Columbia Sportswear Company (NASDAQ:COLM) Q2 2025 Earnings Call Transcript

Columbia Sportswear Company (NASDAQ:COLM) Q2 2025 Earnings Call Transcript August 1, 2025

Operator: Good day, everyone, and welcome to the Columbia Sportswear Company Second Quarter 2025 Financial Results. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Andrew Burns. Sir, the floor is yours.

Andrew Shuler Burns: Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company’s second quarter results. In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary and financial review presentation explaining our results. This document is also available on our Investor Relations website, investor.columbia.com. With me today on the call are Chairman, President and Chief Executive Officer, Tim Boyle; Executive Vice President and Chief Financial Officer, Jim Swanson; and Executive Vice President and Chief Administrative Officer and General Counsel, Peter Bragdon. This conference call will contain forward-looking statements regarding Columbia’s expectations, anticipations or beliefs about the future.

These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement is subject to many risks and uncertainties, and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Columbia’s SEC filings. We caution that forward-looking statements are inherently less reliable than historical information. We do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or to changes in our expectations. I’d also like to point out that during the call, we may reference certain non-GAAP financial measures, including constant currency net sales.

For further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management’s rationale for referencing these non-GAAP measures, please refer to the supplemental financial information section and financial tables included in our earnings release in the appendix of our CFO commentary and financial review. Following our prepared remarks, we will host a Q&A period during which we will limit each caller to 2 questions so we can get to everyone by the end of the hour. Now I’ll call the call over to Tim.

Timothy P. Boyle: Thanks, Andrew, and good afternoon. Overall, second quarter and first half financial results reflect strong demand for our products in international markets. Our EMEA and LAAP regions both grew double-digit percent in the first half, led by China, Japan, Europe direct and international distributor markets. In these markets, our teams are driving omnichannel growth through compelling product assortments and marketing activations that appeal to younger consumers. Our results also reflect ongoing challenges in the U.S. We are focused on reenergizing the Columbia brand through the ACCELERATE growth strategy. In the coming days, we will begin to roll out our new global marketing platform that will be the Columbia brand character and voice for years to come.

This new campaign will bring Columbia back to the roots of what made us an iconic global brand by leveraging our signature air reference and humor in the global advertising. At a time when much of the outdoor industry looks the same, I’m confident that our campaigns will be highly differentiated and drive deeper affinity for the brand. Consumers will see and hear much more about Columbia in the coming weeks and months. Not only are we investing more in demand creation, but we’re also investing more efficiently, leveraging modern digital and social-first strategies. We’re launching a new site redesign on columbia.com with enhanced mobile capabilities and up-level photography that highlights the beauty and craftsmanship of our iconic products.

I believe this brand refresh is going to be one of the most impactful components of our ACCELERATE growth strategy, and I’m anxiously awaiting everybody to see it. We are also enhancing our product assortment to emphasize innovation and style. This fall, we’re launching collections like the New Amaze Puff Insulated Jacket and redesigned Rock Band. We are supporting these launches with elevated in-store investments in many wholesale and DTC locations. Taken together, I believe the combination of product enhancements, elevated in-store experiences and differentiated marketing will energize Columbia’s brand perception in the U.S. and bring new customers to the brand. On our last conference call 3 months ago, I referenced the unprecedented level of public policy uncertainty that our industry is facing in the United States.

Imported apparel and footwear is already heavily taxed under legacy trade laws. The 10% universal tariff and most of the additional tariffs being contemplated are on top of already high existing duties. Unfortunately, clarity with respect to U.S. trade policy has not materialized. This uncertainty overhangs consumer sentiment and every decision that we make for our U.S. business. We continue to take action to mitigate the risks and financial impact of higher tariffs, which represents the largest tax increase the company has faced in its history. Our fortress balance sheet, differentiated brand portfolio and disciplined approach to managing the business give me confidence in our ability to emerge from this period as a stronger company. As we begin the second half of the year, we’re planning our U.S. business cautiously.

We expect higher prices for many consumer goods will negatively impact consumer demand. We also expect retailers will be cautious with their inventory intakes in this uncertain environment. In fall ’25, we’re working with our retail partner to deliver value to consumers and keep inventory and dealer margins healthy. As a result, we’re not making any significant price changes to our fall ’25 product line and expect to absorb much of the incremental tariff costs this year. We estimate the financial impact of the current 10% universal tariff rate, combined with tariff-related supply chain expenses and inclusive of our mitigation efforts will be approximately $35 million to $40 million in 2025. By August 1, we will have received approximately 70% of our U.S. fall ’25 product.

The remaining yet to come fall ’25 product would be exposed to higher tariff rates beyond the 10% universal rate. We don’t know what the final tariff structure will be or how long it will last. Lacking tariff rate certainty, we will continue to work all options for offsetting the impact of higher U.S. tariffs on our business. Our goal is to offset higher tariffs over time through a combination of actions, including price increases, vendor negotiations, SG&A expense efficiencies and other mitigation tactics. We will balance these actions with our overall growth strategy, seeking to minimize the impact to consumer demand and maximize our market share potential. I’ll provide more details on how we’re planning the balance of the year as well as our spring ’26 wholesale business later in the call.

We continue to identify and execute cost savings actions as part of the profit improvement plan. During the quarter, actions included a reduction in force that primarily impacted our U.S. corporate headcount. Year-to-date, we have actioned over $70 million in annual cost savings on top of the $90 million we actioned in 2024. Given the timing of these actions, severance and other onetime expenses, the full impact of cost savings will be ratably realized over the next 12 months. This effort is ongoing as we continue to seek additional profit improvement opportunities. I will now quickly review second quarter financial performance. I’d like to remind everyone that the second quarter is our lowest volume sales quarter. Small year-over-year changes in sales and expense timing can have a material impact on reported results.

Net sales increased 6% year-over-year to $605 million. This was slightly ahead of our outlook, primarily driven by earlier fall wholesale shipments. Where possible, we accelerated receipt and shipment of fall ’25 U.S. inventory to mitigate the impact of potential additional tariff increases. Wholesale net sales increased 14%, while direct-to-consumer was down 1%. Wholesale growth reflects spring and fall shipment timing, which benefited sales in the quarter as well as higher spring ’25 orders. Gross margin expanded 120 basis points to 49.1% and SG&A expenses increased 8%. This performance resulted in a loss per share of $0.19 compared to a loss per share of $0.20 in the prior year. Looking at net sales by geography. U.S. net sales decreased 2%.

Overall, U.S. Columbia brand spring ’25 sell-through has been soft. These outdoor categories and consumer headwinds reinforce our focus on reenergizing the Columbia brand through the ACCELERATE growth strategy. The U.S. wholesale business increased low single-digit percent, reflecting timing of spring and fall wholesale shipments, which benefited sales in the quarter. U.S. DTC net sales declined mid-single-digit percent in the quarter. Brick-and-mortar was down low single-digit percent, reflecting the closure of temporary clearance locations, partially offset by contributions from new stores. We exited the quarter with 7 temporary clearance locations compared to 46 exiting second quarter last year. E-commerce was down low double-digit percent, reflecting soft spring season sell-through, which was partially impacted by ongoing efforts to refine and evolve our online promotions and marketing investments.

For my review of second quarter year-over-year net sales growth in international geographies, I will reference constant currency growth rates to illustrate underlying performance in each market. LAAP net sales increased 12%. China net sales increased high teens percent with broad-based growth across wholesale and DTC. Our team in China continues to do an amazing job bringing young active consumers into the brand with premium localized product offerings and unique marketplace activations. Our e-commerce business across Tmall, JD and TikTok remains a vital component of our growth strategy in China. In the second quarter, we had record e-commerce sales during the 6.18 event. On TikTok, we are driving exceptional results through our live stream programming.

Our PFG influencer campaign drove millions of impressions, raising awareness of our highly differentiated PFG product line, including the iconic PFG Bahama Shirt. Japan net sales increased mid-single-digit percent led by strong e-commerce growth. For the spring season, the team did a great job of promoting our proprietary technologies like Omni-MAX Footwear and Omni-Freeze Zero apparel with relevant localized marketing activities. The grand opening of our new Columbia Tokyo flagship store in the center of Harajuku was a success. The Pubicle store represents one of the most premium expressions of the Columbia brand in the global marketplace. Korea net sales increased low single-digit percent. During the quarter, we partnered with a new Columbia brand ambassador in Korea, actor, Choo Young Woo.

He was the face of our spring cooling campaign, helping to increase brand visibility as well as drive sell- through. Our team in Korea continues to make progress, laying the foundation for future growth with a focus on accelerating digital, revitalizing our DTC store fleet and optimizing marketing investments. LAAP distributor markets were up mid-teens percent, driven by a healthy order book growth. EMEA net sales increased 24%. Europe direct net sales increased high teens percent with growth across all channels, led by DTC stores. Europe is sustaining its brand momentum through grassroots brand activations in the important height category as well as elevating online and in-store marketing across wholesale and DTC. We have immense market share opportunities in Europe, and our team has been unlocking this potential each and every season.

Our EMEA distributor business increased high 20s percent driven by a healthy order book and early shipment of fall ’25 orders. Across our EMEA and LAAP distributor markets, the Columbia brand is performing exceptionally well. I believe this reflects the distributor confidence in the Columbia brand and the success of several product initiatives, including Omni-MAX footwear, our premium titanium collections and PFG. Our merchandising team has partnered with distributors to enhance assortments and retail displays to create hundreds of elevated brand store environments around the world. Success with footwear in these markets validates the tremendous long-term growth potential we have for Columbia footwear. Canada net sales increased 5% in the quarter with wholesale growth more than offsetting a decline in DTC.

Looking at second quarter performance by brand. Columbia net sales increased 8% this spring, Columbia’s product collection emphasized differentiated sun protection and cooling technologies and reenergized PFG styles. Our product teams continue to focus on creating products and driving growth with our targeted consumers who value innovation and style. To activate our product strategy, we also invested in elevated in-store presentations and brand storytelling across the marketplace. For Columbia’s iconic PFG product line, this meant new active fit styles and bold prints and colorways. We celebrated PFG’s classics like the Tamiami shirt with marketing activations and connected with PFG fans through creative new social content. This spring, we introduced a new product collection with Insect Shield technology.

This invisible apparel protection utilizes an active ingredient bonded to the fabric for effective, long-lasting insect repellency. We successfully launched Insect Shield with premium retail partners in the U.S. and in select international markets. In footwear, our new Omni-MAX Konos Featherweight is performing well in the marketplace and receiving positive accolades. Women’s cell selected the new Konos Featherweight as the best new lightweight shoe in their 2025 sneaker awards. This past weekend, it was exciting to see Columbia brand ambassador, Bubba Wallace win the Brickyard 400 NASCAR race at the Indianapolis Motor Speedway. Congratulations, Bubba. Before reviewing Emerging Brands performance, I’d like to discuss an organizational change.

During the second quarter, we realigned our Columbia North America regional organization to bring together our wholesale and direct-to-consumer businesses. This new structure will sharpen our focus and improve our ability to seize growth opportunities in our largest region. Peter Rauch will step into the role of General Manager for the Columbia brand in North America. Peter most recently oversaw our Asian direct business and has held several international finance leadership roles over the years. He was a key leader in our transformational Project CONNECT initiative. And in his new role, Peter will lead an integrated growth strategy and operating model tailored to the unique needs of our North American consumers and partners. Now turning to our emerging brands.

SOREL net sales decreased 10%, primarily driven by lower spring ’25 orders and lower DTC clearance activity compared to elevated PFAS product clearance in the prior year. Sell-through for SOREL’s spring product line, including sneakers and sandals has been healthy and suggests the brand is stabilizing. I believe momentum will continue to build for SOREL in the seasons ahead. This fall, new products and brand imagery will further energize SOREL and retailers are responding positively to the Spring ’26 collection. I’m confident SOREL is moving in the right direction. prAna net sales decreased 6% in the quarter, primarily reflecting soft e-commerce performance in part due to lower clearance activity compared to prior year levels. prAna’s brand refresh will build momentum this fall with new product collections and refreshed brand imagery.

The prAna team is developing a clear voice and omnichannel growth strategy. I’m excited to see it come to life in the seasons ahead. Mountain Hardwear net sales decreased 7% with full price growth more than offset by lower clearance activity compared to PFAS product clearance in the prior year, resulting in a much higher margin. As we move into fall, Mountain Hardwear will be activating new snow sports and cold weather trail marketing campaigns that embody their distinctive voice and imagery. During this period of tariff disruption, I believe Mountain Hardwear has the opportunity to further strengthen its position in the outdoor specialty channel. Spring ’26 orders indicate healthy wholesale growth in the first half of next year. I’ll now discuss our 2025 financial outlook.

This outlook and commentary include forward-looking statements. Please see our CFO commentary and financial review presentation for additional details and disclosures related to these statements. Looking across the global marketplace, there are many external risks and uncertainties that have the potential to impact consumer demand, our operations and profitability. At the top of this list is limited visibility as to what products will cost us in our largest market, the U.S. Given these uncertainties, we’re giving limited second half guidance. Our full year 2025 net sales outlook calls for sales of $3.3 billion to $3.4 billion or down 1% to up 1% year-over-year. This is below our initial guidance provided in February, reflecting lower assumptions for our U.S. wholesale and DTC businesses, partially offset by higher forecasts in most international markets.

For the third quarter, we expect net sales to decline 1% to 3% year-over-year and diluted earnings per share to be in the range of $1 to $1.20. This financial outlook assumes tariffs on U.S. imports remain at the additional 10% universal rate for all countries, except for China, which remains at 30% for the remainder of the year. Any additional tariffs beyond these rates would further increase cost of sales and reduce operating profit. As a reminder, we are importing minimal production from China into the U.S. this year and do not plan to import any finished products from China into the U.S. in 2026. While it’s too early to discuss a 2026 financial forecast, I’d like to provide some color on our spring ’26 wholesale order book. To date, we’ve received almost 90% of our projected spring ’26 orders.

Globally, our initial spring order book, taken together with our in- season forecast supports flat to low single-digit percent wholesale growth in the first half of ’26. This forecast contemplates growth for all of our emerging brands, led by Mountain Hardwear and SOREL. For Colombia, international orders reflect sustained growth momentum across our direct and distributor markets. In the U.S., tariff uncertainty and soft business trends are weighing on initial orders. While retailers are excited to see Columbia’s new marketing campaign come to life this fall, they’re taking a conservative approach to placing orders for future seasons. As a result, we expect Colombia’s U.S. wholesale business to remain down in the first half of ’26. I believe we are making the necessary adjustments and investments to reenergize the U.S. marketplace.

Elevating consumers’ perception of the Columbia brand and ultimately restoring healthy U.S. growth will take time. Our new product collections, new brand voice and marketplace investments are just starting to take hold this fall and will build momentum into 2026. Before my closing remarks, I’d like to note that we recently released our 2024 impact report, highlighting our efforts across environment, social and governance matters. I’d encourage you to review the report, which is available on our website to learn more about the progress and accomplishments we’ve made empowering people, sustaining places and promoting responsible practices. In closing, I’m confident we can navigate near-term uncertainty and unlock significant long-term growth opportunities ahead.

We remain committed to investing in our strategic priorities to accelerate profitable growth, create iconic products that are differentiated, functional and innovative, drive brand engagement with increased focused demand creation investments, enhance consumer experiences by investing in capabilities to delight and retain consumers, amplify marketplace excellence that is digitally led omnichannel and global; and empower talent that is driven by our core values. That concludes my prepared remarks. We welcome your questions for the remainder of the hour. Operator, can you help us with that?

Q&A Session

Operator: [Operator Instructions] Your first question is coming from Laurent Vasilescu from BNP Paribas.

Laurent Andre Vasilescu: I wanted to ask about 1H results relative to what you provided in terms of guidance for — in February for 1H. It looks like you beat by about $20 million. Jim, Tim, was that driven by that shift in wholesale from 3Q to 2Q? And then relative to February guide, I think you’re cutting the full year top line by about $60 million at the midpoint. Is that cut relative to the February guide driven by wholesale — the U.S. wholesale weakness and the U.S. DTC weakness?

Jim A. Swanson: Yes, Laurent, as you look at the first half results, by and large, as you’re pointing out, our first half results are largely in line with the outlook that we provided in February. Now certainly, once you get down into the underlying composition of that, we’ve seen stronger business internationally. We’ve seen some softness in the domestic business. And then for sure, there are some wholesale timing shifts in our deliveries that are benefiting the first half, maybe just to characterize that a little bit, the benefit that we saw in the second quarter was about a $30 million timing shift, half of which was later spring shipments that shifted out of Q1 and into Q2 and the other half was earlier fall production as we accelerated production in advance of and to mitigate any potential further tariff increases.

And then as it relates to the full year guidance, yes, we’re down about $70 million, I think you put it relative to the guidance we provided in February. And by and large, that’s reflective of the same factors, softness in the U.S. business, partially offset by the strength of what we’re seeing internationally.

Laurent Andre Vasilescu: Very helpful, Jim. And when I look at the PowerPoint presentation relative to talking about the performance by region, everything is pretty much up, even U.S. wholesale is up partly due to that shift, those shifts. But — the one point of pressure, obviously, is the U.S. DTC brick-and-mortar, obviously, you’re lapping some of the temporary stores. But dot-com is under real pressure. It seems to be like a theme happening across a lot of vendors. Just curious to know what your take is there. What’s happening with the consumer in terms of their online purchases? And on that point — or question rather, how should we think about DTC versus wholesale for the third quarter?

Timothy P. Boyle: Yes. I think clearly, there’s some pressure on dot-com. The way we’re approaching it is we’re going to have a complete refresh of our site that will become apparent to consumers within the next 10 to 20 days, where we’ve got new photography and that, coupled with our marketing efforts, which are breaking, I think, on the 4th of August, our expectation is that we’ll see some nice lift. We had strong digital performance through some of our wholesale customers. So it’s not totally a problem across the entire marketplace. But certainly, our products can look better and perform better with an improved performance with our dot-com business.

Jim A. Swanson: And then Laurent, as it relates to the third quarter and what we anticipate in the U.S. from a wholesale and D2C standpoint, from a D2C perspective, we’ve really looked at the trend that we’ve seen over the course of the first half of the year, particularly the second quarter and have extrapolated and we’re more or less assuming we stay on trend with what we’ve seen more recently in the business. And for the wholesale business, given the earlier deliveries of fall shipments, we will see that business be down a bit as we get into the third quarter.

Laurent Andre Vasilescu: Okay. Very helpful. And last question here. Gross margins, it looks like for 3Q gross margin down maybe. Is it fair to assume 150 bps? And then within that, how much is the tariff impact embedded in that?

Jim A. Swanson: Yes. I think more or less the way I would think about gross margin in the third quarter. We haven’t provided detailed guidance on it, Laurent, but we did indicate in the CFO commentary that we anticipate tariffs being approximately $15 million to $20 million. So your 150 basis points of gross margin contraction in the quarter largely aligns with that tariff impact. Having said that, we’re in a much better place in terms of the — how healthy our inventories are. So there will be a partial offset to that, just given the lower level of closeouts and liquidation activity that we do in the marketplace.

Operator: Your next question is coming from John Kernan from TD Cowen.

John David Kernan: Just back to the tariff point. Jim, you gave us pretty specific guidance about the second half COGS impact on the Q1 call, $40 million to $45 million incremental hit. Just curious how you see that developing mitigation potential. And now with the new rates that are getting announced, how you think these costs are going to trend into fiscal ’26?

Timothy P. Boyle: Well, I wish we knew specifically what the tariffs are going to be. We still don’t know, and I’m not convinced that after the 1st of August that we will know because it’s a very material approach to complicated negotiations. So the mitigating activities include, obviously, we could increase prices. We have been diligently discussing the topic with our vendors in Asia. We’ve been adjusting some prices, as I said. And we’re looking throughout the supply chain for areas where we can save and increase the profitability.

John David Kernan: Got it. But it’s safe to assume the biggest impact will be coming probably in fiscal ’26. Is that correct?

Jim A. Swanson: Yes. I think by and large, the $35 million to $40 million of tariff impact that we anticipate this year, we really don’t — aside from obviously continuing to be disciplined in our spend management in the form of price increases and other actions, we’re absorbing the lion’s share of all of the tariff impact in FY ’25.

John David Kernan: Tim, you’ve been in the industry a long time. You’ve seen a lot of cycles. A lot of companies out there are talking about mitigation, some of them talking about fully mitigating. Do you think this is an industry that’s ready to accept full-blown price increases as we go into fiscal ’26?

Timothy P. Boyle: Well, just as a reminder, the apparel and footwear industries have been incredibly heavily tariffed from a historical perspective since the days of smooth hauling. So in 2024, Colombia was the 81st largest duty payer in the United States, which is crazy based on the size of the company. So consumers that have been paying heavy tariffs since the ’30s, if they want to continue to receive product, they’re going to be paying duties of a much larger number. That’s why we’re being quite cautious in terms of how we’re approaching inventory investments in the U.S. And our expectations are that there will be some elasticity issues as it relates to products being sold with additional heavy tariffs.

John David Kernan: That makes sense. And just on that inventory theme, it looks like dollars up about 13% this quarter. Jim, how do you feel about the composition of the inventory where you are from a markdown perspective as we get into back half ’25?

Jim A. Swanson: We’re in excellent shape, very comfortable with our overall inventories. I think if you were to adjust our inventories for the earlier production of our fall ’25 inventory, combined with the tariffs on that inventory and also some FX translation, we’ve rebuilt some deep inventory coming off of the PFAS transitions last year, our inventories are flat to slightly down year-over-year. So it’s exceptionally clean and the aging of the inventory is in great shape as well. So we feel good going into the latter part of the year. And if things end up better than what we’re projecting now, certainly, I think there’s still some opportunity for us to chase some business as well.

Operator: Your next question is coming from Pete McGoldrick from Stifel.

Peter Clement McGoldrick: I was curious on cost savings. So you’ve already exceeded the high end of the original $125 million to $150 million range. As you assess other areas of cost savings, I’m curious if any of those savings are embedded in your outlook? Or would that be incremental to what you laid out today?

Jim A. Swanson: To the degree that the outlook for the balance of our year is only inclusive of what we’ve achieved in cost takeout thus far. And we are continuing to evaluate any and all options with the pressure that we’re seeing in the business and the impact of the tariffs, and we’ll provide further updates on that over time. But I think we’ve provided the best estimate we can in the outlook that we provided.

Peter Clement McGoldrick: Okay. And then on tariffs, the $35 million to $40 million for fiscal ’25 is after mitigation efforts, and you mentioned you’d be absorbing the lion’s share. I was curious if you could share sort of an annualized run rate of how you expect the gross impact of total tariffs to impact the business and the offsets?

Jim A. Swanson: Well, I think maybe the best way to explain that, and we don’t get into speculating what might happen with future tariffs with announcements that are forthcoming. But if you look at just where tariffs are currently at the universal 10% plus the 30% from a China standpoint, we do not anticipate having imports from China in FY ’25 — or FY ’26 rather. Our FOB imports into the U.S. are about in round numbers, $800 million on an annual basis. And so if you think about a 10% universal tariff, you’re looking on a fully annualized basis, $80 million. And then you can run different scenarios off of that. That’s the way to think about it.

Peter Clement McGoldrick: That’s really helpful. And last one would be on the Columbia brand structure in North America. Can you talk about the opportunities for improvement under the new organizational structure, how that might manifest in performance and any time line for — to recognize improvements?

Timothy P. Boyle: Certainly. Well, we’ve been running the business here, which is partially a direct-to-consumer business and partially a wholesale business. Those have been distinctly managed, and we expect that as the team coalesces that we’ll begin to see almost immediate results in terms of improving the way we come to market to consumers. So we’re excited about the opportunities that it’s going to provide for us.

Operator: Your next question is coming from Tom Nikic from Needham.

Tom Nikic: I want to ask about one of the kind of bright spots in the quarter and specifically the last couple of quarters, I think your Europe business has been quite strong. I just wanted to dig in a little bit deeper there and like how are you kind of able to resonate so strongly with the European consumer. And obviously, there’s a lot of macro noise everywhere, but it seems like you’re really fighting through it pretty strongly overseas. So we would just love to get a little more color there.

Timothy P. Boyle: So thanks. It’s been a continued focused effort by our team in Europe. And remember, it’s — we’re for all intents and purposes, a small player in Europe. So significant improvements are maybe outsized. But the team in Europe has done a great job of focusing on certain markets, including Germany, the U.K. and France to be the center point of our European expansion and growth. There’s also been a key move in adding DTC locations as well as a focus on opening partner stores to help us improve the total business overall in Europe. It’s just been a very disciplined approach, and there’s kudos to those team members for making it happen.

Tom Nikic: All right. Great. And if I could ask one more about — so the inventory growth was plus 13% in the quarter, which obviously is higher than the projected sales growth over the next couple of quarters. I would assume that there’s some kind of pull forward ahead of tariffs that impacts that number. And is there any way that we should think about what the inventory growth will look like at year-end?

Jim A. Swanson: Well, we still see a path, and we haven’t provided a projection here, but we do see a path where we can keep our inventories exiting the year flat to maybe even down. There’s obviously a ton of assumptions as it relates to how the top line plays out, the timing and receipts of spring ’26 inventory in that. As I touched on in an earlier question, the inventory being up $100 million at the end of the second quarter, that’s — 70% of that is earlier production and tariff costs and the balance of it is a combination of currency and just rebuilding up our replenishment inventories coming off of low levels last year. So we’re in exceptionally good shape in terms of the composition of the inventory.

Operator: Your next question is coming from Mauricio Serna from UBS.

Mauricio Serna Vega: First, maybe could you talk a little bit more about how you’re thinking about the underlying growth in the order books in the second half of ’25, just given the shift in shipments out of Q3 into Q2? And then maybe in the DTC business in the U.S. seeing some deceleration. Any way that — do you have a sense of how much — how that has been driven by your strategy to pull back and promotions versus maybe just like consumers being more under pressure and then reducing their discretionary spending?

Timothy P. Boyle: Yes. I think if you look at the company historically, it’s been much — the impact of weather has been much greater than the impact of the economy. And so our expectation is for an average winter year, but if we have a great winter year, we’ll have a very strong second half. Additionally, there are some competitors who have had difficulty importing product based on the tariffs that are being imposed. So there’s an opportunity for us to pick up market share because smaller vendors in the community that are not going to be able to import. As it relates to DTC, it’s important to know we were heavily liquidating PFAS inventories, both through our own stores and the temporary clearance stores that we had. So my expectation is that the vast improvement, which you will see soon in our dot-com presentations as well as the impact of the new marketing efforts and other efforts around product ACCELERATE that we’ll see strong improvement in the DTC business as well.

Mauricio Serna Vega: Got it. And then just a quick follow-up on the guidance for the year. I think if you do the math in the midpoint, it assumes like revenues in Q3 are down 2% and then down slightly even faster in Q4. Like any — like is that just a caution in the consumer sentiment as like more tariffs get passed through like they feel like the potential tariffs? Or what is driving that kind of like sequential deceleration in outlook?

Timothy P. Boyle: Yes. I mean our expectation is that the impact of the tariff costs will begin to manifest themselves late in Q3 and in Q4. So it’s obviously difficult to predict with any kind of certainty what will happen. But consumers are very likely to be cautious and we will be constraining their pay — their purchases during that period.

Operator: Thank you. That completes our Q&A session. Everyone, this concludes today’s event. You may disconnect at this time.