What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-01 · 185 added, 154 removed, 276 unchanged (55% of the section changed)

10 unchanged sentences

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

COLUMBIA SPORTSWEAR COMPANY | Q2 2024 FORM 10-Q | 20

We are investing in our strategic priorities to:

ACCELERATE Growth Strategy

As part of our strategic priorities, in October 2024, we announced the ACCELERATE Growth Strategy.

At its core, the ACCELERATE Growth Strategy is intended to elevate the Columbia brand ("Brand") to target a younger and more active consumer.

It is a multi-year initiative centered around several consumer-centric shifts to our Brand, product and marketplace strategies, as well as enhanced ways of working.

We believe successful execution of the ACCELERATE Growth Strategy can elevate the Brand and drive profitable growth.

Through the ACCELERATE Growth Strategy, we will focus on achieving the following objectives:

• steward existing consumer segments while focusing on bringing new younger and active consumers into the Brand;

• elevate consumers' perception of the Brand;

• create product based on a consumer-centric product construct;

• enhance the positioning of the Brand in the U.S.

• deliver integrated full-funnel marketing.

In addition, we are committed to investing in our strategic priorities with a renewed emphasis to:

• accelerate profitable growth;

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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 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.

In an effort to reduce inventories and to assist with our transition of merchandise containing perfluoroalkyl and polyfluoroalkyl substances ("PFAS") chemicals, we opened temporary outlet stores in the U.S., which will remain open through 2024, and begin to ramp down throughout 2025.

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.

Concurrent with our ACCELERATE Growth Strategy, we continue to make progress on our 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:

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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.

We anticipate these cost savings will ramp up over the course of

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2024 and 2025, with the full benefit being realized in 2026.

In 2024, we expect to attain approximately $90 million in realized cost savings and avoidance, net of approximately $3 million to $4 million of severance and other costs.

Business Environment and Trends

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

Increasing U.S.

Competitive Environment and Evolving U.S.

Consumer Trends | We believe our competition in the historical U.S.

outdoor apparel and footwear market has increased as many brands have shifted their strategies and new brands have entered the marketplace 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 has spread 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.

We believe the successful implementation of our strategic priorities, including our Columbia brand ACCELERATE Growth Strategy, will enable us to better compete in this evolved U.S.

marketplace in the future.

North America Economic Environment | We believe general economic uncertainty in the U.S.

and Canada is impacting consumer and customer behavior and demand.

A culmination of economic indicators including high interest rates, increased consumer debt, and ongoing inflationary pressures, amongst other indicators, are contributing to wholesale customer cautiousness, as well as changes in consumer confidence and shopping behavior.

This has contributed to slower-than-planned sales within our DTC and wholesale businesses in North America.

In the near-term, we expect our DTC and wholesale channels in North America to continue to be challenged, in part due to the economic environment.

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, particularly in the U.S.

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

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

This, among other factors, is contributing to reduced demand for our direct-to-consumer ("DTC") e-commerce sites for certain brands and branded stores.

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

Further, in an effort to reduce inventories and to assist with our transition of merchandise containing perfluoroalkyl and polyfluoroalkyl substances ("PFAS") chemicals, we opened temporary outlet stores in the U.S in 2024 .

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

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We anticipate continuing to utilize temporary clearance locations to assist with inventory liquidation through 2024 with plans to ramp down these locations throughout 2025.

Changing Consumer Trends | The U.S.

consumer remains challenged by the current economic environment as inflationary pressures continue to weigh on sentiment across the U.S.

retail environment.

This has translated to traffic declines and slower-than-planned sales

COLUMBIA SPORTSWEAR COMPANY | Q2 2024 FORM 10-Q | 21

within our DTC e-commerce and brick-and-mortar businesses.

As a result, we expect our DTC channel to continue to be challenged year-over-year.

We believe this is a transitional trend and that, over time, growth will return to the DTC channel.

Changing International Consumer Trends | We believe consumers in our international markets have adjusted their shopping habits, particularly in China as the outdoor category sector rapidly expands and Japan as the market continues to benefit from international tourism.

We expect certain of our international businesses to continue to grow year-over-year and into 2025.

Delayed Inventory Receipts | Supply chain disruptions, including impacts of Red Sea closures, Bangladesh factory disruptions, port strikes and severe weather events, have extended our supply chain lead times resulting in delayed receipt of inventory.

Later receipts of inventory impact our ability to capture consumer demand and increase the risk of wholesale order cancellations and lower potential reorders, some of which is currently occurring.

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.

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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.

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 in 2023 and first half of 2024.

As a result of ongoing conflict disrupting ocean transport through the Red Sea, spot ocean freight rates have begun to increase, and ocean carriers have initiated peak season surcharges.

We utilize contracted pricing for the bulk of our ocean freight, which minimizes our exposure to spot pricing.

However, if the conflict and ocean freight rate trends persist beyond our current contracts, we could incur increased ocean freight costs in future periods.

Additionally, we may incur peak season surcharges and/or need to pay a premium to secure needed capacity.

Freight Cost Environment | We have realized declines in ocean freight rates and costs in comparison to prior elevated levels.

These lower ocean freight rates resulted in substantially lower inbound freight costs, which benefited our gross margin in 2023 and through the third quarter of 2024.

We anticipate these lower ocean freight costs will abate providing less of a gross margin benefit in the fourth quarter of 2024 and diminishing even more so into 2025.

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

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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.

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Heightened Geopolitical Risk | We sell our products in more than 100 countries and our ability to sell, import into and produce 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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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 PFAS chemicals, we have been working to eliminate PFAS chemicals across our global product line.

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

For example, in anticipation of the effectiveness of the regulations in California and New York states related to PFAS chemicals, we have worked to eliminate PFAS chemicals across our global product line.

These PFAS matters have resulted in a more promotional environment in 2024 as retailers sell through merchandise containing PFAS .

RESULTS OF OPERATIONS

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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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

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Net licensing income 6.1 0.7 % 6.0 0.7 % 16.2 0.7 % 15.0 0.6 %

Operating income (loss) (23.8) (4.2) % 6.2 1.0 % 20.9 1.6 % 62.7 4.3 %

Operating income 112.5 12.1 % 134.6 13.7 % 133.4 5.9 % 197.2 8.1 %

Interest income, net 5.4 0.6 % 1.9 0.1 % 22.9 1.0 % 8.6 0.4 %

Other non-operating income (expense), net 1.3 0.1 % (0.4) — % 2.0 0.1 % 0.4 — %

Income (loss) before income tax (15.0) (2.6) % 9.6 1.5 % 39.2 3.0 % 70.1 4.9 %

Income tax expense (benefit) (3.2) (0.6) % 1.2 0.2 % 8.6 0.6 % 15.5 1.1 %

Net income (loss) $ (11.8) (2.0) % $ 8.4 1.3 % $ 30.6 2.4 % $ 54.6 3.8 %

Diluted earnings (loss) per share $ (0.20) $ 0.14 $ 0.51 $ 0.88

Income before income tax 119.2 12.8 % 136.1 13.8 % 158.3 7.0 % 206.2 8.5 %

Income tax expense 29.0 3.1 % 32.6 3.3 % 37.6 1.7 % 48.1 2.0 %

Net income $ 90.2 9.7 % $ 103.5 10.5 % $ 120.7 5.3 % $ 158.1 6.5 %

Diluted earnings per share $ 1.56 $ 1.70 $ 2.04 $ 2.56

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 24

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

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

Three Months Ended June 30,

Three Months Ended September 30,

(in millions, except for percentages) Reported

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

Our global net sales decrease primarily reflects lower wholesale net sales in the U.S., partially offset by strength in international markets, compared to the same period in 2023.

DTC net sales were flat, with declines in our e-commerce business offset by growth in our brick-and-mortar business from temporary and new stores, compared to the same period in 2023.

The declines in wholesale net sales resulted from retailer cautiousness and a difficult competitive environment in the U.S.

The declines in e-commerce net sales resulted from softness in the U.S., which we attribute to a challenging e-commerce environment for traditional outdoor brands, coupled with efforts to de-emphasize promotions on Columbia.com.

Our global net sales decrease primarily reflects lower wholesale net sales in the U.S.

and Canada, partially offset by continued strength in international markets, compared to the same period in 2023.

The declines in wholesale net sales reflect the impact of lower Fall 2024 wholesale orders as a result of retailer cautiousness and a difficult competitive environment in the U.S.

and Canada, as well as delayed shipment of Fall 2024 wholesale orders in the third quarter compared to earlier shipment of Fall 2023 orders in the same period of the prior year.

The strength in international markets is aided by a higher portion of Fall 2024 distributor orders shipping in the third quarter compared to the timing of Fall 2023 shipments in the prior year, as well as generally robust consumer demand within many markets of our LAAP and EMEA businesses.

DTC net sales increased, reflecting growth in our brick-and-mortar business from temporary and new stores, partially offset by declines in our e-commerce business, compared to the same period in 2023.

The declines in e-commerce net sales resulted from softness in the U.S., which we attribute to a challenging e-commerce environment for outdoor brands, coupled with efforts to de-emphasize promotions on Columbia.com.

Gross Profit.

Gross profit is summarized in the following table:

Three Months Ended June 30,

Three Months Ended September 30,

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

1 unchanged sentence

Gross margin 50.2 % 48.7 % 150 bps

Gross margin contracted primarily due to the following factors:

• an approximate 330 bps decrease in channel profitability resulting from lower margins reflecting actions to spur demand and reduce excess inventory, as well as changes in sales provisions;

partially offset by

Gross margin expanded primarily due to the following factor:

• favorable other costs, including lower inbound freight costs;

partially offset by

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 25

• unfavorable decrease in channel profitability reflecting higher clearance and promotional activity, partially offset by favorable input costs and product mix.

Selling, General and Administrative Expenses.

SG&A expenses are summarized in the following table:

Three Months June 30,

Three Months September 30,

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

1 unchanged sentence

Selling, general and administrative expenses as percent of net sales 38.8 % 35.7 % 310 bps

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

• lower supply chain expenses, reflecting decreased global distribution center expenses resulting from more normalized inventory levels;

• lower demand creation expenses, primarily reflecting decreased net sales;

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

• higher omni-channel expenses of $14.3 million, reflecting higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expense;

• higher incentive compensation, reflecting higher performance against target as compared to the comparative period;

partially offset by

• higher omni-channel expenses, reflecting higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses.

• lower supply chain expenses, reflecting decreased global distribution center expenses resulting from more normalized inventory levels and supply chain optimization efforts.

Interest Income, Net.

Interest income, net is summarized in the following table:

Three Months Ended June 30,

Three Months Ended September 30,

(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:

Three Months Ended June 30,

Three Months Ended September 30,

(in millions, except for percentages) 2024 2023 Change

Income tax expense (benefit) $ (3.2) $ 1.2 $ (4.4) (367) %

Income tax expense $ 29.0 $ 32.6 $ (3.6) (11) %

Effective income tax rate 24.4 % 24.0 %

Income tax expense (benefit) decreased to ($3.2) million for the second quarter of 2024 from a tax expense of $1.2 million for the comparable period in 2023.

Our effective tax rate was 21.6% for the three months ended June 30, 2024 compared to 12.6% for the same period in 2023.

For the three months ended June 30, 2024, our effective tax rate was primarily impacted by a non-recurring expense associated with stock compensation benefits.

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

Income tax expense decreased to $29.0 million for the third quarter of 2024 from a tax expense of $32.6 million for the comparable period in 2023.

Our effective tax rate was 24.4% for the three months ended September 30, 2024 compared to 24.0% for the same period in 2023.

For the three months ended September 30, 2024, our effective tax rate was primarily impacted by a non-recurring expense related to a foreign currency gain resulting from an intercompany transaction.

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

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Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions, except for percentages) Reported

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Our global net sales decrease primarily reflects lower wholesale net sales in the U.S.

for the six months ended June 30, 2024, compared to same period in 2023.

DTC net sales increased, reflecting growth in our brick-and-mortar business from temporary and new stores, partially offset by declines in our e-commerce business for the six months ended June 30, 2024, compared to the same period in 2023.

The declines in wholesale net sales resulted from retailer cautiousness and a difficult competitive environment in the U.S.

and Canada, partially offset by continued strength in international markets, compared to the same period in 2023.

The declines in wholesale net sales have generally resulted from retailer cautiousness and a difficult competitive environment throughout the year, primarily in the U.S and Canada.

The strength in international markets has generally resulted from robust consumer demand within many markets of our LAAP and EMEA businesses.

The declines in e-commerce net sales have resulted from softness in the U.S.

throughout the year, which we attribute to a challenging environment for outdoor brands, coupled with efforts to de-emphasize promotions on Columbia.com.

Gross Profit.

Gross profit is summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

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

1 unchanged sentence

Gross margin 49.8 % 49.2 % 60 bps

Gross margin was flat primarily due to the following factors:

• unfavorable decrease in channel profitability resulting from lower margins reflecting actions to spur demand and reduce excess inventory;

Gross margin expanded primarily due to the following factors:

• favorable other costs, including lower inbound freight costs;

• favorable region and channel net sales mix;

partially offset by

• unfavorable decrease in channel profitability reflecting higher clearance and promotional activity, partially offset by favorable input costs and product mix.

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 27

1 unchanged sentence

SG&A expenses are summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

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

1 unchanged sentence

Selling, general and administrative expenses as percent of net sales 44.6 % 41.7 % 290 bps

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

• lower supply chain expenses of $17.1 million, reflecting decreased global distribution center expenses resulting from more normalized inventory levels;

• lower demand creation expenses, primarily reflecting decreased net sales;

partially offset by

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

• higher omni-channel expenses of $31.7 million, reflecting higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses;

partially offset by

• lower supply chain expenses of $26.0 million, reflecting decreased global distribution center expenses resulting from more normalized inventory levels and supply chain optimization efforts;

• lower demand creation expenses, primarily reflecting decreased net sales.

Interest Income, Net.

Interest income, net is summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(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:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions, except for percentages) 2024 2023 Change

1 unchanged sentence

Effective income tax rate 23.8 % 23.4 %

Income tax expense decreased to $8.6 million through the second quarter of 2024 from $15.5 million for the comparable period in 2023.

For the six months ended June 30, 2024, our effective tax rate was primarily impacted by a benefit related to a non-recurring decrease in foreign withholding taxes.

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

Income tax expense decreased to $37.6 million through the third quarter of 2024 from $48.1 million for the comparable period in 2023.

Our effective tax rate was 23.8% for the nine months ended September 30, 2024 compared to 23.4% for the same period in 2023.

For the nine months ended September 30, 2024, our effective tax rate was primarily impacted by a non-recurring benefit related to a decrease in accrued foreign withholding taxes.

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.

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1 unchanged sentence

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

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

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

Three Months Ended June 30,

Three Months Ended September 30,

(in millions, except for percentage changes) Reported

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

Three Months Ended June 30,

Three Months Ended September 30,

(in millions) 2024 2023 Change

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Unallocated corporate expenses (78.9) (75.9) (3.0)

Operating income (loss) $ (23.8) $ 6.2 $ (30.0)

operating income decreased $31.6 million to $23.5 million, or 6.9% of net sales, for the second quarter of 2024 from $55.1 million, or 13.8% of net sales, for the comparable period in 2023.

Operating income $ 112.5 $ 134.6 $ (22.1)

operating income decreased $16.2 million to $115.4 million, or 20.2% of net sales, for the third quarter of 2024 from $131.6 million, or 20.7% 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 $58.9 million, or 15%, for the second quarter of 2024, compared to the same period in 2023, driven primarily by decreased net sales in our U.S.

net sales decreased $64.1 million, or 10%, for the third quarter of 2024, compared to the same period in 2023, driven primarily by decreased net sales in our U.S.

wholesale business.

DTC net sales decreased modestly as a result of lower e-commerce net sales, partially offset by net sales growth from our brick-and-mortar business.

The declines in wholesale net sales resulted from retailer cautiousness and a difficult competitive environment in the U.S.

The increases in brick-and-mortar net sales were primarily driven by our temporary clearance locations which have continued to support our excess inventory liquidation efforts.

As of June 30, 2024, our U.S.

The declines in wholesale net sales reflect the impact of lower Fall 2024 wholesale orders as a result of retailer cautiousness and a difficult competitive environment in the U.S., as well as delayed shipment of Fall 2024 wholesale orders in the third quarter compared to earlier shipment of Fall 2023 orders.

The declines in e-commerce net sales resulted from continued softness in the U.S., which we attribute to a challenging e-commerce environment for outdoor brands, coupled with efforts to de-emphasize promotions on Columbia.com.

The increases in brick-and-mortar net sales were primarily driven by temporary clearance locations and new stores, coupled with increased productivity from existing stores.

As of September 30, 2024, our U.S.

business operated 42 temporary clearance locations, compared to 36 locations for the comparable period in 2023.

In addition, our U.S.

business operated 163 retail stores as of June 30, 2024, compared to 157 stores for the comparable period in 2023.

SG&A expenses increased as a percentage of net sales to 42.6% for the second quarter of 2024 compared to 38.7% for the same period in 2023, driven by fixed SG&A expenses and decreased net sales.

business operated 169 retail stores as of September 30, 2024, compared to 159 stores for the comparable period in 2023.

SG&A expenses increased as a percentage of net sales to 30.2% for the third quarter of 2024 compared to 27.6% for the same period in 2023, driven by fixed SG&A expenses and decreased net sales.

In total, U.S.

SG&A expenses decreased for the second quarter of 2024, compared to the same period in 2023, primarily driven by lower supply chain expenses resulting from more normalized inventory levels and lower demand creation expenses, partially offset by higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses.

SG&A expenses decreased for the third quarter of 2024, compared to the same period in 2023, primarily driven by lower supply chain expenses resulting from more normalized inventory levels and supply chain optimization efforts, as well as lower demand creation expenses, partially offset by higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses.

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 29

LAAP operating income increased $2.0 million to $6.1 million, or 6.1% of net sales, for the second quarter of 2024 from $4.1 million, or 4.4% of net sales, for the comparable period in 2023.

LAAP net sales increased 7% (13% constant-currency) compared to the same period in 2023.

LAAP net sales primarily reflected increased net sales in our LAAP distributor business due to higher Fall 2024 distributor orders and favorable impacts from timing of distributor shipments, as well as increased sales in China reflecting strong consumer demand, compared to the same period in 2023.

Japan net sales declined driven by unfavorable effects from foreign currency fluctuation, which more than offset constant-currency net sales growth resulting from increased international tourism.

Korea net sales also declined.

LAAP SG&A expenses decreased as a percentage of net sales to 47.4% for the second quarter of 2024 compared to 53.1% for the same period in 2023.

EMEA operating income decreased $0.6 million to $14.4 million, or 13.9% of net sales, for the second quarter of 2024 from $15.0 million, or 14.9% of net sales, for the comparable period in 2023.

EMEA net sales increased $3.1 million, or 3% (3% constant-currency), for the second quarter of 2024, compared to the same period in 2023.

EMEA net sales increased primarily in our Europe-direct business, boosted by continued momentum and increased traffic within our brick-and-mortar and e-commerce businesses.

This net sales increase was partially offset by decreased net sales in our EMEA distributor business.

EMEA SG&A expenses increased as a percentage of net sales to 28.6% for the second quarter of 2024 compared to 26.7% in 2023, primarily driven by higher DTC brick-and-mortar expenses and personnel expenses.

Canada had an operating loss of $0.1 million, or (0.4)% of net sales, for the second quarter of 2024 compared to operating income of $0.1 million, or 0.4% of net sales, for the comparable period in 2023.

Canada net sales decreased $1.1 million, or 4% (4% constant-currency), for the second quarter of 2024, compared to the same period in 2023, primarily reflecting the impact of lower Spring 2024 wholesale orders, partially offset by growth in DTC brick-and-mortar net sales.

Canada SG&A expenses increased as a percentage of net sales to 49.7% for the second quarter of 2024 compared to 48.5% for the same period in 2023, driven by fixed SG&A expenses and decreased net sales.

In total, Canada SG&A expenses decreased for the second quarter of 2024 compared to the same period in 2023.

LAAP operating income increased $5.9 million to $20.4 million, or 15.1% of net sales, for the third quarter of 2024 from $14.5 million, or 12.6% of net sales, for the comparable period in 2023.

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

LAAP net sales increased 17% (18% constant-currency), for the third quarter of 2024, compared to the same period in 2023, primarily driven by our China and LAAP distributor businesses.

Increased net sales in our China business reflected continued strong consumer demand, aided by positive outdoor category trends, compared to the same period in the prior year.

Increased net sales in our LAAP distributor business reflected growth in our Fall 2024 distributor orders compared to the same period in the prior year.

Japan net sales increased within our DTC and wholesale businesses primarily due to strong international tourism.

Korea net sales increased primarily due to wholesale net sales reflecting a higher portion of Fall 2024 wholesale orders shipping in the third quarter compared to the timing of Fall 2023 shipments in the prior year, partially offset by declines in DTC net sales reflecting ongoing consumer demand headwinds.

LAAP SG&A expenses decreased as a percentage of net sales to 39.4% for the third quarter of 2024 compared to 42.5% for the same period in 2023, driven by increased net sales.

In total, LAAP SG&A expenses increased for the third quarter of 2024, compared to the same period in 2023, primarily driven by higher demand creation expenses.

EMEA operating income decreased $1.0 million to $33.2 million, or 23.4% of net sales, for the third quarter of 2024 from $34.2 million, or 26.5% of net sales, for the comparable period in 2023.

EMEA net sales increased $12.4 million, or 10% (10% constant-currency), for the third quarter of 2024, compared to the same period in 2023, primarily driven by our EMEA distributor and Europe-direct businesses.

Increased net sales in our EMEA distributor business primarily reflected a higher portion of Fall 2024 distributor orders shipping in the third quarter compared to the timing of Fall 2023 shipments in the prior year and, to a lesser extent, increased Fall 2024 orders.

Increased net sales in our Europe-direct business reflect continued momentum and increased traffic within our DTC brick-and-mortar and e-commerce businesses.

This net sales increase was partially offset by decreased net sales in our Europe-direct wholesale business driven by later shipment of Fall 2024 orders as compared to the same period in the prior year.

EMEA SG&A expenses increased as a percentage of net sales to 26.5% for the third quarter of 2024 compared to 25.0% in 2023, primarily driven by higher personnel expenses and variable DTC expenses.

Canada operating income decreased $7.8 million to $22.4 million, or 26.8% of net sales, for the third quarter of 2024 from $30.2 million, or 28.6% of net sales, for the comparable period in 2023.

Canada net sales decreased $21.8 million, or 21% (19% constant-currency), for the third quarter of 2024, compared to the same period in 2023, primarily reflecting decreased net sales in our wholesale business.

Decreased net sales in our wholesale business primarily reflected the impact of lower Fall 2024 wholesale orders due to retailer cautiousness and a difficult competitive environment in Canada, as well as delayed shipment of Fall 2024 wholesale orders in the third quarter compared to earlier shipment of Fall 2023 orders.

DTC net sales decreased modestly as a result of lower e-commerce net sales, partially offset by net sales growth from our brick-and-mortar business.

Canada SG&A expenses increased as a percentage of net sales to 22.6% for the third quarter of 2024 compared to 18.2% for the same period in 2023, primarily driven by fixed SG&A expenses and decreased net sales.

In total, Canada SG&A expenses decreased for the third quarter of 2024 compared to the same period in 2023.

Unallocated Corporate Expenses

Unallocated corporate expenses decreased by $0.4 million to $67.7 million in the second quarter of 2024, from $68.1 million for the same period in 2023.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Unallocated corporate expenses increased by $3.0 million to $78.9 million in the third quarter of 2024, from $75.9 million for the same period in 2023.

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 30

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions, except for percentage changes) Reported

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

COLUMBIA SPORTSWEAR COMPANY | Q2 2024 FORM 10-Q | 29

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2024 2023 Change

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Operating income $ 133.4 $ 197.2 $ (63.8)

operating income decreased $40.2 million to $96.5 million, or 11.8% of net sales, for the six months ended June 30, 2024 from $136.7 million, or 14.9% of net sales, for the comparable period in 2023.

operating income decreased $56.5 million to $211.8 million, or 15.3% of net sales, for the nine months ended September 30, 2024 from $268.3 million, or 17.3% 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 $102.0 million, or 11%, for the six months ended June 30, 2024, compared to the same period in 2023, driven primarily by decreased net sales in our U.S.

net sales decreased $166.1 million, or 11%, for the nine months ended September 30, 2024, compared to the same period in 2023, driven primarily by decreased net sales in our U.S.

wholesale business.

DTC net sales decreased modestly as a result of lower e-commerce net sales, partially offset by net sales growth from our brick-and-mortar business.

The declines in wholesale net sales resulted from retailer cautiousness and a difficult competitive environment in the U.S.

The increases in brick-and-mortar net sales were primarily driven by our temporary clearance locations, which have continued to support our excess inventory liquidation efforts.

SG&A expenses increased as a percentage of net sales to 37.9% for the six months ended June 30, 2024 compared to 35.6% for the same period in 2023, primarily driven by decreased net sales.

The declines in wholesale net sales have generally resulted from retailer cautiousness and a difficult competitive environment throughout the year.

The increases in brick-and-mortar net sales were primarily driven by temporary clearance locations and new stores, coupled with increased productivity of existing stores for the nine months ended September 30, 2024.

SG&A expenses increased as a percentage of net sales to 34.7% for the nine months ended September 30, 2024 compared to 32.3% for the same period in 2023, primarily driven by fixed SG&A expenses and decreased net sales.

In total, U.S.

SG&A expenses decreased for the six months ended June 30, 2024 compared to the same period in 2023, primarily driven by lower supply chain expenses resulting from more normalized inventory levels and lower demand creation expenses, partially offset by higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses.

LAAP operating income increased $5.5 million to $27.9 million, or 11.7% of net sales, for the six months ended June 30, 2024 from $22.4 million, or 9.8% of net sales, for the comparable period in 2023.

SG&A expenses decreased for the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by lower supply chain expenses resulting from more normalized inventory levels and supply chain optimization efforts, as well as lower demand creation expenses, partially offset by higher DTC brick-and-mortar expenses, including costs associated with new stores and temporary clearance locations and personnel expenses.

LAAP operating income increased $11.4 million to $48.3 million, or 12.9% of net sales, for the nine months ended September 30, 2024 from $36.9 million, or 10.7% of net sales, for the comparable period in 2023.

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

LAAP net sales increased $8.5 million, or 4% (9% constant-currency), for the six months ended June 30, 2024, compared to the same period in 2023.

Increased LAAP net sales were primarily driven by our China business, which continues to see strong consumer demand.

Japan net sales declined, driven by unfavorable effects from foreign currency fluctuation, which more than offset constant-currency net sales growth resulting from international tourism.

Korea net sales also declined.

LAAP SG&A expenses decreased as a percentage of net sales to 44.1% for the six months ended June 30, 2024, compared to 45.7% for the same period in 2023.

EMEA operating income decreased $1.9 million to $33.5 million, or 16.1% of net sales, for the six months ended June 30, 2024 from $35.4 million, or 16.9% of net sales, for the comparable period in 2023.

EMEA net sales decreased $0.7 million, or 0% (1% constant-currency), for the six months ended June 30, 2024, compared to the same period in 2023, driven by lower EMEA distributor net sales, partially offset by an increase in our Europe-direct DTC net sales.

EMEA SG&A expenses increased as a percentage of net sales to 30.0% for the six months ended June 30, 2024 compared to 27.4% for the same period in 2023, primarily driven by higher DTC brick-and-mortar expenses and personnel expenses.

Canada operating income increased $0.2 million to $11.1 million, or 14.1% of net sales, for the six months ended June 30, 2024 from $10.9 million, or 12.7% of net sales, for the comparable period in 2023.

Canada net sales decreased $7.1 million, or 8% (9% constant-currency), for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to lower Spring 2024 wholesale orders, partially

LAAP net sales increased $28.1 million, or 8% (12% constant-currency), for the nine months ended September 30, 2024, compared to the same period in 2023, primarily driven by our China business.

Increased net sales in our China business reflected continued strong

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 31

offset by an increase in DTC brick-and-mortar net sales.

Canada SG&A expenses increased as a percentage of net sales to 35.3% for the six months ended June 30, 2024 compared to 33.8% for the same period in 2023, primarily as a result of decreased net sales.

consumer demand, aided by positive outdoor category trends.

Our LAAP distributor business also saw increased net sales driven by growth in our Fall 2024 orders compared to the same period in the prior year.

This net sales increase was partially offset by decreased net sales in our Korea DTC business reflecting a challenging competitive and economic environment.

Japan net sales were flat driven by strong demand from increased international tourism which was largely offset by unfavorable foreign currency translation compared to the same period in the prior year.

LAAP SG&A expenses decreased as a percentage of net sales to 42.4% for the nine months ended September 30, 2024, compared to 44.6% for the same period in 2023, primarily driven by increased net sales.

In total, LAAP SG&A expenses increased for the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by higher demand creation expenses.

EMEA operating income decreased $2.8 million to $66.8 million, or 19.1% of net sales, for the nine months ended September 30, 2024 from $69.6 million, or 20.6% of net sales, for the comparable period in 2023.

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

EMEA net sales increased $11.7 million, or 3% (3% constant-currency), for the nine months ended September 30, 2024, compared to the same period in 2023, primarily driven by our Europe-direct business.

Increased net sales in our Europe-direct business were driven by robust demand throughout our DTC brick-and-mortar and e-commerce businesses.

Our EMEA distributor business also saw increased net sales.

This net sales increase was partially offset by decreased net sales in our Europe-direct wholesale business.

EMEA SG&A expenses increased as a percentage of net sales to 28.6% for the nine months ended September 30, 2024 compared to 26.5% for the same period in 2023, primarily driven by higher personnel expenses and variable DTC expenses.

Canada operating income decreased $7.6 million to $33.5 million, or 20.6% of net sales, for the nine months ended September 30, 2024 from $41.1 million, or 21.4% of net sales, for the comparable period in 2023.

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

Canada net sales decreased $28.9 million, or 15% (14% constant-currency), for the nine months ended September 30, 2024, compared to the same period in 2023, driven primarily by decreased net sales in our Canada wholesale business.

DTC net sales increased driven by increases in our brick-and-mortar business, offset by declines in our e-commerce business.

Canada SG&A expenses increased as a percentage of net sales to 28.8% for the nine months ended September 30, 2024 compared to 25.2% for the same period in 2023, primarily as a result of fixed expenses and decreased net sales.

In total, Canada SG&A expenses decreased for the nine months ended September 30, 2024 compared to the same period in 2023.

Unallocated Corporate Expenses

Unallocated corporate expenses increased by $5.4 million to $148.1 million for the six months ended June 30, 2024 from $142.7 million for the same period in 2023, largely driven by higher personnel expenses.

Unallocated corporate expenses increased by $8.3 million to $227.0 million for the nine months ended September 30, 2024 from $218.7 million for the same period in 2023.

LIQUIDITY AND CAPITAL RESOURCES

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This trough cash position is impacted by the amount of product we order from our contract manufacturers in anticipation of customer demand and is more heavily impacted in advance of periods of expected high demand.

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 32

Cash Flow Activities

Cash flows are summarized in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2024 2023 Change

6 unchanged sentences

$ (43.7) $ (217.0) $ 173.3

The change in cash flows provided by operating activities was driven by a $124.7 million increase in cash provided by changes in assets and liabilities, partially offset by a $25.5 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Accounts payable , Inventories , and Prepaid expenses and other current assets.

The $100.4 million increase in cash provided by Accounts payable was primarily driven by lower inventory receipts in the second quarter of 2024 compared to the second quarter of 2023.

The $46.5 million decrease in cash used in 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 and the first half of 2024.

These amounts were partially offset by the $33.2 million decrease in cash provided by Prepaid expenses and other current assets primarily driven by lower inventory prepayments.

Net cash provided by investing activities was $30.0 million for the six months ended June 30, 2024, compared to $89.9 million of cash used in investing activities for the six months ended June 30, 2023.

The change in cash flows used in operating activities was driven by a $55.9 million increase in cash used in changes in assets and liabilities, as well as a $42.9 million decrease in cash provided by net income and non-cash adjustments.

The most significant comparative changes in assets and liabilities included Inventories , Prepaid expenses and other current assets , and Accounts payable.

The $185.8 million decrease in cash provided by Inventories reflected cash provided of $135.4 million for the nine months ended September 30, 2023 as we liquidated excess inventory levels throughout 2023, as well as cash used of $50.3 million for the nine months ended September 30, 2024 as we aligned inventory supply with anticipated seasonal demand.

The $21.8 million decrease in cash provided by Prepaid expenses and other current assets was primarily driven by lower inventory prepayments.

These amounts were partially offset by the $135.1 million decrease in cash used in Accounts payable driven by the timing of inventory receipts, including higher in-season inventory, and related payments, including a reduction in the use of early payments.

Net cash provided by investing activities was $321.1 million for the nine months ended September 30, 2024, compared to $38.5 million of cash used in investing activities for the nine months ended September 30, 2023.

For the 2024 period, net cash provided by investing activities consisted of $751.2 million in cash provided by sales and maturities of short-term investments, partially offset by $388.3 million in cash used for purchases of short-term investments and $41.7 million for capital expenditures.

For the 2023 period, net cash used in investing activities consisted of $117.9 million in purchases of short-term investments and $41.4 million for capital expenditures, partially offset by $120.7 million provided by sales and maturities of short-term investments.

Net cash used in financing activities was $139.0 million for the six months ended June 30, 2024 compared to $115.2 million for the six months ended June 30, 2023.

Net cash used in financing activities was $284.6 million for the nine months ended September 30, 2024 compared to $197.6 million for the nine months ended September 30, 2023.

For the 2024 period, net cash used in financing activities primarily consisted of repurchases of common stock of $230.9 million and dividend payments to our shareholders of $52.9 million.

For the 2023 period, net cash used in financing activities primarily consisted of repurchases of common stock of $144.6 million and dividend payments to our shareholders of $55.4 million.

COLUMBIA SPORTSWEAR COMPANY | Q2 2024 FORM 10-Q | 31

Sources of Liquidity

Cash and cash equivalents and short-term investments

As of June 30, 2024, we had cash and cash equivalents of $341.8 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 $231.6 million and $71.2 million, respectively, as of June 30, 2023.

As of September 30, 2024, we had cash and cash equivalents of $306.7 million and short-term investments of $67.2 million, compared to $350.3 million and $414.2 million, respectively, as of December 31, 2023 and $213.3 million and $1.5 million, respectively, as of September 30, 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 our domestic credit facility.

As of June 30, 2024, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million.

As of September 30, 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.

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 33

International Credit Facility

As of June 30, 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).

As of September 30, 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$4.9 million).

There was no balance outstanding under the facility.

Other Sources

As of June 30, 2024, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$103.2 million.

As of September 30, 2024, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$106.4 million.

There was no balance outstanding under these facilities.

4 unchanged sentences

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

As of June 30, 2024, our inventory balance decreased to $823.6 million, compared to $1,162.5 million as of June 30, 2023, driven by a 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.

As of September 30, 2024, our inventory balance decreased to $798.2 million, compared to $885.2 million as of September 30, 2023, driven by a 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.

12 unchanged sentences

Management uses free cash flow as a measure to assess both business performance and overall liquidity.

COLUMBIA SPORTSWEAR COMPANY | Q2 2024 FORM 10-Q | 32

Other cash commitments

Our inventory purchase obligations were $450.9 million as of June 30, 2024, compared to $343.4 million and $301.9 million as of December 31, 2023 and June 30, 2023, respectively.

Our inventory purchase obligations were $437.2 million as of September 30, 2024, compared to $343.4 million and $367.3 million as of December 31, 2023 and September 30, 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.

3 unchanged sentences

We believe that the estimates, assumptions and judgments involved in the accounting for sales reserves, allowance for uncollectible accounts receivable, excess, close-out and slow-moving inventory, impairment of long-lived assets, intangible assets and goodwill, and income taxes have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates.

Because of the uncertainty inherent in these matters, actual results may differ from the estimates we use in applying these critical accounting policies and estimates.

Because of the uncertainty inherent in these matters, actual results may

COLUMBIA SPORTSWEAR COMPANY | Q3 2024 FORM 10-Q | 34

differ from the estimates we use in applying these critical accounting policies and estimates.

We base our ongoing estimates on historical experience and other assumptions that we believe to be reasonable in the circumstances.

8 unchanged sentences

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