Columbia(COLM) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 detail slight sales growth, stable net income, and decreased operating cash flow Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $2.71 billion from year-end 2024, driven by lower cash, while total liabilities also declined Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $323,339 | $531,869 | $418,462 | | Inventories | $623,700 | $690,515 | $607,373 | | Total current assets | $1,741,336 | $2,008,582 | $1,846,218 | | Total assets | $2,707,415 | $2,975,265 | $2,762,231 | | Total current liabilities | $558,783 | $766,545 | $447,306 | | Total liabilities | $997,648 | $1,195,226 | $852,788 | | Total shareholders' equity | $1,709,767 | $1,780,039 | $1,909,443 | Condensed Consolidated Statements of Operations For Q1 2025, net sales increased 1.1% to $778.5 million, gross margin improved to 50.9%, and diluted EPS rose to $0.75 due to share repurchases Q1 2025 vs Q1 2024 Performance (in thousands, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $778,452 | $769,982 | | Gross profit | $396,057 | $389,559 | | Operating income | $46,508 | $44,681 | | Net income | $42,248 | $42,300 | | Diluted EPS | $0.75 | $0.71 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $32.0 million in Q1 2025, a significant shift from $106.8 million provided in Q1 2024, primarily due to working capital changes Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(32,038) | $106,773 | | Net cash provided by (used in) investing activities | $(61,431) | $37,109 | | Net cash used in financing activities | $(118,649) | $(71,343) | | Net decrease in cash and cash equivalents | $(208,530) | $68,143 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation by product and channel, segment performance, and financial instrument risk management, including $696.7 million in currency forward contracts Q1 2025 Net Sales by Product Category and Channel (in thousands) | Category/Channel | Net Sales | | :--- | :--- | | Product Category | | | Apparel, accessories and equipment | $628,820 | | Footwear | $149,632 | | Channel | | | Wholesale | $399,769 | | Direct-to-consumer | $378,683 | | Total | $778,452 | Q1 2025 Segment Operating Income (in thousands) | Segment | Operating Income | | :--- | :--- | | U.S. | $65,954 | | LAAP | $26,330 | | EMEA | $18,978 | | Canada | $8,963 | | Total Segment Operating Income | $120,225 | - The company offers a voluntary supply chain financing (SCF) program. As of March 31, 2025, outstanding payables under this program were $51.4 million, recorded within Accounts Payable[54] - The company uses currency forward contracts to hedge cash flow and manage currency risk. The notional amount of outstanding cash flow hedges was $696.7 million as of March 31, 2025[66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 'ACCELERATE Growth Strategy' and 'Profit Improvement Program' targeting over $150 million in savings, alongside Q1 2025 performance and tariff uncertainties Overview and Strategic Initiatives The company is implementing the 'ACCELERATE Growth Strategy' to attract younger consumers and a 'Profit Improvement Program' targeting over $150 million in annualized savings - The Columbia brand's ACCELERATE Growth Strategy is a multi-year initiative to elevate the brand and target a younger, more active consumer[80] - The Profit Improvement Program delivered approximately $90 million in cost savings in 2024. Actions planned for 2025 are intended to bring cumulative annualized savings to over $150 million[85] Business Environment and Trends The business faces significant uncertainty from potential U.S. tariffs, impacting costs and demand, while adapting North American DTC strategy and monitoring international trends - In April 2025, the U.S. announced an incremental 10% tariff on products imported from most countries, creating significant volatility and uncertainty[86] - The company expects to absorb much of the incremental tariff cost for Fall 2025 products and is exploring mitigation tactics like re-design, re-sourcing, and re-pricing for 2026[88] - In North America, the company is shifting its DTC e-commerce to be less promotional and is opening new branded stores in high-traffic malls to elevate the brand image[94] Results of Operations Q1 2025 consolidated net sales grew 1% (or 3% constant-currency) to $778.5 million, driven by international segments, with gross margin improving 30 basis points to 50.9% Q1 2025 Net Sales Growth by Brand (Constant Currency) | Brand | Constant Currency Net Sales % Change | | :--- | :--- | | Columbia | +5% | | SOREL | -6% | | prAna | -10% | | Mountain Hardwear | -13% | | Total | +3% | Q1 2025 Net Sales Growth by Segment (Constant Currency) | Segment | Constant Currency Net Sales % Change | | :--- | :--- | | U.S. | -1% | | LAAP | +14% | | EMEA | +7% | | Canada | -2% | - Gross margin expanded by 30 basis points to 50.9%, benefiting from lower outbound shipping expenses, higher closeout margins, and favorable Spring 2025 product input costs[105] - SG&A expenses increased 1%, driven by higher costs for DTC brick-and-mortar stores and increased investment in demand creation aligned with the ACCELERATE strategy[107][109] Liquidity and Capital Resources The company maintains strong liquidity with $658.4 million in cash and investments, but Q1 2025 operating cash flow was a $32.0 million use, with future tariff impacts expected - As of March 31, 2025, the company had cash and cash equivalents of $323.3 million and short-term investments of $335.1 million[124] - The company has a $500.0 million unsecured, committed revolving credit facility, with no balance outstanding as of March 31, 2025[125] - Planned capital expenditures for 2025 are approximately $60 to $80 million, focusing on DTC operations, supply chain, and digital capabilities[132] - Inventory purchase obligations stood at $708.6 million as of March 31, 2025, up from $675.0 million a year prior[134] Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk disclosures from its 2024 Annual Report on Form 10-K - There has not been any material change in the market risk disclosure from the company's 2024 Annual Report on Form 10-K[142] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures are effective at a reasonable assurance level[144] - No changes occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[145] PART II — OTHER INFORMATION Legal Proceedings The company is involved in various legal matters not expected to materially affect its financial condition, results of operations, or cash flows - The company is involved in litigation and legal matters in the normal course of business, which are not expected to have a material adverse effect on its financials[148] Risk Factors Key risks include evolving U.S. trade policy and tariffs, changes in demand, supply chain reliance, IT challenges, cybersecurity threats, and global operational risks - Rapidly evolving U.S. global trade policy, including new tariffs, has had and may continue to have an adverse impact on the business, operating results, and financial condition[151] - The business is subject to risks from volatile economic conditions, highly competitive markets, and changing consumer preferences and fashion trends[155] - Reliance on contract manufacturers, primarily in the Asia Pacific region, creates risks related to production capacity, quality control, and compliance with labor and environmental laws[163][165][166] - The company relies on information technology systems, and any failure, interruption, or security breach could disrupt operations, cause data loss, and negatively affect its reputation and financials[183][190] - As of March 31, 2025, three related shareholders controlled just over 50% of the company's common stock, allowing them to exercise significant influence over corporate matters[233] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,251,784 shares for $101.4 million in Q1 2025, with $526.1 million remaining for future repurchases Share Repurchases for Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | Jan 2025 | — | $— | $627.6 | | Feb 2025 | 923,879 | $80.58 | $553.1 | | Mar 2025 | 327,905 | $82.33 | $526.1 | | Total Q1 | 1,251,784 | $81.03 | $526.1 | - As of March 31, 2025, the company had $526.1 million remaining available under its share repurchase authorization[236] Other Information No directors or officers entered into or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers entered into or terminated Rule 10b5-1 trading arrangements during the first quarter of 2025[239] Exhibits This section provides an index of all exhibits filed, including corporate governance documents, incentive plan agreements, and CEO/CFO certifications - The Exhibit Index lists documents filed with the report, including CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and forms of new long-term incentive cash and RSU award agreements (Exhibits 10.1, 10.2)[241]