Columbia Sportswear (NASDAQ: COLM) Q2 2025 Earnings Call dated Jul. 31, 2025
Corporate Participants:
Unidentified Speaker
Andrew Burns — VP, Investor Relations & Strategic Planning
Timothy P. Boyle — Chairman, President and Chief Executive Officer
Jim Swanson — Senior Vice President and Chief Financial Officer
Peter Bragdon — EVP, Chief Administrative & Legal Officer
Analysts:
Unidentified Participant
Laurent Vasiliscu — Analyst
John Kernan — Analyst
Pete McGoldrick — Analyst
Tom Nikhic — Analyst
Mauricio Cerna — Analyst
Presentation:
operator
Good day everyone and welcome to the Columbia Sportswear Company second quarter 2025 financial results. @ this time, all participants are on a listen only mode and we’ll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Andrew Burns. Sir, the floor is yours.
Andrew Burns — VP, Investor Relations & Strategic Planning
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 8K 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 Bracken. 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 and 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 call the call over to Tim.
Timothy P. Boyle — Chairman, President and Chief Executive Officer
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 US we’re focused on re energizing 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 Colombia back to the roots of what made us an iconic global brand by leveraging our signature irreverence and humor in memorable 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 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 is seeing 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 US and bring new customers to this brand.
On our last conference call three 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 US Trade policy has not materialized. This uncertainty overhangs consumer sentiment and every decision that we make for our US 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 US 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 partners 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 to 40 million dollars in 2025. By August 1st we will have received approximately 70% of our US 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 US Tariffs on our business.
Our goal is to offset higher tariffs over time through a combination of actions including price increases, vendor negotiations, SG and 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 US 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 one time 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 US 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 SGA 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 re energizing the Columbia brand through the accelerate growth strategy. The US Wholesale business increased low single digit percent reflecting timing of spring and fall wholesale shipments which benefited sales in the quarter. US 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 seven 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 618 event on TikTok. We were 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 Omnimax Footwear and Omnifreeze 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 beautiful store represents one of the most premium expressions of the Columbia brand in the global marketplace. Columbia Net sales increased low single digit percent during the quarter. We partnered with a new Columbia brand ambassador in Korea, actor Chu 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 EME 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 hype 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 ship at a full 25 orders across our EMEA and LAP 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 Omnimax 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 re energized 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 Rio tail partners in the US and in select international markets. In footwear, our new Omnimax Konos Featherweight is performing well in the marketplace and receiving positive accolades. Women’s Health 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 Asia 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 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 suggest the brand is stabilizer. 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. Product 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 am excited to see it come to life in the seasons ahead. Hardware 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 Hardware 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 Hardware 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 to 3.4 billion. We’re down 1% to up 1% year over year. This is below our initial guidance provided in February, reflecting lower assumptions for our US 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 US 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 US this year and do not plan to import any finished products from China into the US 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 1H26.
This forecast contemplates growth for all of our emerging brands led by Mountain Hardware 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 to placing orders for future seasons. As a result, we expect Colombia’s US wholesale business to remain down in 1H26. I believe we are making the necessary adjustments and investments to re energize the US Marketplace.
Elevating consumers perception of the Columbia brand and ultimately restoring healthy US 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?
Questions and Answers:
operator
Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you’re listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press Star one on your phone. Thank you. Your first question is coming from Laurent Vasiliscu from BNP Paribus. Your line is live.
Laurent Vasiliscu
Good afternoon. Thank you very much for taking my question. I wanted to ask about 1H results relative to what you provided in terms of guidance in February for one hybrid 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 US Wholesale weakness and the USDTC weakness?
Jim Swanson
Yeah. 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, you know, we’ve seen stronger business internationally, we’ve seen some softness in the domestic business. And then for sure, you know, 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 at 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, yeah, 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 US Business partially offset by strength. What we’re seeing internationally.
Laurent Vasiliscu
Very helpful, Jim. And when I look at the PowerPoint presentation with relative to talking about the performance by region, everything is pretty much up. Even US Wholesale is up partly due to that Shift those shifts. But the one point of pressure, obviously, is the US DTC brick and mortar. Obviously, you’re lapping some of the temporary stores, but.com is under real pressure. It seems to be like a theme happening across a lot of vendors. Just curious to know what your, 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 DTCs versus wholesale for the third quarter? Thank you.
Timothy P. Boyle
Yeah, I think, you know, clearly there’s some pressure on Dot com. The way we’re approaching is we’re going to have a complete refresh on our site will become apparent to consumers within the next 10 to 20 days where we’ve got new photography. And that coupled with our, with our marketing efforts, which are breaking, I think, on the 4th of August our expectations that we’ll see some nice lift. We’ve had strong digital performance through some of our wholesale customers. So it’s not, 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 own.com business.
Jim Swanson
And then, Laurent, as it relates to the third quarter and what we anticipate in the U.S. from a wholesale and DTC standpoint, from a DTC 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 extrapolated or we’re more or less doing that, 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 Vasiliscu
Okay, very helpful last question here. Gross margins, it looks like per 3Q gross margins down, maybe is it fair to assume 150bps? And then within that, how much is the tariff impact embedded in that?
Jim Swanson
Yeah, 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 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 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.
Laurent Vasiliscu
Okay, very helpful. Thank you very much for all the Color. Best of luck.
Unidentified Speaker
Thanks.
operator
Thank you. Your next question is coming from John Kernan from TD Cowan. Your line is live.
John Kernan
Good afternoon Tim and Jim. Just back to the tariff point. Jim, you gave us pretty specific guidance about the second half COGS impact on the Q1 call. 40 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. Thank you.
Timothy P. Boyle
Well, I wish we knew specifically what the tariffs were 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 we submitigated the mitigating activities include obviously we could impri. 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 to for areas where we can save and increase the ability.
John Kernan
Got it. But it’s safe to assume the biggest impact will be coming probably in fiscal 26, is that correct?
Jim Swanson
Yeah, I think by and large the 35 to 40 million of tariff impacts that we anticipate this year, we really, we really don’t. Aside from, you know, obviously continuing to be disciplined in our spend management in the form of price increases and other actions, you know, we’re absorbing the lion’s share all of the tariff impact in FY25.
John 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, Columbia was the 81st largest duty payer in the United States, which is crazy based on the size of the company. So consumers have been paying heavy tariffs since the 30s. If they want to continue to receive product, they’re going to be, 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 US and our expectations are that there will be some elasticity issues as it relates to products being sold with heavy, additional heavy tariffs.
John Kernan
That makes sense. And Just on that inventory theme. 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 Swanson
We’Re in excellent shape, very comfortable with our overall inventory. 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 rebuilt 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 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.
John Kernan
Very helpful. Thanks, guys.
operator
Thank you. Your next question is coming from Pete McGoldrick from Stifel. Your line is live.
Pete McGoldrick
Hi. Thanks for taking my question. I was curious on cost savings. So you’ve already exceeded the high end of the original $125 to $150 million range as you assess other areas of cost savings that might curious if any of those savings are embedded in your outlook or would that be incremental to what you laid out today.
Jim 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 you know, we are continuing to evaluate any and all options with, you know, the pressure that we’re seeing in the business and the impact of the tariffs and, you know, provide further updates on that over time. But I think, you know, we’ve provided the best estimate we can in the the outlook that we provided.
Pete McGoldrick
Okay, thank you for that. And then on tariffs, the 35 to 40 million dollars 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 offsets.
Jim Swanson
Well, I think that maybe the best way to explain that and you know, 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 FY25 or FY26. Rather, our FOB import into the US 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 it fully annualized basis, 80 million.
And then you can run different scenarios off of that. That’s the way to think about it.
Pete 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 timeline 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. But we’re excited about the opportunities it’s going to provide for us.
Pete McGoldrick
All right, thank you very much.
operator
Thank you. Your next question is coming from Tom Nikhic from Needham. Your line is live.
Tom Nikhic
Hey everybody, thanks for taking my question. I wanted to ask about one of the kind of bright spots in the quarter and specifically the last couple of quarters. I think your Europe is, has been quite strong. I just wanted to dig in a little bit deeper there and 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 just love to get a little more color there.
Timothy P. Boyle
No thanks. It’s been a continued focus effort by our team in Europe. And remember, it’s a, we’re for all intents and purposes, 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 UK 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 just kudos to those, to those team members for making it happen.
Tom Nikhic
All right, great. And if I could ask one more about. So the inventory growth was plus 13% in the quarter, which obviously is, you know, higher than the projected sales growth the next couple of quarters. I would assume that there’s some, you know, kind of pull forward ahead of tariffs that impacts that number. And, you know, is there any way that we should, you know, think about what the inventory growth will look like at year end?
Jim Swanson
Well, we see we still See a path and you know, we have provided a projection here, but we do see a path where we can keep our inventories, you know, exiting the year flat to maybe even down. There’s obviously a ton of assumptions, you know, as it relates to how the top line plays out. Timing and receipts of spring 26 inventory. In that, as I touched on in an earlier question, you know, the inventory being up 100 million at the end of the second quarter, you know, that’s, you know, 70% of that is earlier production and tariff costs and the balance of its combination of currency and just replan rebuilding up our replenishment inventories coming off of low levels last year.
So we’re in, we’re in exceptionally good shape in terms of the composition of the inventory.
Tom Nikhic
Alright, sounds good. Thanks very much and best of luck in the second half of you.
Jim Swanson
Thank you.
operator
Thank you. Your next question is coming from Mauricio Cerna from ubs. Your line is live.
Mauricio Cerna
Great. Good afternoon. Thanks for taking my questions first. Maybe could you talk a little bit more about how you’re thinking of the underlying growth in the order books in second half of 25 just given, you know, the shift in shipments out of Q3 into Q2 and then maybe in the DTC business, you know, in the U.S. you know, seeing some deceleration anyway that. Do you have a sense of how much, how that has been driven by, you know, your strategy to pull back and promotions versus you know, maybe just like consumers being more under pressure and then, you know, reducing their discretionary spending.
Thank you.
Timothy P. Boyle
Yeah, 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. 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, smaller vendors in the community, they’re 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 Cerna
And then just a quick follow up on the guidance for the year. You know, 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. Is that just like caution in the consumer sentiment that’s like more tariffs get passed through? Like, they feel that the pinch of tariffs or what is driving that kind of like, sequential deceleration?
Timothy P. Boyle
Yeah. I mean, our expectations is that the impact of the tariff costs will begin to manifest themselves late in Q3 and in Q4. So it’s it’s obviously difficult to predict with any kind of certainty what will happen, but consumers are very likely to be cautious and will, will be constraining their paying their, their purchases during that period.
Mauricio Cerna
Understood. Thank you very much.
Timothy P. Boyle
Thank you.
operator
That completes our Q and A session, everyone. This concludes today’s event. You may disconnect at this time.