Greetings. Welcome to Columbia Sportswear Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Andrew Burns, VP of Investor Relations and Strategic Planning at Columbia Sportswear. You may begin.

Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's third 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. 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 don't undertake any duty to update any of the forward-looking statements after the date of the conference call to conform the forward-looking statements to actual results or 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 two questions, so we can get to everyone by the end of the hour. Now I'll turn the call over to Tim.

Thanks, Andrew, and good afternoon. Overall, third quarter financial results reflect a continuation of the trends we've experienced all year. The North American outdoor marketplace remains challenged and we are working to maximize sales in a soft consumer demand environment. Outside of North America, we continue to experience positive momentum in most direct and distributor businesses led by our China and Europe direct business. Third quarter net sales declined 5% year-over-year and came in at the low end of our guidance range. Despite this, we were able to exceed our diluted earnings per share guidance range through a better than planned gross margin and disciplined expense management. Our financial position remains strong. We exited the quarter with cash and short-term investments of over $370 million and no debt. We are on track to generate over $300 million in operating cash flow this year. In addition to investing in our business to drive long-term profitable growth, we are returning free cash flow to shareholders via dividends and share repurchases. Through the first three quarters of the year, our share repurchases totaled $231 million. Highlighting our continued commitment to our capital allocation strategy, the Board of Directors has approved a new $600 million buyback authorization. As we enter our peak sales season, there's no shortage of uncertainty. We await the arrival of colder weather in many regions of the world. With this in mind, we are taking a more cautious net sales outlook for the remainder of the year. Despite the top-line pressure, we are slightly raising the bottom end of our diluted earnings per share guidance. Before reviewing our results and outlook in more detail, I'd like to discuss Columbia's new growth strategy named ACCELERATE. In recent months, the Columbia brand initiated ACCELERATE, a growth strategy intended to elevate the brand and attract younger and more active consumers. Over the past 86 years, we've built an extraordinary company and one of the largest outdoor brands in the world. Our top strategic priority is to accelerate profitable growth, and I know our company is capable of growing rapidly. The ACCELERATE growth strategy is centered around several consumer-centric shifts and enhanced ways of working. First, we have strengthened our consumer segmentation framework to clearly define the growth opportunities ahead of us. We will continue to serve our existing consumers with accessible outdoor essentials while also focusing on bringing new, younger active consumers into the brand. We know that this consumer segment is the largest and fastest-growing part of the outdoor market. We already successfully serve this consumer outside the US where we are seeing strong growth in markets like China and Europe. In the coming seasons, our brand, product, and marketplace strategies in the US will focus on reaching younger, more active consumers. We know that when we deliver the right product to the right consumers at the right time, we win in the marketplace. The second shift is elevating consumers' perception of the brand. We're doing this with a refreshed creative strategy that brings Columbia's unique brand personality to life. We're embracing the spirit of the brand that our one tough mother, Gert Boyle, made famous. We engineer exceptional products for whatever life throws at you, helping to keep consumers warm, dry, cool, and protected. At the same time, we don't take ourselves too seriously. The Columbia brand is fun, irreverent, and authentic, and this will become increasingly evident in our marketing. To lead this new marketing direction, we recently hired Matt Sutton as the Columbia Brand Head of Marketing. Matt has extensive experience in brand and digital marketing and will be leading the strategic integration of the Columbia global marketing efforts. We've also announced a new global ad agency of record, Adam & Eve, to help us bring our vision to life. The third shift is around product. The foundation of our success is creating iconic products that are differentiated, functional, and innovative. Under the leadership of Woody Blackford, our product teams have a new product construct to drive growth with targeted consumer segments. Consumers already trust the Columbia brand for its quality, value, and reliability. In the coming seasons, we will be emphasizing innovation and style with new products as well as updates to our most iconic styles. We're reducing our assortment to focus our efforts on fewer, more powerful collections with clear purpose. The fourth shift in ACCELERATE is elevating the position of the Columbia brand in the US marketplace. To activate our brand and product strategies, we will invest alongside our best-in-class strategic retail partners to elevate in-store presentations and bring our unique brand and products to life. In our direct-to-consumer e-commerce business, we've already begun to evolve columbia.com to be the best expression of the brand. We want visitors to come to the site to see our latest products and innovations with enriched brand storytelling. In our brick-and-mortar stores, we're focusing on enhancing our assortments and in-store presentations to tell better brand stories and drive sales. The next shift in ACCELERATE is our integrated full-funnel marketing strategy. We'll have a greater emphasis on consistent year-round share of voice in the market. Not only are we planning to invest more into marketing, but we're also going to be more efficient with how and where we activate these demand creation investments. We will be more differentiated with creative marketing activations and immersive ways to experience the brand. Combined, our ACCELERATE product, marketing, and marketplace strategies are engineered to get the right product to the right consumers at the right place in time. This will enable us not only to meet our consumers where they are but inspire them to go further with us. We're excited to bring ACCELERATE to life. This will be a multi-year strategy that steadily builds momentum in the seasons ahead. As 2025 progresses, the changes we're making will be increasingly evident to consumers. While we are not prepared to provide financial metrics for the ACCELERATE growth strategy at this point, I firmly believe these actions will drive brand-right profitable growth. We will seek to balance brand investments with disciplined expense management to achieve our goal of profitable growth with operating margin expansion over time. I will now review our third quarter financial performance. Net sales of $932 million declined 5% year-over-year, driven by a 9% decline in global wholesale net sales, partially offset by 2% direct-to-consumer growth. Gross margin expanded 150 basis points to 50.2%. This was ahead of plan driven by favorable international gross margin performance, lower than expected promotional activity in the U.S., and lower freight expenses. SG&A expenses increased 3%, primarily reflecting higher direct-to-consumer expenses, partially offset by lower supply chain expenses. Favorable gross margin and SG&A underspend resulted in operating income and diluted earnings per share coming in above our guidance range. Looking at our net sales by geography, U.S. net sales decreased 10%, primarily driven by a mid-teens percent decrease in U.S. wholesale. As a reminder, our fall 2024 order book in the U.S. was down a mid-single-digit percent. While still very early in the season, wholesale sell-through has gotten off to a slow start. We expect sell-through to pick up with the arrival of cold weather. U.S. direct-to-consumer net sales were relatively flat. Brick-and-mortar was up mid-single digits, driven by a contribution from the temporary clearance locations, increased store productivity, and new stores opened over the last year. U.S. e-commerce net sales were down high teens percent reflecting challenging outdoor market conditions as well as a shift in Columbia.com digital marketing strategies. For my review of third quarter year-over-year net sales growth in international geographies, I will reference constant currency growth rates to illustrate underlying growth in each market. Latin America and Asia Pacific region saw net sales increase by 18%. China net sales increased low 20% with healthy growth across wholesale and direct-to-consumer. Despite broader economic headwinds in China, the outdoor category continues to grow. Columbia is capitalizing on this trend with localized product lines and unique brand activations that highlight Columbia's heritage and innovation. During the quarter, Columbia hosted a hiking event in Shangri La National Park. The well-attended event featured music and hiking in the first-of-its-kind event at this premier hiking destination. The event was amplified by celebrity brand ambassadors whose online content generated millions of impressions. China's e-commerce business continues to build momentum with several highlights in the quarter. Columbia had an incredibly successful Super Brand Day on Tmall ranking third in sales volume across all outdoor brands. On TikTok, Columbia's first footwear store launched and is off to a strong start. It's exciting to see the Columbia brand realize its full growth potential in this important region, and it remains on track to be one of our fastest-growing markets this year. Japan net sales increased by a double-digit percent aided by continued strength in international tourism. Korea's net sales increased mid-single-digit percent. During the quarter, we appointed Jeff McPike as the new General Manager of Columbia Sportswear Korea. Jeff is a 25-year industry veteran with a passion for building innovative omnichannel consumer experiences. His marketplace expertise will be instrumental in building the right strategy to drive our business forward in Korea. LAAP distributor markets were up mid-20s percent, primarily reflecting robust fall 2024 orders. Europe, Middle East, and Africa region saw net sales increase by 10%. Europe direct net sales increased low single digits led by robust direct-to-consumer growth. The European team is doing an exceptional job of creating brand visibility and relevance with unique marketing activations. This season, we hosted 90 hike Society events, creating grassroots connections with young hikers and introducing them to Columbia technologies. Our Europe direct business remains on track to be one of our fastest-growing markets this year. Our EMEA distributor business increased by approximately 130%, driven by a shift in timing of shipments as well as higher fall 2024 orders on the strength of the Columbia brand in many distributor markets. Canada net sales decreased by 19%, driven by lower wholesale sales. The Columbia brand remains well positioned in Canada with high brand awareness and consumer trust. Looking at performance by brand, Columbia brand net sales decreased by 1%, primarily reflecting a challenging marketplace in the U.S. and Canada, partially offset by a continuation of healthy trends in most international markets. This fall, we have several innovations that are integral to our product and marketing strategies. Omni-Heat Infinity remains our largest innovation platform and one of the fastest-growing parts of our business. Our newest cold weather innovation, Omni-Heat Arctic will be prominently featured in our direct-to-consumer channels. As a reminder, Omni-Heat Arctic starts with the translucent outer layer that lets solar energy in. Heat is then transmitted to an insulation layer close to the body for maximum warmth, mimicking the polar bear's warmth protection system. I'd like to congratulate our Chief Product Officer, Woody Blackford, and our Vice President of Innovation, Haskell Beckham, who were honored for their significant contributions to developing new fabrications and technologies in the apparel industry. Thank you for everything you do to make Columbia a leader in the outdoor space. On the collaboration front, this fall we partnered with Disney on Mickey's outdoor Club collection inspired by the iconic artwork from the Mickey Mouse comic strip. This collection featured beloved Disney characters on a camping trip, and top styles quickly sold out. The line was featured in numerous Disney-focused and outdoor media outlets. This holiday season, Columbia will launch our ninth annual Star Wars collection. The first content promoting the collaboration will go live tomorrow and will feature a surprise appearance from a Star Wars special guest. Fans of Star Wars and NASCAR are going to want to see this. Shifting to our emerging brands, Mountain Hardwear net sales increased by 2% driven by direct-to-consumer growth. The brand has several exciting brand and product activations for the balance of the year, including an expanded Ghost Whisperer collection, new snow sports offerings, and a soon-to-be-announced product collaboration. Mountain Hardwear's product line and brand positioning are on track and the team is focused on accelerating growth. prAna net sales decreased by 7% in the quarter. I'm encouraged by the progress the prAna leadership team has made in recent months activating wholesale distribution, refreshing marketing, and recruiting new talent to the team. I'm confident these actions position the brand for growth starting with a positive order book for spring 2025. SOREL brand net sales decreased by 39% driven by lower fall 2024 orders and elevated clearance and promotional sales activity in the prior year. The SOREL team is focused on building brand, product, and marketplace strategies to drive the long-term growth potential that I know the brand is capable of. This process will take time, and I expect sales trends will remain under pressure in the spring 2025 season. I will now discuss our 2024 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: outdoor industry and U.S. consumer headwinds, weather, geopolitical conflicts, supply chain disruptions, and the upcoming U.S. elections. These factors, among others, have the potential to impact consumer demand and our operations. With this uncertainty in mind, we are reducing our net sales outlook to reflect a 3% to 5% decline this year. Gross margin is now expected to expand by 40 to 90 basis points. SG&A is expected to be 42.8% to 43% of sales leading to an operating margin of 7.7% to 8.4%. The profit improvement program is on track to deliver approximately $90 million in cost savings. This year we are slightly raising the low end of our diluted EPS guidance range, which is now $3.70 to $4.05. As we noted on the last call, our spring 2025 order book reflects a return to growth in our wholesale business in the first half of the year. This order book reflects growth across Columbia, prAna, and Mountain Hardwear, and growth in the U.S. and international markets. Based on spring 2025 orders, we anticipate first half wholesale net sales to increase mid-single digits. While we are not providing any full-year 2025 guidance at this time, our objective is to deliver net sales growth and operating margin expansion. We will provide our next update on 2025 when we report in February. In summary, I'm confident we have the right strategies in place to unlock the significant growth opportunities we see across the business. The ACCELERATE growth strategy provides clear strategic shifts that will unlock brand-right profitable growth for years to come. We are investing in our strategic priorities with renewed emphasis 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, omni-channel, and global, and empower talent that is driven by our core values. That concludes my prepared remarks. We'll welcome your questions for the remainder of the hour.

Certainly. At this time, we will be conducting a question-and-answer session. Please note that each caller is limited to two questions. The first question today is coming from Bob Drbul from Guggenheim. Bob, your line is live.

Hi, good afternoon. Hi Tim. I guess, I have two questions for you. The first one is just on the ACCELERATE growth strategy. You talk about bringing newer, younger active consumers into the brand. Do you believe those consumers are already in the channels that you're competing in? I'm just trying to understand sort of how do you get after that segment of the consumer base? And the second question I have for you, Tim, is you said it's obviously warm, 75 or 80 today in New York, but like warmer weather, slow start to the season. How do you feel like the channel is out there with many of your wholesale partners?

Great. Yeah, I can help you with both of those, Bob. As it relates to the younger consumers, we believe that they're already aware of the brand. We know they're engaged with the brand internationally. We just need them to be more involved with the brand domestically. Our expectation is that with the new marketing leadership and help from a creative agency that we've announced, we're going to be again returning to a more differentiated approach to a humorous, irreverent brand personality, allowing us to stand out and be more important to these consumers that we're trying to attract. We believe that they are familiar with the brand; they just need more engagement. So that's the plan—to spend more to engage those individuals more efficiently and to get the messaging right. As for the channel, I believe it's in the proper shape now. Our customers have spent a lot of time clearing up inventories, addressing past issues in various geographies. The channel looks better and we're just waiting for excellent weather to kickstart things.

Great. Can I just follow up, Tim?

Sure.

So just in terms of the marketing, is the plan to create a 'one tough father' strategy with you and Joe? Are you guys going to get back into the acting business, or what are we looking for here?

No, I said that card is expiring and I think I'm done with that. No, this is going to be an approach that will be quite interesting and different. We've previewed it with a few customers and their reactions have been quite positive. We'll have to present it to our investor group soon, but suffice it to say that we're excited about the opportunity.

Thank you. The next question is coming from Laurent Vasilescu from BNP Paribas. Laurent, your line is live.

Good afternoon. Thank you very much for taking my question. Tim, I wanted to follow up on the comment around first half 2025 wholesale growth of mid-single-digits. Maybe can you unpack that a little bit more for the audience? What's driving that growth? Is it just easier year-over-year comparisons or is it driven by pricing or restocking? And I noticed you mentioned that growth will be coming from all regions, but are all regions equal in that nature or should we think about just more growth coming from international at least for Spring 2025?

Yes, that's right. The business is going to be more balanced in the first half of 2025. We will see significant improvements in our U.S. business as retailers are cautious about placing orders in prior periods due to various market conditions. There will be improvements across almost every market, not all to the same extent, but I can point out that our international business has performed significantly better than our domestic business, and our expectations are that those markets will continue to improve possibly more rapidly than the U.S.

And then Laurent, maybe just a couple of added comments to that. In terms of pricing versus stocking as it relates to the spring 2025 season, by and large, we've held prices for the season aside from whatever mixed shifts there might be with what's sold in. And I think Tim's point about regional growth opportunities is important; you can generally assume that the U.S. business mirrors that overarching first-half expectation.

Okay, very helpful, Tim and Jim. And then just to follow up on margins. With regards to the ACCELERATE plan, I think Tim you mentioned the higher and more efficient demand creation. I know demand creation last year was at 6%. Where do you want to go through this ACCELERATE program? And then Jim, for you on the cost savings program for the $90 million for 2024. I was just curious how much you've realized so far in the first few quarters and how should we think about for the fourth quarter? And for 2026, I know you're not commenting about 2025 financial targets but should we think about that 125 to 150 kind of balance between the two years that remain for this profit improvement plan?

Yes, let me make sure I get my questions out of the way and then I'll turn it over to Jim here. The margins are planned to be strong and certainly in comparison to last year. The marketing rates will be established as we approach the end of the year, but suffice it to say there’s going to be an increased amount of spending in marketing, as well as a more efficient use of those financial resources. We haven't settled on a firm number yet, but we know we need to increase our spending and have incorporated those additional costs into other parts of the business to offer growth and expand operating margin over time.

And then, Laurent, as it relates to the Profit Improvement Program, we're well along this year in achieving the targets that we've set. Earlier in the year, we mentioned a target of $75 million to $90 million. With our revisions, we're tracking toward the high-end of that estimate and are really pleased with our progress across the business. A significant component of that is attributable to getting our inventories under control and lessening supply chain and inventory carrying costs. There are also broader optimization efforts happening across our supply chain with a focus on disciplined cost management. I'm happy to see that we're progressing in that regard. Regarding out years, I think it might be premature to break down those details; I’ll provide more information when we call in February.

Okay, very helpful and best of luck with the holiday season.

Thanks, Laurent.

Hey, good afternoon, guys. Thanks for taking the questions. Tim, what do you think the catalyst is for improved spending on outdoor categories? The competition seems fairly high and the macro seems somewhat depressed. But what do you think gets us out of the slump? You are calling for mid-single-digit wholesale growth next year, which is a nice uplift. What do you think sustainable growth looks like? And what's the catalyst for it in the outdoor industry?

Well, frankly, I'm always disappointed when we aren't growing in the high-teens because I believe the company, with its balance sheet and the infrastructure we've built, should be experiencing much stronger growth. Much of our malaise in the U.S. is due to the ways we've been marketing our products. We believe our products are superior to many competitors; we just haven't been articulating this well. This needs to change and will be key in making us a larger player in the U.S. Additionally, we have discussed our underperformance in categories like footwear, which will receive more emphasis in terms of product development and marketing.

Understood. That's helpful. Maybe just a follow-up question on the margin structure of the business. The SG&A rate is going to sit somewhere in the low 40s, and gross margins are now above 50%. Over the past five years, the SG&A rate has really been the reason for the margin leverage. How do we think about the SG&A rate going into fiscal 2025 and 2026? There's obviously been some cost savings programs announced, but how do you stop the deleveraging of SG&A?

Well, the first order of business is going to be increasing the top line, which is a focus of the company. However, we also have levers to pull, and I'll let Jim address a few of them. Many of these initiatives are already underway.

Certainly. We do have a profit improvement program implemented. Some efforts focused on how we reduce the total costs of our supply chain, which have increased by several points over this five-year timeframe. We believe there are efficiencies to be gained in how we streamline our operations, processes, and product flow. We are committed to disciplined management to bring the SG&A back down to a more appropriate level while simultaneously ensuring that we are investing wisely to drive growth.

At the end of the day, this is about growing the business. We believe we can control costs effectively, but growth is paramount, and we will achieve it.

Understood. Maybe just one final question on the wholesale channel commentary. How would you describe the U.S. wholesale channel? International trends are above domestic. Just curious how you view the North American wholesale channel going into fiscal 2025 and what dynamics are at play.

Clearly, there has been significant consolidation in the retail market across North America for many years. This has put more leverage in the hands of the retailer. We need to be better suppliers and achieve greater sell-through, which will be driven by great product, backed by robust marketing.

Thank you. The next question will be from Paul Lejuez from Citigroup. Paul, your line is live.

Thanks. It's Tracy Kogan filling in for Paul. I had a question about your gross margin. It came in better than planned in the third quarter. You mentioned that there were lower promotions in the U.S. market. I was just wondering if you could characterize the current promotional environment. And then secondly, I was wondering what was built into your guidance for four quarters in terms of promotions. Thank you.

Yeah, we would expect promotions to be stronger as we approach the holiday season. The gross margin improvement was due to several factors including free charges and first costs of goods entering the country. We anticipate further promotions, and we’ve incorporated those expectations into our guidance today.

To add to that, in July, we lowered our full-year gross margin forecast due to anticipated promotional activity in the second quarter that didn’t materialize to the extent we had expected in the third quarter. However, it remains a promotional environment. We did not increase the bottom end of our range, given the need to respond to market demand with promotions. This response is essentially what's baked into our fourth quarter guidance. As for the year-on-year change, we expect better gross margin expansion in Q4 due to cleaner inventories with less wholesale close-out sales compared to last year. We think our direct-to-consumer business and margins will be on par with last year's performance, both from a promotional and an overall margin standpoint.

That's very helpful.

Thank you. The next question will be from Alex Perry from Bank of America. Alex, your line is live.

Hi. Thanks for taking my questions here. I wanted to ask about your exposure to potential China tariffs. Can you just remind us what percent of U.S. goods are sourced in China? Do you have any initiatives in place to mitigate any potential impact? And would you consider price as a lever as well? Thanks.

Thanks. Yes, we strategically began our move out of China several years ago, even prior to the previous administration. We now have a very small percentage of merchandise flowing into the U.S. from China, so our exposure there is minimal. Although we are concerned about tariffs, products in footwear and apparel face some of the highest tariff rates in the United States. These products carry duties of nearly 40%, which hasn’t led to increased investment in domestic production. We find arguments regarding tariffs improving domestic production for footwear and apparel to be misleading. We believe we are adept at managing tariffs and duty rates globally, and are quite successful in managing our international business despite the complications of trade wars.

To elaborate on our sourcing exposure to China, about 20% of our footwear category is sourced from there, and apparel is at a low single-digit percentage. Therefore, exposure is relatively modest, as Tim described.

Really helpful. And then I just wanted to follow up on the gross margin. So I think at the high end, you imply about 150 basis points of expansion in the fourth quarter. Can you discuss other elements driving that expansion? Do you expect these tailwinds in Q4 and the third quarter to continue into the first half of next year? Thanks.

Yes. The primary reason we anticipate fourth quarter gross margin expansion is due to significantly cleaner inventories compared to last year. We expect a much lower percentage of our total business being conducted through close-out sales. There will be some improvement in our outlet business as we have a better assortment of inventory. However, as mentioned earlier, we do expect that promotions and markdowns will remain slightly higher. We've taken a reasonable approach in formulating our margin outlook today.

Perfect, very helpful. Best of luck going forward.

Thank you.

Thanks for taking my questions. Tim, you’ve discussed how the weather has been warm to start the season. I'm curious about the assumptions embedded in your outlook. Are you essentially assuming normal weather for November and December, or are you expecting it to continue to be warm? What are the underlying assumptions informing your guidance?

Certainly. Through October, we've seen notably warm weather, which has dampened sell-through across both our wholesale and direct-to-consumer business. This pattern has been reflected in our updated outlook. We anticipate some improvement as we move into the latter part of the year, but we're certainly not expecting a major cold front to significantly intensify demand. We've aimed to take a balanced approach to our projections.

And Tim, after many years in the industry, when do you feel you need the weather to change to improve sales? When should retailers start to be cautious about promotions on seasonal items?

These trends can be difficult to assess precisely. Ideally, snow would start early, like by Labor Day. The severity and location of the weather are important. We've had favorable conditions in Europe, contributing to good business there. Overall, I believe we have focused on the right level of inventory for smoother promotion cadences.

This uncertainty around weather is partially why we've maintained a wider guidance range, rather than narrowing it.

Finally on SOREL, you mentioned it having a $1 billion sales potential while trending closer to $250 million this year. Are you seeing any signs of improvement with management changes and adjusted strategies? Do you still believe in that billion-dollar potential?

SOREL is a unique brand with a compelling background and personality. We just need to harness that better. I'm optimistic about the men's product line, which had been neglected previously. There remains significant opportunity for strong marketing targeted at women and ensuring we present the right offerings.

Thank you. The next question is coming from Jonathan Komp from Baird. Jonathan, your line is live.

Hi, good afternoon. I just want to follow up on the commentary around the wholesale outlook into the first half of 2025. I know the first half of 2024 was quite weak, leading to the potential that you might still be down on a two-year basis. How are you assessing the marketplace, and how does the multi-year performance compare to other reads across the industry?

Yes, as I said, there has been substantial consolidation in the retail trade over the years, resulting in fewer large customers. Our expectation is to enhance our marketing efforts, spending, and in-store appearances, all part of the ACCELERATE strategy. This should lead to a much stronger business performance in the wholesale sector.

Awesome. Just one follow-up regarding the ACCELERATE strategy. You’ve been focusing on reducing costs and driving margin expansion through cost cuts. Is there a risk you went too far with some of those cost actions? Why does it make sense to target margin expansion while now investing in accelerating growth?

As it relates to ACCELERATE, we focus on reducing spend across all categories, rather than cutting back on specific initiatives. We're adjusting our spending levels in certain areas to prioritize marketing and promotional activities critical for invigorating our brand trust and recognition.

Great. Thanks for taking my questions. I wanted to ask about the Q3 sales figure. With the mentioned wholesale shipments, was there a net impact? I believe there was a pull forward from EMEA, but also some delays in areas like Europe Direct. I’d like to clarify the impact on our financials. Secondly, could you elaborate on overall outdoor industry demand in the U.S. going into 2025, considering last year's challenges?

Regarding the timing shifts, for the fall 2024 season, our wholesale business was down 9%. Our full-season projection is a decline of four percent, indicating a partial shift to the fourth quarter—around $15 million to $20 million—due to supply chain disruptions. This impacted both North America and partially Europe. For the broader outdoor business, we see strength within outdoor apparel—more consumers are comfortable outdoors versus transitioning to formalwear. We need to capture a more significant share of the expanding market.

Yes, that's right. The market for outdoor apparel is potentially robust, and we expect it to continue growing. There’s a need to secure our fair share of the market. Thank you, Anthony. I want to thank everyone for listening. We are very excited about the ACCELERATE growth strategy and its implications for our company. We're anticipating the arrival of cold weather and are looking forward to seeing how it unfolds. Thanks for listening in. We look forward to our next quarter's report.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.