $6.0 million, or 10% (11% constant-currency), for the first quarter of 2024, compared to the same period in 2023, primarily due to lower Spring 2024 wholesale orders, partially offset by an increase in DTC brick-and-mortar business.

Canada SG&A expenses increased as a percentage of net sales to 27.9% for the first quarter of 2024 compared to 26.8% for the same period in 2023.

Unallocated Corporate Expenses

Unallocated corporate expenses increased by $26.0 million to $218.7 million for the nine months ended September 30, 2023 from $192.7 million for the same period in 2022, primarily driven by higher personnel expenses.

Unallocated corporate expenses increased by $5.7 million to $80.4 million for the first quarter of 2024 from $74.7 million for the same period in 2023, largely driven by higher personnel expenses.

LIQUIDITY AND CAPITAL RESOURCES

Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $720 million in total liquidity as of September 30, 2023.

Including cash, cash equivalents, short-term investments and available committed credit lines, we had approximately $1.5 billion in total liquidity as of March 31, 2024.

Our liquidity may be affected by the general seasonal trends common to the industry.

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Cash flows are summarized in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023 Change

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Net effect of exchange rate changes on cash (4.4) 0.1 (4.5)

Net decrease in cash and cash equivalents $ (217.0) $ (604.2) $ 387.2

The change in cash flows provided by operating activities was driven by a $365.8 million decrease in cash used in changes in assets and liabilities, partially offset by a $15.5 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories and Accounts Payable , and to a lesser extent, Prepaid expenses and other current assets and Accrued liabilities .

The $578.6 million increase in cash provided by Inventories reflected a decrease in inventory as we curtailed inventory purchases to compensate for elevated inventories exiting 2022 and to eventually align inventory supply with future demand.

The $54.3 million increase in cash provided by Prepaid expenses and other current assets was primarily driven by changes to inventory prepayments.

These amounts were partially offset by the $216.0 million increase in cash used in Accounts payable primarily resulting from earlier production and payment of Fall 2023 and Spring 2024 inventory, as well as the $23.8 million increase in cash used in Accrued liabilities, which was primarily driven by higher sales reserves at the beginning of 2023 compared to 2022 as a result of higher sales in the fourth quarter of 2022.

Net cash used in investing activities was $38.5 million for the nine months ended September 30, 2023, compared to $88.5 million of cash provided by investing activities for the nine months ended September 30, 2022.

For the 2023 period, net cash used in investing activities consisted of $41.4 million in cash used for capital expenditures, partially offset by $2.9 million in net sales and maturities of short-term investments.

For the 2022 period, net cash provided by investing activities consisted of $131.0 million in net sales and maturities of short-term investments partially offset by $42.5 million in cash used for capital expenditures.

Net cash used in financing activities was $197.6 million for the nine months ended September 30, 2023 compared to $339.7 million for the nine months ended September 30, 2022.

Net increase/(decrease) in cash and cash equivalents

$ 68.1 $ (69.2) $ 137.3

The change in cash flows provided by operating activities was driven by a $31.8 million increase in cash provided by changes in assets and liabilities, partially offset by a $3.0 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories and Accounts receivable , and to a lesser extent, Prepaid expenses and other current assets, and Accounts payable .

The $60.2 million increase in cash provided by Inventories reflected a decrease in inventory as we curtailed inventory purchases to compensate for elevated inventories exiting 2022 and liquidated excess inventory levels throughout 2023

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and the first quarter of 2024.

The $18.4 million decrease in cash used in Accounts payable was primarily driven by lower inventory receipts in the first quarter of 2024 compared to the first quarter of 2023.

These amounts were partially offset by the $32.5 million decrease in cash provided by Accounts receivable primarily driven by lower wholesale net sales for the quarter.

Additionally, changes in Prepaid expenses and other current assets resulted in cash used of $0.5 million for the first quarter of 2024 compared to cash provided of $23.1 million for the first quarter of 2023, driven by overall decreases in inventory prepayments from December 31, 2022.

Net cash provided by investing activities was $37.1 million for the three months ended March 31, 2024, compared to $111.7 million of cash used in investing activities for the three months ended March 31, 2023.

For the 2024 period, net cash provided by investing activities consisted of $110.9 million in cash provided by sales and maturities of short-term investments, partially offset by $59.0 million in cash used for purchases of short-term investments and $14.8 million for capital expenditures.

For the 2023 period, net cash used in investing activities consisted of $98.2 million in purchases of short-term investments and $14.0 million for capital expenditures, partially offset by $0.6 million provided by sales and maturities of short-term investments.

Net cash used in financing activities was $71.4 million for the three months ended March 31, 2024 compared to $35.6 million for the three months ended March 31, 2023.

For the 2024 period, net cash used in financing activities primarily consisted of repurchases of common stock of $50.2 million and dividend payments to our shareholders of $17.9 million.

For the 2023 period, net cash used in financing activities primarily consisted of repurchases of common stock of $15.3 million and dividend payments to our shareholders of $18.6 million.

COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 31

Sources of Liquidity

Cash and cash equivalents and short-term investments

As of September 30, 2023, we had cash and cash equivalents of $213.3 million and short-term investments of $1.5 million, compared to $430.2 million and $0.7 million, respectively, as of December 31, 2022 and $159.2 million and $1.0 million, respectively, as of September 30, 2022.

As of March 31, 2024, we had cash and cash equivalents of $418.5 million and short-term investments of $369.3 million, compared to $350.3 million and $414.2 million, respectively, as of December 31, 2023 and $361.0 million and $99.5 million, respectively, as of March 31, 2023.

Domestic Credit Facility

Refer to Note 7 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023 for further information regarding the domestic credit facility.

As of September 30, 2023, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.

As of March 31, 2024, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.

We were in compliance with all associated covenants and there was no balance outstanding under the facility.

International Credit Facility

As of September 30, 2023, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €4.4 million (approximately US$4.6 million).

As of March 31, 2024, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €4.4 million (approximately US$4.7 million).

There was no balance outstanding under the facility.

Other Sources

As of September 30, 2023, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$104.2 million.

As of March 31, 2024, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$104.5 million.

There was no balance outstanding under these facilities.

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Inventory balances may be elevated in advance of periods of expected high demand.

As of September 30, 2023, our inventory balance decreased to $885.2 million, compared to $1,056.9 million as of September 30, 2022, driven by a reduction in current season and carryover inventory resulting from lower inventory buys and earlier receipt and shipment of Fall 2023.

As of March 31, 2024, our inventory balance decreased to $607.4 million, compared to $959.2 million as of March 31, 2023, driven by a meaningful reduction in current season and carryover inventory resulting from lower inventory buys, as well as the use of our outlet stores and temporary clearance locations to profitably sell excess merchandise.

We believe older season inventories represent a manageable portion of our total inventory mix.

To address higher inventory levels, we meaningfully reduced purchases of Spring 2023 and Fall 2023 inventory and are taking a cautious approach to future inventory purchases.

Additionally, we are leveraging our outlet stores and opened temporary outlet stores to profitably clear excess merchandise.

As we continue to sell carryover and excess inventory during the Fall 2023 season, we believe our inventory levels have begun to normalize.

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 26

We have planned 2024 capital expenditures of approximately $60 to $80 million.

This includes investments in our DTC operations, including new stores, U.S.

distribution projects to increase efficiency and expand storage, corporate facilities improvements, and digital and supply chain capabilities to support our strategic priorities.

Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction as well as the availability of capital assets from suppliers.

This includes investments in our DTC operations, including new stores and digital and supply chain capabilities to support our strategic priorities.

Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction.

Our long-term goal is to maintain a strong balance sheet and a disciplined approach to capital allocation.

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Free cash flow is a non-GAAP financial measure.

Free cash flow is calculated by reducing net cash flow from operating activities by capital

COLUMBIA SPORTSWEAR COMPANY | Q3 2023 FORM 10-Q | 32

expenditures.

Free cash flow is calculated by reducing net cash flow from operating activities by capital expenditures.

Management believes free cash flow provides investors with an important perspective on the cash available for shareholders and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation.

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Other cash commitments

Our inventory purchase obligations wer e $367.3 million a s of September 30, 2023, compared to $401.4 million and $435.5 million as of December 31, 2022 and September 30, 2022, respectively.

Our inventory purchase obligations wer e $675.0 million a s of March 31, 2024, compared to $343.4 million and $540.6 million as of December 31, 2023 and March 31, 2023, respectively.

There have been no other significant changes to our other cash commitments as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

CRITICAL ACCOUNTING ESTIMATES

Management's discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP.

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Refer to Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding our critical accounting policies and estimates.

Management regularly discusses with our audit committee each of our critical accounting estimates, the development and selection of these accounting estimates, and the disclosure about each estimate in this Quarterly Report on Form 10-Q.

Management regularly discusses with our audit committee our critical accounting estimates and the development and selection of these accounting estimates.

These discussions typically occur at our quarterly audit committee meetings and include the basis and methodology used in developing and selecting these estimates, the trends in and amounts of these estimates, specific matters affecting the amount of and changes in these estimates, and any other relevant matters related to these estimates, including significant issues concerning accounting principles and financial statement presentation.

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There has not been any material change in the market risk disclosure contained in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023.

COLUMBIA SPORTSWEAR COMPANY | Q1 2024 FORM 10-Q | 27

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis