Columbia Sportswear Company (NASDAQ:COLM) Q2 2023 Earnings Call Transcript

Tim Boyle: Yes. Mountain Hard Wear, as you know, is a high-end Alpinist brand, and we believe that we’ve got the right team managing that business today. It’s been challenged in the past. Frankly, I think we’re in the right spot with that brand, and there’s a large opportunity for us, especially in the U.S., as we approach some specialized an area where we’re sort of a smaller niche consumer. And I believe that’s going to be — we’ll be successful with that brand, and we have the right people in place to manage it.

Operator: Thank you. The question is coming from Mauricio Serna from UBS. Mauricio, your line is live.

Mauricio Vega: I wanted to ask about the sales guidance. Just if I look at the 3Q outlook you provided, I think it implies sales will be down 2% to 8% in 4Q. Just want to understand if that’s all related to shift in wholesale shipments, like, between the quarters? And from a regional perspective, how should we think about that? Just wanted to confirm, like, I would think that a lot of that maybe is coming from us. And then maybe you talked about — you commented about some challenges in the footwear category. I just want to make sure like if those challenges that you’re talking about, is that like related specifically to outdoor? Or would you say it’s more like throughout overall sportswear?

Jim Swanson: Tim, do you want to touch on the footwear one, then I’ll come back around the sales?

Tim Boyle: Yes. I can talk about the footwear. The outdoor category has been softening a bit. And that’s where the primary business for the Columbia brand is. The SOREL brand, on the other hand, is primarily women’s fashion brand. We’ve seen great successes in the sandal category with that brand. And the expectation for the balance of the year is solid growth in women’s protective footwear as well as fashionable products. So, we’re excited about that, but there is some softness in the outdoor category as it relates to the Columbia brand.

Jim Swanson: And, then Mauricio, as it relates to the sales guidance, so we’ve provided third quarter revenue growth of 4% to 6%. And then if you engineer that back to what would be contemplated in the fourth quarter, it’d be down a mid-single-digit percent. And to your question, there are still a lot of timing shifts each quarter. Last year, for the fall ’22 season, we were awfully late getting inventory to the market. And so there was a higher proportion of our fall ’22 wholesale orders that shipped in the fourth quarter. So, we’re contemplating being much earlier, and we would expect our wholesale direct business being up quite substantially in the third quarter. However, there’s going to be an offset as we ship the international distributor fall ’23 orders in the second quarter.

So there is an awful lot of noise when you get into the overall timing impacts of our wholesale and distributor business. So keep that in mind when you look at quarterly flows. And then as it relates to the direct-to-consumer side of the business, I think we’ve planned it relatively stable in Q3, Q4, a mid-single-digit percent of growth.

Mauricio Vega: Can you repeat that number, mid-single digit for DTC? Is that right?

Jim Swanson: Yes. That’s right.

Operator: Thank you. And the next question is coming from Alex Perry from Bank of America. Alex, your line is live.

Alex Perry: I just have one here. I just wanted to ask, can you talk about how you’re thinking about gross margins in the third quarter? Should they be up year-over-year? And do you still expect a fairly promotional environment as we enter the back half? Like, I guess within the full year gross margin guide, what is sort of the expectation for promos in the back half? And any color on sort of 3Q versus 4Q gross margin would be super helpful.