Columbia Sportswear Company (COLM) Earnings Call Transcript & Summary

Greeting. Welcome to the Columbia Sportswear Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Tucker. You may begin.

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 and Chief Executive Officer, Tim Boyle; Co-President, Joe Boyle and Peter Bragdon; Executive Vice President and Chief Financial Officer, Jim Swanson; and Executive Vice President, Chief Administrative Officer and General Counsel, Richelle Luther. 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 and 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. And now I'll turn the call over to Tim.

Thanks, Matt, and good afternoon. In the second quarter, we're pleased to have again delivered net sales growth exceeding our quarterly guidance driven by strong growth in international markets, partly offset by continued headwinds in the U.S. Our reported earnings and profit margins include the impact of U.S. tariff refunds recognized during the quarter. Without this onetime item, our underlying performance was largely in line with our expectations, with sales being the high end of our guidance and gross margin slightly below plan on higher promotional activity while operating margins and loss per share landed roughly at the midpoint of our guidance range. International business, which represents over 40% of our sales, continues to lead our growth up 9% year-over-year. While our U.S. business remained challenged this quarter and declined 4%, we saw sequential improvement despite consumer discretionary spending coming in under mounting inflationary pressure. We saw this pressure translate into soft traffic in our U.S. DTC brick-and-mortar business during the quarter, resulting in higher discounts and lower sales than planned. Despite these headwinds, we were pleased to see positive and better-than-expected growth in our U.S. DTC e-com business, driven by our emerging brands. We're also encouraged by improving metrics in Columbia brand U.S. e-commerce, including new customer acquisition, which we view as indicators of progress on the Accelerate strategy. Additionally, we're seeing encouraging signs of the traction the Columbia brand is making with target consumers, including improvements in unaided awareness and purchase intent among professional elite and dynamic active consumers in North America. We're also realizing stronger growth rates with newer and more elevated products and collections aimed at these target consumer groups. That said, we know it will take more time and work to bring the newness, innovation and elevated style to our product portfolio at the level we need in order to continue shifting consumers' perceptions of the brand in the U.S. and put us back on a path of sustainable long-term growth. As a reminder, Accelerate is a multiyear strategy that we launched into the marketplace nearly 1 year ago based on key shifts about consumer, brand, product, marketplace and marketing. While the foundational shifts of Accelerate are starting to show tangible signs of paying off, we have continued to refine the strategy. The Columbia brand is now focused on 5 strategic pillars: one, own the trail with a focus on both hike and trail run; two, dominate warm, our on-mountain warm and innovation story, including but not limited to ski and snowboard; three, Power PFG, expanding our leadership in both fishing performance and lifestyle; four, fuel outdoor lifestyle with product that has outdoor DNA, but is designed for everyday wear with elevated style; and five, accelerate footwear, which is an opportunity embedded across each of the previous 4 pillars and a stand-alone growth priority in its own right. These 5 pillars are nested in the original shifts of the Accelerate strategy, providing a click down for more focused execution with our consumers. These pillars leverage our authenticity and heritage in the outdoors and the reputation for quality and durability that consumers have long known us for. They also incorporate many aspects of the playbooks that have already been driving the healthy and sustainable growth of our international businesses. But we also know that today's consumers are expecting even more in terms of credibility, style and relevance. Performance credibility in their favorite outdoor activities style in their everyday wear with an outdoor function and esthetic and relevance within the outdoor culture and communities to which they belong. In support of these 5 brand pillars, we're also sharpening our approach to segmenting our product construct with performance and innovation-led product designed for end-use activities, specifically hike trail run, and snowboard and FISH and with style-led product designed for consumers looking to incorporate versatile outdoor function and elevated aesthetic into their everyday life. Executing across our 5 brand pillar means executing an offense that encompasses all seasons, climates and geographies where Columbia is present and where people can enjoy the outdoors with footwear and apparel that both fulfill their performance needs and make them look and feel great. I'm excited to see these strategies continue to come to life in the marketplace over the coming seasons as we execute against these strategic pillars and the broader accelerate work. I can feel the energy and excitement from our teams to focus on these strategic priorities that are both clear and aligned across the Columbia brand organization, both here and around are. I'm also excited to share that in addition to the positive consumer response to the engineered for whatever brand platform, our marketing team continues to gain recognition and accumulated awards for our Expedition impossible campaign. Following the Gold Clear award we highlighted last quarter in late June, expedition impossible racked up an incredible 10 awards at the Con Lion Film awards Festival, which is widely considered to be 1 of the most competitive and prestigious award events in the marketing and communications industry globally with competition against some of the world's largest and most famous brands. Columbia's awards spanned across social media, public relations, brand strategy and direct marketing, making us the single most awarded company at this year's event. Of particular note, expedition impossible on the Grand Prix award in brand experience and activation, and we also won the Dan Widen Titanium award the culmination of the festival and its marquee award, which has been compared to winning the best picture at the Oscars. I want to congratulate our team once again for this well-deserved recognition and for the continued impact of this work is creating for our brand. This launching late last year, Expedition Impossible has garnered an incredible amount of media coverage and thousands of creative submissions from consumers or flatter the from around the globe. We're excited for the fun adventure to continue through next week. On August 4, we will reveal who, if anyone, reached the Edge of the Earth. Another major marketing highlight for Columbia brand in Q2 was our campaign that pitted Columbia Global Brand Ambassador, Robin Irwin, against crocodiles. The crocs proved to be no match for Robert, thanks to the vastly superior traction, cushioning and dryness provided by his footwear, the Columbia Tellurix titanium [indiscernible]. The campaign was both authentic to the Columbia brand and resonated with Robert's large and loyal following, attracting more than 3.7 million views and over 300,000 likes across digital platforms. the Tellurix, 1 of our most technical and premium footwear offerings in the height category sold out during the quarter and is poised to scale in future seasons on strong consumer demand. We also saw strong sell-through of additional items featured on the Rob's look page of columbia.com during the quarter and look forward to more fun and creative moments from our partnership with Robert in the future. The success of Tellurix was part of another key ingredient this quarter for the Columbia brand. which is the momentum we're seeing in footwear, including high single-digit percent growth globally in Q2. This growth was driven by several styles with particular strength in more technical footwear, beating our proprietary Omnimax technology, including the Tellurix and Peak Freak franchises in hike, the Konos in trail running and the dry Tortuga in fish. The growing strength of our footwear business was also reflected in the media recognition that our products received this quarter, among several product awards received by Columbia, some of the most notable including the Tellurix being featured among the best lightweight hiking boots by wired and among the best outdoor sneakers of 2026 by women's health. Additionally, within PFG, the Wire and cast back TC shoes were included in best summer gear lists by outdoor life and saltwater Sportsman, respectively. When Footwear also recently took first place on a different type of podium. Earlier this month, Columbia sponsored athlete, Gabriel Rueda took first place overall to prestigious UTMB Val d'Aran Ultra-Trail race in Spain, besting in elite field of competitors over 163 kilometers and 10,000 meters of elevation gain. In a sport where elite runners often change shoes multiple times during an event, Gabriel not only started the race in a pair of Columbia Kono's Speed Trail ATR, our highest performance trailer shoes, but he completed the entire race and cross the finish line in exactly the same pair. Originally hailing from a small village in Argentina, Gabriel's path to becoming an elite trail runner is truly inspirational and his success is equally inspiring to us as it validates Columbia as an emerging force on the trail running scene, including at the sports highest levels. Big congrats to Gabriel and look forward to seeing him on many future users. Now I'll provide an update on our spring wholesale order book, which provides encouraging indicators of the progress we're making under the Accelerate strategy. Although we are still taking orders, the book is nearly complete, and current indications point to a low to mid-single-digit percent growth with broad-based contributions to this growth across our brands, including the Columbia brand in the U.S. Additionally, we're seeing growth across account types and tiers, including our higher-priority brand-enhancing partners. From a product perspective, we're pleased to see footwear growth outpacing apparel with solid growth in both categories. It's also particularly encouraging to see strong adoption of new apparel and footwear styles including growth in key styles targeting younger dynamic active consumers consistent with our Accelerate strategy. Turning back to the second quarter financial performance, I'd like to remind everyone that the second quarter is our lowest volume sales quarter and small year-over-year changes in sales and expense timing can have a material impact on reported results. Net sales increased 2% versus the prior year to $614 million, driven by growth in international distributors and global e-commerce, partially offset by an expected decline in wholesale, primarily due to a lower U.S. 26 order book versus the prior year. During Q2, we began receiving refunds of the U.S. EPA tariffs with the majority of cash we received in June. As such, during the quarter, we recognized approximately $78 million in refunds and interest in our financial statements based on EPA tariffs previously paid. From an accounting perspective, we recognized $60 million in Q2 operating margin primarily as a reduction to cost of sales and $2 million of interest income with $15 million as a reduction to inventory. As a reminder, we absorbed the impact of IEEPA tariffs on our gross margins last year. Including the impact of tariff refunds, second quarter gross margin expanded 920 basis points on a reported basis to 58.3%. Excluding tariff refunds, gross margin contracted by 50 basis points versus the prior year, driven by continued headwinds from incremental U.S. tariffs and increased discounting. SG&A expense increased 2%, reflecting higher DTC expenses, including some unplanned store impairment charges, partly offset by lower personnel costs, resulting from our prior year actions taken as a part of the profit improvement program. This overall performance resulted in EPS of $0.52, excluding the impact of tariff refunds, our loss per share of $0.41 would have fallen roughly in line with the midpoint of our Q2 guidance range. Inventories remained healthy and are down 6% and versus the prior year in dollar terms with units down 7%. We continue to maintain our fortress balance sheet exiting the quarter with $625 million in cash and short-term investments and no debt. Looking at net sales by geography. U.S. net sales decreased 4%, declining slightly more than expected due to soft traffic within our DTC stores. Relative to the prior year, the lower sales were primarily driven by a high single-digit percent decline in U.S. wholesale, resulting from a lower Spring '26 wholesale order book. COLM's performance was slightly ahead of plan due to stronger-than-expected quarter conversion. US DTC net sales were down slightly in the quarter, primarily reflecting the impact of store closures as well as softer traffic, which was largely offset by improved conversion. E-commerce grew low single-digit percent and exceeded plan driven by our emerging brands. While Columbia brand U.S. e-commerce was down low single-digit percent for the quarter, we're encouraged with improving underlying metrics as we reposition e-comm as the pinnacle expression of the brand. From our review of second quarter year-over-year net sales growth in international geographies, I will reference constant currency growth to illustrate underlying performance in each project. LAP net sales increased 13% and China net sales increased mid-single digit percent driven by solid growth in DTC e-com. This was partly offset by single-digit percent declines in wholesale due to shipment timing and in DTC stores, reflecting soft traffic amid a more challenging macro environment. A key highlight in the quarter was our strong performance during China's 618 shopping event with robust growth versus the prior year, coupled with an improved markdown rate. Our China team executed a successful spring brand campaign titled Its Nature's Fault which encourage consumers to embrace nature and its imperfect perfection, creating significantly higher social media engagement and impressions versus the prior year. We also continue to create energy through grassroots and events with our height society, including events that combine the increasingly popular activities of hiking and fishing which we believe only Columbia can authentically do. Japan net sales increased low double-digit percent, rebounding nicely from a challenging first quarter. This reflected growth in both wholesale and DTC despite weak outlet store traffic amid a softening macro environment. In addition to adverse weather in the month of June due to heavy rates. Key growth drivers included our Thrive Revive channel on the footwear side, which sold out in the quarter as well as cooling apparel, including our Omni-Freeze Zero technology. Korea net sales increased low double-digit percent, reflecting double-digit percent growth in both wholesale and DTC e-com. DTC brick-and-mortar grew low single-digit percent and beat plan but with higher promotional activity due to lower traffic and increased consumer price sensitivity amid rising inflation. Product highlights included robust growth in tooling apparel, channel footwear styles and our PFG Bahama shirt, which was supported by a well-executed retail activation celebrating the style's 30th anniversary. Our LAAP distributor markets delivered mid-20% growth driven by the Fall '26 order book and earlier fall shipments reflecting continued momentum in these diverse global markets, driven by robust growth in Columbia brand apparel. EMEA net sales increased high single-digit percent overall. Europe direct net sales increased low double-digit percent showing continued momentum in both wholesale and DTC, abet with a higher promotional activity in DTC mid weaker traffic due to macro headwinds and unfavorable weather. The Europe team drove energy for the Columbia brand through a successful spring marketing campaign leveraging the engineered for whatever platform across digital, social and out-of-home media, delivering more than 650 million impressions on digital and social channels alone. We also continue to build strong connections with local outdoor communities through our Hike Society. In Q2, we hosted Hike Fest events in France and the U.K. that sold out within minutes creating considerable buzz and user-generated content for our brand among target consumers. Our EMEA distributor business increased mid-single-digit percent versus the prior year, driven by increased spring and Fall '26 orders, partially offset by later fall shipments. Canada net sales decreased high single-digit percent in the quarter, primarily reflecting declines in wholesale due to unfavorable shipment timing and lower Spring '26 orders. This was partly offset by growth in DTC with higher e-commerce sales, partly offset by lower brick-and-mortar results due to worker traffic and softening consumer environment. Looking at second quarter performance by brand. Columbia net sales increased 1%, with international growth more than offsetting declines in the U.S. Turning now to our emerging brands, all of which are expected to grow at '26. As a reminder, each of these brands derive a significant majority of their revenue from the U.S. marketplace. SOREL net sales decreased 14% driven largely by later wholesale shipment timing versus the prior year, which was partly offset by growth in DTC e-com. As a reminder, Q2 typically represents less than 10% of SOREL's annual business. We continue to anticipate a stronger fall 26 season for SOREL, with growth expected in both wholesale and DTC for the second half. As announced last month, we're also thrilled to welcome Joe Vernachio back to Columbia Sportswear's family as the President of SOREL brand. We know Joe well from his prior tenure as President of Mountain Hardware. He brings extensive industry experience as a proven, consumer-focused and collaborative leader. I'm confident that Joe is the right leader at the right time to drive the next phase of SOREL's growth and further unlock the brand's tremendous potential. PrAna net sales increased 14%, reflecting double-digit percent growth in wholesale and high single-digit percent growth in DTC e-com with flattish growth in DTC brick-and-mortar on lower traffic, which was offset by better conversion. We remain encouraged by the momentum building in prAna brand with healthy growth in both new and retained customers, particularly among its target younger consumer. A key highlight during the quarter was the opening of prAna's third full price store in La Jolla, California, which has gotten off to a great start, enhanced by a steady stream of elevated in-store experiences. Mountain Hardware net sales grew 6% year-over-year, driven by double-digit percent growth in DTC channels. This was partly offset by a low double-digit percent decline in wholesale due to substantially lower closeout sales versus the prior year, which more than offset low single-digit percent full price growth. A major highlight in the quarter was Mount Hardware's fourth collaboration with Stussy, which surpassed each of the prior collections in sales with remarkably strong sell-through. We were also excited to see the new Kazam ultralight trail backpack launch in Q2 and immediately become a top 10 style in terms of sell-through. We'll now discuss our financial outlook for the third quarter of 2026 and the full year. This outlook and commentary include forward-looking statements. Please see our CFO commentary and financial review presentation for additional details and disclosures relating to those statements. While we remain focused on execution and what we can control, the operating environment remains highly dynamic, particularly around the major external factors affecting our business that we spoke about 3 months ago, involving tariffs in the U.S. and the conflict in the Middle East. The outlook for U.S. tariffs policy remains highly uncertain. While the administration continues to signal its intention to bring tariffs back to rates similar to the IEEPA levels, if and when that will happen remains unclear. As such, our financial outlook now assumes that the current 10% to 12.5% tariff rates remain in place through the end of this year. Additionally, our second half outlook contemplates a $15 million benefit to our cost of sales from the IEEPA tariff refunds previously received. However, we expect this tailwind of gross margin will be largely offset by accommodations to our factory partners that have navigated this period of uncertainty with us. That said, from a timing perspective, we expect to incur a net headwind to our gross margins related to these accommodations in Q3 and a net tailwind to our gross margin in Q4 related to the remaining refunds. Turning now to the ongoing contact to the Middle East. While the direct measurable impacts to our business have remained relatively contained, including the order cancellations from our distributor in that region that we spoke about last quarter, the macroeconomic headwinds and supply chain disruptions related to the conflict are of greater concern and have begun to materialize. The prolonged period of elevated global gasoline prices stemming from the conflict is putting pressure on discretionary spending and consumer sentiment, particularly among lower and middle-income consumers, which could impact consumer demand in the second half. Additionally, we now anticipate meaningful shifts in the timing of fall '26 shipments from the third quarter to the fourth due to longer logistics lead time resulting from supply chain disruptions as well as discrete delays stemming from capacity constraints within a note of our global supply chain. These delays are expected to shift all of our anticipated second half growth to the fourth quarter creating greater risk to our outlook given the macroeconomic headwinds impacting operating environment. For the third quarter, we anticipate sales in the range of down 1.5% to flat versus the prior year. This will result in slight SG&A deleverage and when combined with our anticipated decline in gross margin, resulted in earnings per share of $1.15 to $1.35. Now turning to our full year outlook. We are increasing our full year margin and earnings guidance ranges to pass through the impact of second quarter tariff refunds. We continue to expect underlying results to land within the ranges we previously provided, including some benefit from our revised tariff rate assumptions. That said, our underlying sales and margin outlook for the second half has incrementally moderated versus 90 days ago based on the macroeconomic and supply chain headwinds we have discussed. For full year net sales, we're maintaining our prior guidance of 1% to 3% growth versus the prior year. We now expect reported gross margins of 52.1% to 52.3% and or up 160 to 180 basis points versus the prior year. We continue to expect that SG&A will represent 43.6% to 44.2% of net sales, increasing slightly year-over-year, but at a slower rate than the net sales growth. Based on these assumptions, we're raising our reported operating margin guidance to 8.5% to 9.3% for the year. We're also raising our reported diluted earnings per share guidance to the range of $4.40 to $4.90. In addition to the factors already discussed, this reflects an incrementally higher full year tax rate assumption of approximately 25%. In closing, we're pleased to have delivered first half results that were in line to slightly better than our planned overall. Despite navigating external headwinds and other impacts to our business that were unforeseen when we started the year. While the operating environment has become more challenging since our last call, I remain encouraged by the strength and resilience of our international business, the signs of progress we are seeing with our Accelerate strategy and the stability provided by our fortress balance sheet. Thank you again to our global workforce who are instrumental in the execution of our strategies and our business success. That concludes my prepared remarks. Operator, could you help us facilitate the questions?

[Operator Instructions] The first question comes from Bob Drbul with BTIG.

I was wondering if we could just unpack a little bit like the commentary around the second half outlook some of the supply chain disruptions and better clarity or visibility on your delivery schedules with the product. Can you just talk about has there been any change around the order book with your better visibility? And so when you look at the wholesale plans and the acceleration that you had talked about previously, has that changed much? Could you quantify that a little bit in the North American piece specifically? And I guess the second piece of this is the Spring '26 order book firmed up probably earlier than I can remember, right? And so that's pretty encouraging. And the guidance that you gave or the expectations around the order book, is that primarily -- I mean is it broad-based? Is North America in that sort of mid-single-digit range as well? If you could maybe give a little more color around that, that would be helpful.

Sure. Absolutely. So first of all, related to the change in the Q3, Q4 shipping numbers, we're basically talking about a percent 1 way or the other. And it's not a function of any cancellations or any adjustments. These are both known and expected logistic issues around -- which were impacted both by the conflicts in the Middle East and the disruption to shipping as well as a certain topic in our -- from our consolidation nodes as we discussed. So we're confident that the numbers are going to be coming through as we've got planned. And then you mentioned the Spring '26 order book, but you're talking about Sprint 27, right?

Yes, '27, sorry. Yes.

Yes. And yes, basically, Growth across all the brands and all the geographies, including the North American U.S.A. business. So we're starting to see the results of accelerate and really exciting good stuff happening that way.

And Bob, given Tim's comments and that we've not seen any changes in our order book for Fall '26, we would still contemplate growth for U.S. and North America in the back half of the year for the wholesale business. Of course, with the shift that we're seeing that's going to be much more back-end weighted where we'll probably see a decline in Q3 and increase our growth in Q4.

Okay. Great. And just, Jim, on the other -- the second piece of the IEEPA tariff refunds, how does that go into play? Or sort of how and when will that play out in the gross margin line. Is that second half '26? Does that flow into '27?

Well, we received the refund as Tim touched on in the prepared remarks. Having said that, what we realized in the P&L was about a $60 million benefit to operating margin. That left about $15 million of what we received in refunds on the balance sheet as a credit to inventory that will be realized over the balance of this year relatively ratably between Q3 and Q4. And of course, that we've indicated, there is an offset related to factory accommodations that will likely take place in Q3. So you'd expect the Q3 margin headwind and a Q4 margin tailwind related to all that.

The next question comes from Laurent Vasilescu with BNP Paribas.

I wanted to follow up on Bob's question about the shift. Is it fair to assume -- should I -- should we assume like about -- last quarter, you talked about a $10 million shift this quarter, should we assume it's a $30 million shift from 3Q into 4Q? And if that's the case, what region would be impacted? Is it Europe because of the Middle East. I'm just trying to better understand what's the supply chain bottleneck that is leading to this shift?

Yes. Sure. Thanks for the question, Laurent. As it relates to the size of the shift, it's north of the $30 million that you referred to. In fact, if we were to adjust for the timing shift that we're seeing Q3 and Q4 in growth in terms of relatively equivalent in the 4% to 5% range, Q3 being a little bit slower growth than Q4 within that. And then as it pertains to the regions, this is a global impact, but I would say that the predominant of it is more North American focused. And certainly the Middle East is a contributing factor to this. I think the other element of it is upon the invalidation of the IEEPA tariffs by the Supreme Court. We did see a bit of a rush on the supply chain and capacities. And so that's part of what's contributing to this is importers are trying to get products into the U.S. at that lower 10% rate relative to the risk of a higher rate longer term. The other thing I might mention as it relates to just the timing and flow of wholesale shipments is we were a bit earlier in our shipment last year for fall 25 weighted to the third quarter, some of the effect that Fall '25 being early Fall '26, certainly be later as we see it today. And then also keep in mind when you think about the higher rate of growth in the fourth quarter, we did have a shortage of inventory as we curtailed some production for Fall '25 last year. So that's going to provide a bit of a favorable comp as you think about the rate growth in the fourth quarter.

Super helpful. And then as a follow-up, my second question is on China. On a constant currency basis, grew mid-single digits. I think in the -- in your CFO prepared commentary, it talks about 3 driven by China, but also to Europe direct. Maybe can you -- for the audience, can you share what you're seeing in China? I mean, I think it's been a little bit buffer tougher for a lot of names out there. Curious to know, is it due to the typhoons, warm weather? Just curious to know what you're seeing? And how do we think about China overall growth rate for this fiscal year?

Yes. China for us, as you know, we've talked a lot about it being the biggest opportunity for us in growth. We have the typical weather and other disruptions that happen every year. We still think it's an enormous opportunity for us. And we're still quite small there by comparison to others. So that's why we're so confident that our business is going to get bigger there, especially when you consider the growth rates in our e-com businesses across multiple platforms. So I'm still very bullish on China and looking forward to greater things there.

Yes. I'd just add, Laurent. The 618 event that we just came through in Q2 that Tim touched on, we saw robust growth as a part of the selling in on that from a dot-com or online perspective. And as it relates to growth on the year, we still anticipate China being 1 of our fastest-growing markets. And I think I commented on last quarter, we anticipated double-digit growth on the year. And I think we're more or less tracking to that same level. And obviously, some of the strength of the order book that we've got for the wholesale business in the back half.

The next question comes from Paul Lejuez with Citigroup.

It's Tracy Kogan filling in for Paul. I was hoping you guys could talk about how you're U.S. store business trended by month in 2Q and what you're seeing quarter-to-date? And then I was wondering if your gross margin guidance for 3Q also assumes you're more promotional.

As it relates to the store performance, the single biggest thing we would comment on some of this was covered in the prepared remarks that Tim provided, but is the softness that we saw from the traffic standpoint. And that was most notable beginning in the mid to latter part of April. I think largely coincided with the inflationary pressure that the consumers under from a fuel and food price standpoint and that we really saw that decline in traffic happen in an hold relatively steady throughout the quarter, Tracy, so I would describe it as that there was increasing deterioration as we went through the quarter as much as it was a step function down at a point in time then kind of holding relatively constant in that going forward. And then as it relates to how we're thinking about gross margin in Q3 and frankly, for the balance of the year. You'll note that we did pass through the benefit of the refund. The other thing we've done in our outlook on the full year is we had reduced our assumptions in the latter part of the year. We've previously assumed that, i.e. best equivalent tariffs will be in place. we're now assuming that the current tariffs that we know in the 10% to 12.5% range would be there. So the offset to that is essentially an assumption around the consumer environment a bit more pressure and the continuation of these promotions, not to mention with fuel prices going up in the anticipation of some incremental freight charges from predominantly an outbound standpoint.

The next question comes from Mitch Kummetz with Seaport Global.

Can you talk a little bit about what DTC and at-once assumptions are embedded in your back half outlook?

Yes. Mitch, I presume you're talking about the U.S. business. By and large, I would describe, we've cautioned a bit more risk here today with what we're seeing from a macro standpoint in addition to the supply side of things. For the most part, they're consistent with the more recent trends that we've seen in the business. the cancellation side of things like we've touched on, we've not seen anything meaningful in the form of cancellations, but we just note the risk with what we're seeing with the consumer. That's the reason why we're a bit more cautionary today with regard to the range and where we might fall within that range.

And then, Tim, in your prepared remarks, you talked a little bit about new customer acquisition on the Columbia brand side. Could you just maybe elaborate on that? I think you said that you're picking up younger consumers, which I think is part of your strategy with Accelerate. Can you talk a little bit about who you're bringing in? What are these new consumers buying? Are they buying a newer elevated products? What are you learning from this? And is it, to some extent, a proof point that the strategy is working?

Yes, certainly. Well, we can see the age of these consumers in sort of in general, and it's really encouraging to see the results of their purchases as it relates to or more expensive product, especially as it relates to footwear. And we think this is a definite result of the promotional activities not dollar promotional, but marketing promotional activities as it relates to the impact of the accelerating marketing which we've been focusing on, including the explanation impossible that's been so highly lodged by the various groups that measure advertising as well as what we've done with Robert Irwin. And so we just see some great results there, and it's very encouraging in terms of our [indiscernible]. The younger products that we're offering.

And then maybe lastly, just on the strength of the spring order book. I mean do you at this point, sort of anticipate that, that will translate into kind of low to mid-single-digit sales growth in the first half. And I know you're not guiding to next year, but is that how we should think about it if that should be driving that type of growth rate through the first half of next year?

The audio is a little bit weak for us, Mitch, but I think your question was related to the Spring '27 order book. And based on the visibility we have today, we've got, call it, roughly 90% of the orders of 10, and that gives us the indication of the low single to mid-single-digit rate of growth in the first half of next year from a wholesale standpoint. And we're hopeful that we'll continue to take that forward over the course of the next couple of months. And the potential to be on the upper end of that. So we'll look forward to providing an update in October.