Columbia(COLM) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2025, reflect total assets of $2.89 billion, a Q2 net loss of $10.2 million, and a six-month negative operating cash flow of $62.9 million, largely due to increased inventory Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $2.89 billion, with key changes including a decrease in cash to $579.0 million and a significant increase in inventories to $926.9 million, while total liabilities rose to $1.24 billion and equity decreased to $1.65 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $427,804 | $531,869 | $341,822 | | Inventories | $926,929 | $690,515 | $823,557 | | Total current assets | $1,894,029 | $2,008,582 | $1,847,810 | | Total assets | $2,890,377 | $2,975,265 | $2,760,821 | | Liabilities & Equity | | | | | Accounts payable | $478,948 | $385,695 | $267,853 | | Total current liabilities | $761,282 | $766,545 | $544,441 | | Total liabilities | $1,236,505 | $1,195,226 | $936,859 | | Total shareholders' equity | $1,653,872 | $1,780,039 | $1,823,962 | Condensed Consolidated Statements of Operations For Q2 2025, net sales increased to $605.2 million, gross profit rose to $297.1 million with improved margin, and the company reported a net loss of $10.2 million, while six-month net income increased to $32.1 million Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $605,246 | $570,244 | $1,383,698 | $1,340,226 | | Gross profit | $297,108 | $273,419 | $693,165 | $662,978 | | Operating income (loss) | $(23,591) | $(23,802) | $22,917 | $20,879 | | Net income (loss) | $(10,196) | $(11,741) | $32,052 | $30,559 | | Diluted EPS | $(0.19) | $(0.20) | $0.58 | $0.51 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $62.9 million, a significant reversal from the prior year, primarily due to a $218.1 million increase in inventories Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(62,886) | $108,893 | | Net cash provided by investing activities | $110,582 | $29,951 | | Net cash used in financing activities | $(165,262) | $(138,960) | | Net decrease in cash and cash equivalents | $(104,065) | $(8,497) | - The significant use of cash in operations was primarily due to a $218.1 million increase in inventories, compared to an $88.8 million increase in the prior year period[16] - The company repurchased $131.7 million of common stock in the first six months of 2025, an increase from $102.6 million in the same period of 2024[16] Notes to Condensed Consolidated Financial Statements The notes provide detailed breakdowns of financial data, including disaggregated revenue by product and channel, segment performance, increased use of Supply Chain Financing, and share repurchase activity Q2 2025 Net Sales by Product Category (in thousands) | Product Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Apparel, Accessories and Equipment | $494,302 | $463,940 | +6.6% | | Footwear | $110,944 | $106,304 | +4.4% | | Total | $605,246 | $570,244 | +6.1% | Q2 2025 Net Sales by Channel (in thousands) | Channel | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Wholesale | $317,218 | $278,384 | +14.0% | | Direct-to-consumer | $288,028 | $291,860 | -1.3% | | Total | $605,246 | $570,244 | +6.1% | - Outstanding payables under the Supply Chain Financing (SCF) program were $137.2 million as of June 30, 2025, compared to $0 as of June 30, 2024, indicating increased use of this financing tool[62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2025 net sales growth to strong EMEA and LAAP performance, offset by U.S. declines, while focusing on 'ACCELERATE Growth Strategy' and 'Profit Improvement Program' amidst tariff uncertainties and a soft U.S. consumer environment Overview and Strategy The company is executing its 'ACCELERATE Growth Strategy' to attract younger consumers and a 'Profit Improvement Program' that has already achieved over $150 million in annualized cost savings - The Columbia brand's ACCELERATE Growth Strategy is a multi-year initiative focused on elevating the brand to attract younger consumers while retaining its core value-oriented customer base[88][91] - The Profit Improvement Program has yielded annualized cost savings exceeding $150 million through actions executed in 2024 and the first half of 2025, surpassing the initial target of $125-$150 million[93] Business Environment and Trends The business environment is marked by significant uncertainty from U.S. tariffs, prompting accelerated inventory receipts, while the North American market remains soft and competitive, contrasting with healthy international trends - To mitigate potential tariff impacts, the company has accelerated the timing of inventory receipts and worked with wholesale customers to ship Fall 2025 orders earlier[95] - The company expects to absorb much of the incremental tariff cost for Fall 2025 but plans to offset higher tariffs over time through price increases, vendor negotiations, and SG&A efficiencies[97] - In response to a soft U.S. market, the company is implementing the ACCELERATE Growth Strategy, which includes becoming less promotional on Columbia.com and opening new branded stores in high-traffic malls[99][100][101] Results of Operations — Consolidated For Q2 2025, consolidated net sales grew 6% to $605.2 million, driven by wholesale, with gross margin expanding to 49.1% due to healthier inventory, while SG&A expenses rose 8% to $325.6 million Q2 2025 Net Sales Performance vs. Q2 2024 | Category | Reported % Change | Constant Currency % Change | | :--- | :--- | :--- | | Total Net Sales | 6% | 6% | | By Brand | | | | Columbia | 8% | 7% | | SOREL | (10)% | (11)% | | By Channel | | | | Wholesale | 14% | 14% | | Direct-to-consumer | (1)% | (2)% | - Q2 2025 gross margin expanded by 120 basis points to 49.1%, primarily due to a 245 bps increase from healthier inventory, which led to higher product margins and less promotional activity[112][116] - Q2 2025 SG&A expenses increased by 8% to $325.6 million, driven by higher omni-channel expenses ($12.7 million) from new stores and increased investment in demand creation[113][117] Results of Operations — Segment In Q2 2025, EMEA and LAAP segments showed strong net sales growth of 26% and 13% respectively, while the U.S. segment declined 2% and Canada experienced a larger operating loss due to higher SG&A Q2 2025 Net Sales by Geographic Segment (in thousands) | Segment | Q2 2025 Net Sales | Q2 2024 Net Sales | Reported % Change | | :--- | :--- | :--- | :--- | | U.S. | $335,117 | $340,228 | (2)% | | LAAP | $112,333 | $99,484 | 13% | | EMEA | $130,562 | $103,922 | 26% | | Canada | $27,234 | $26,610 | 2% | Q2 2025 Segment Operating Income (Loss) (in thousands) | Segment | Q2 2025 Op. Income | Q2 2024 Op. Income | Change | | :--- | :--- | :--- | :--- | | U.S. | $17,338 | $23,466 | $(6,128) | | LAAP | $7,022 | $6,082 | $940 | | EMEA | $21,630 | $14,419 | $7,211 | | Canada | $(1,954) | $(23) | $(1,931) | Liquidity and Capital Resources The company maintains strong liquidity with $579.0 million in cash and access to a $500.0 million credit facility, despite negative operating cash flow for the first half due to strategic inventory increases to mitigate tariff impacts - Cash flow from operations was a use of $62.9 million for the first six months of 2025, a $171.8 million decrease from the prior year, mainly due to a $129.3 million increase in cash used for inventories[146] - Inventory balance increased to $926.9 million as of June 30, 2025, compared to $823.6 million a year prior, as the company accelerated production and receipt of Fall 2025 inventory to mitigate tariff risks[154] - Planned capital expenditures for the full year 2025 are approximately $60 to $80 million, targeting investments in DTC operations, new stores, and supply chain capabilities[155] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes in its market risk disclosures from those reported in its Annual Report on Form 10-K for the year ended December 31, 2024 - There has not been any material change in the market risk disclosure from the company's most recent Annual Report on Form 10-K[165] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures are effective at providing reasonable assurance[167] - No changes occurred during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[168] PART II — OTHER INFORMATION Legal Proceedings The company is involved in various legal matters arising in the normal course of business, which management does not believe will have a material adverse effect on its financial condition - The company is involved in routine litigation but does not expect the outcomes to have a material adverse effect on its financial position[171] Risk Factors The company outlines numerous risks, with a significant focus on adverse impacts from evolving U.S. global trade policy and tariffs, alongside dependencies on consumer spending, intense competition, supply chain reliance, and IT system vulnerabilities - Rapidly evolving U.S. global trade policy and tariffs may reduce consumer demand, impair the financial health of wholesale customers, and cause supply chain disruptions[174] - The company's success is highly dependent on consumer discretionary spending, which can be volatile, and faces significant competition from global brands, emerging brands, and private labels[178] - Reliance on contract manufacturers, primarily in Asia, creates risks related to production capacity, quality control, and potential supply disruptions[186] - A security breach of IT systems or those of third-party cloud providers could disrupt operations, expose confidential data, and result in substantial costs or reputational damage[212] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 426,000 shares of common stock for approximately $30.2 million, with $495.9 million remaining available under the authorized share repurchase program Common Stock Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 426,000 | $71.01 | | May 2025 | — | $— | | June 2025 | — | $— | | Total | 426,000 | $71.01 | - As of June 30, 2025, the company had $495.9 million remaining available under its share repurchase program[257][259] Other Information The company provided an update on U.S. tariff expenses following executive orders in July and August 2025, noting that over 90% of its Fall 2025 U.S.-bound inventory was shipped before the effective date, mitigating immediate impact - Executive orders in July and August 2025 revised incremental tariffs for key sourcing countries, including Vietnam (10% to 20%), Bangladesh (10% to 20%), and India (10% to 25%, plus an additional 25%)[261] - The company mitigated the immediate impact of the new tariffs as over 90% of its Fall 2025 U.S.-bound inventory was shipped before the August 7, 2025 effective date[261] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and certifications from the CEO and CFO, along with XBRL interactive data files - The report includes required certifications from the CEO and CFO under Rules 13a-14(a) and Section 1350[264]