Columbia Sportswear Company (COLM) Q1 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to the Columbia Sportswear First 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 first 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-Presidents, 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. Now I'll turn the call over to Tim.

Thanks, Matt, and good afternoon. In the first quarter, we're pleased to have again delivered net sales and profitability exceeding our quarterly guidance, driven by early spring 2026 wholesale shipments and better-than-expected demand in Europe and the U.S. as well as disciplined expense management. Our international business, which represents over 40% of our sales, continued to lead our growth, up 16% year-over-year. While our U.S. business remained challenged this quarter and declined 10%, the decrease was largely anticipated based on the decline in our advanced Spring '26 wholesale orders. This also reflected our decision last year to reduce the supply of certain winter products as a precautionary measure in response to U.S. tariff announcements. Cleaner inventories also drove less clearance sales. That said, I'm encouraged by signs of growing momentum in the U.S., including an increased fall '26 order book, which we expect to enable the wholesale business to return to growth in the second half. It's increasingly clear to me that the Columbia ACCELERATE Growth Strategy is resonating with consumers. A major highlight for the Columbia brand in Q1 was the Winter Olympics, where the U.S. Curling team thrilled fans at home and around the world, capturing a historic silver medal in mixed doubles, all while competing in distinctive and iconic Columbia kits. This generated billions of views around the world for one of the most watched Olympic events, along with more than 25 million views of Columbia's U.S. Curling jerseys on social media. Additionally, longtime Columbia and Team USA Freestyle skiing athlete, Alex Ferreira, reached the pinnacle of his sport claiming the gold medal in the men's halfpipe. Alex's performance and victory further demonstrate that Columbia's products meet the highest standards of elite winter athletes. And he has continued to inspire fans and drive energy for the Columbia brand since returning home. He's been celebrating at events such as the recent U.S. ski and snowboard nationals in Aspen, Colorado. The Columbia brand also garnered outsized attention at another sporting event of major importance in Q1 crashing the tailgate party at the big game in Santa Clara with Nature Calls, the only beer that uses bear scat in the brewing process. Columbia sent 2 bear ambassadors to the game, and they made their presence known, appearing 4 times on the stadium's Jumbotron and even making it on the live TV broadcast. This impact was enhanced by influencer partnerships with sports personalities around the event. Social media content from the game itself, generating over 9 million views on social media alongside hundreds of news articles. We're excited that the return to our irreverent roots also continues to see recognition from the media and outdoor community. The Engineered for Whatever campaign was recently awarded a Gold Clio Award, one of the most respected international awards in advertising, marketing and communication for the launch of our Expedition Impossible Challenge that we spoke to you about last quarter, which has generated over 10 million organic views on social media. Congrats to the team and stay tuned for more exciting things ahead. Our engineering excellence was also reinforced in Q1 with several product awards from multiple media outlets. Among many examples, a highlight included our women's Arcadia II jacket and our men's Watertight II jacket, both being featured in the New York Times Wirecutter Guide for Best Everyday rain jackets, a testament to the durability, performance and value we build into every design. Our newer product collections and marketing activations launched under the ACCELERATE Growth Strategy and Engineered for Whatever campaign are increasingly resonating with consumers. This is evidenced by improvements in organic search interest, direct site traffic and customer acquisition rate for the first quarter. Another first quarter highlight for the Columbia brand is the momentum we see building in PFG, performance fishing gear. As a reminder, we have a long and deep heritage with PFG as pioneers of the fishing apparel and footwear category. As a brand known for high performance, authenticity and fun, PFG is inspiring the next generation of anglers, supported by investments in sales and marketing, including an always-on social media strategy, a refreshing ground game and the addition of new fishing athletes and ambassadors to the PFG roster. A key product highlight in the quarter was the Bahama shirt, long known for keeping anglers cool and comfortable and also widely known as the unofficial uniform of country music superstar, Luke Combs. This year, we're celebrating the Bahama's 30th anniversary and expect sales of the Bahama to grow by double-digit percent for the spring '26 season. The celebration will continue beyond Q1 with additional marketing investments and collaborations with authentic artists and influencers to drive energy for this iconic style. Another PFG highlight on the footwear side is the Dry Tortuga Boot, which saw sales more than triple in Q1. We believe it's the most rugged, durable and comfortable fishing boot on the market and delivers attractive styling that's a standout in the fishing category. Looking ahead, we're excited about the potential for PFG to build on this recent momentum and take share in this growing market, particularly with younger consumers who are increasingly adopting the sport and lifestyle of fishing. Now I'll provide an update on our Fall '26 order book, which is another indicator of the traction we're gaining with our ACCELERATE Strategy. Since our last update, the order book continued to trend positively, reinforcing our expectations for mid-single-digit percent wholesale growth globally in the second half. While the overall growth is encouraging, the dimensions of that growth provide further signals of progress under the ACCELERATE Strategy. As a reminder, we launched ACCELERATE roughly 2 years ago. And given product development time lines, we're now increasingly seeing the new products created under this strategy hit the market, driving growth in the order book and representing an increasing share of Columbia brand sales. In addition to U.S. growth in the Fall '26 order book, we're excited to see double-digit percent sales growth in Columbia's women's business and in footwear. At a product level on a global basis, we're seeing outsized growth in our most premium and innovative products and platforms, including double-digit percent growth or better in our titanium product and our Omni-Heat Arctic technology as well as meaningfully scaling of our new MTR fleece. Our 2 major product launches from fall '25, the Amaze and ROC lines will continue to scale with orders up more than double versus the prior year. We're also thrilled to have Amaze featured in triple the number of DICK'S Sporting Goods location this fall as compared to last year. Turning to the current operating environment. While we remain focused on execution and what we can control, the operating environment remains highly dynamic with major external events affecting our business since we last spoke 3 months ago, particularly involving tariffs in the U.S. and the conflict in the Middle East. First, let me address the tariff situation. Following the U.S. Supreme Court's tariff ruling in late February, the U.S. administration implemented a 10% universal tariff under Section 122, which is set to expire in July. Our prior full year outlook, which was issued prior to the court's ruling, included unmitigated incremental tariff impacts of approximately 300 basis points on our gross margin. We are now expecting a slight improvement based on the 10% universal tariffs extending through July and the assumption that the U.S. administration will implement new tariffs at or near IEEPA tariff rates following the expiration of the Section 122 rates. We now expect an approximate 200 basis point unmitigated headwind from tariffs to our full year gross margin outlook. As a reminder, we made the decision last year to absorb nearly all of the fall '25 impact of incremental tariffs and not raise prices. The court's ruling also required the refund of IEEPA tariffs already paid. As of the date they were terminated, we have paid a total of approximately $80 million in IEEPA tariffs. Approximately $55 million of which has been recognized through cost of sales with the remainder residing in inventory on our balance sheet as of the end of the first quarter. We have already taken action by submitting our refund claims, and we fully intend to pursue every avenue available to secure the refunds that we are owed. We have not yet recognized any benefit of refunds in our financial statements nor have we updated our financial outlook for such refunds. Turning now to the ongoing conflict in the Middle East, which broke out in late February. First, my thoughts go out to any of our customers, employees, business partners and their loved ones who may be directly impacted by this conflict. Their safety and security is always our first and primary concern. As far as our business is concerned, this conflict has already triggered order cancellations and forecasted order reductions for certain Middle East distributor markets. While these impacts have not meaningfully changed our full year financial outlook to date, the prolonged nature of the conflict poses further risks. Macroeconomic and supply chain risks are among the areas that could have a more profound effect. These risks, including the potential softening of consumer demand, driven by the ongoing surge in energy prices and the resulting inflationary pressures on consumers' wallets. Increased oil prices are expected to put pressure on our product input costs with the exposure we're getting in our spring '27 season. Further, the conflicts impact on global supply chains could result in late arriving inventory, increased freight and logistics costs and potential order cancellations. Due to the high degree of uncertainty associated with the ongoing conflict and resulting impact on the global economy and supply chains, we are not able to incorporate these risks into our updated 2026 financial outlook. Despite these external factors, I am confident in our ability to navigate these risks given our highly experienced leadership team, flexible and resilient global supply chain, fortress balance sheet and high-quality products that provide a strong value proposition for the consumer. Turning back to our first quarter financial performance. Net sales were roughly flat year-over-year at $779 million, reflecting a balanced performance across channels with both DTC and wholesale coming in flat to the prior year. Gross margin contracted 20 basis points to 50.7%, driven by 310 basis points in incremental unmitigated tariff costs, partly offset by mitigation actions, including targeted price increases. SG&A expenses increased nearly 1%, reflecting higher DTC expenses, partially offset by lower enterprise technology and supply chain personnel expenses, reflecting cost reductions actions which were taken last year. This overall performance resulted in diluted earnings per share above our guidance range. Inventories remain healthy and are relatively flat versus the prior year in dollar terms with units down approximately 11% year-over-year. We remain steadfast in our commitment to driving shareholder value, returning meaningful cash to shareholders, including $150 million in share repurchases during the first quarter, which resulted in the retirement of 2.5 million shares and opportunistic acceleration of activity related -- relative to recent periods. We continue to maintain our fortress balance sheet, exiting the quarter with $535 million in cash and short-term investments and no debt. Looking at net sales by geography. U.S. net sales decreased 10%, but performed better than planned. The decline in sales resulted from a lower spring '26 order book, constrained supply of winter season product, which limited our ability to fulfill consumer demand and lower clearance sales on lean inventory. The U.S. wholesale business was down low teens percent. The U.S. DTC net sales declined high single-digit percent in the quarter. Brick-and-mortar was down mid-single-digit percent, partially reflective of clean inventories and inclusive of the impact of less temporary clearance stores compared to last year. E-commerce was down low teens percent, driven by the shortage of winter product and lower conversion of consumer traffic. We're encouraged with the early spring 2026 selling, led by key categories, including footwear, outerwear, women's sportswear and PFG. We continue to see momentum building through our elevated home page, personalized and digital marketing efforts, including improvements in engagement and customer acquisition. For my review of first 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 3%. China net sales increased mid-single-digit percent driven by growth in wholesale from increased spring '26 orders, which benefited from earlier wholesale shipment timing. Highlights from the quarter included a successful airport campaign featuring our Titanium Dry technology and Tellurix performance hiking shoe in China's top 3 airports during the Chinese New Year season, which drove strong full price sell-through for those product lines. We also launched the Columbia Fishing Club to deepen connections with anglers across China following the success we've had with similar club events and activations based on hiking. We can see the impact that activities like these are having for our brand in China, including strong year-over-year growth in new member acquisition and active purchasers as well as market share gains with younger consumers and women. Japan net sales declined mid-single-digit percent, reflecting headwinds from softer international tourism as well as later shipment of spring '26 wholesale orders. While it was a challenging start to the year, we are encouraged by recent trends with a notable improvement in business momentum following the recent launch of Spring '26 product. Korea net sales increased high single-digit percent with growth across all channels, driven by the execution of marketplace initiatives. The Korea team continued to do a great job of leveraging the Engineered for Whatever campaign in Q1 and amplifying consistent high-impact brand visibility across consumer channels, driving strong sell-through for key products such as the Tellurix. I'm also pleased with how the team continues to elevate the marketplace and consumer experience, driving improved productivity in targeted doors. I want to take a moment to thank Jeff McPike for his strong leadership of the Korean business. This summer, Jeff will be returning to the U.S. to assume the critical role of Vice President, North America Retail. In this role, Jeff will be responsible for leading all aspects of our North America brick-and-mortar business. I'm confident in the ability of the Korea team to continue building on the momentum established under Jeff's leadership. Our LAAP distributor markets delivered low double-digit percent growth in Q1, reflecting a healthy order book for spring '26. Growth was driven by the Columbia brand in both footwear and apparel, particularly sportswear as our distributor teams continue to do a spectacular job strengthening our brand with active consumers in these diverse global markets. EMEA net sales increased low 20% overall. Europe direct net sales increased high teens percent, fueled by strong DTC performance and healthy wholesale sales, partly reflecting earlier shipments of spring '26 orders. Results across channels reflected robust demand for winter season product, aided by favorable weather early in the quarter and ample inventory availability. We're thrilled with the strong start to the year and anticipate seeing that momentum continue with a strong start to our spring season. Our EMEA distributor business increased low 30%, reflecting earlier shipments of orders and a healthy order book for spring '26. Canada net sales increased low single digits in the quarter, driven by growth in DTC brick-and-mortar, reflecting increased productivity from existing stores and strong winter sell-through. Looking at the first quarter performance by brand. Columbia net sales increased 1% as international growth more than offset expected declines in the U.S. Turning now to our emerging brands, all of which are expected to grow in '26. As a reminder, each of these brands derive a significant majority of their revenue from the U.S. marketplace. SOREL net sales decreased 12% due largely to reduced supply of winter season products in the U.S. as previously discussed, and lower closeout sales leading to declines across all channels and more than offsetting strong momentum in the international markets. Encouragingly, we have seen sales trends improve with the launch of spring '26 styles, including healthy growth in sneakers, a priority category that demonstrates SOREL is becoming viewed as more than just a winter brand. prAna net sales decreased 5%, driven by declines in wholesale, partly offset by solid growth in in-line DTC channels. This included low teens percent growth in e-com, driven partly by a shift in social media strategy that's helping to drive strong brand momentum, including improvement in new customer acquisition, customer retention, revenue per customer and robust growth with younger consumer. Mountain Hardwear net sales were flat year-over-year. Weakness with winter season product amid unfavorable weather in the Western U.S. early in the quarter was eventually offset by strong momentum with spring '26 product, particularly in e-commerce, driven by a surge in organic search demand. U.S. wholesale grew low single-digit percent in the quarter, led by high-quality specialty retail and digital partners with key product categories of equipment and outerwear driving the growth in Q1. Looking ahead, we're excited about the recent launch of the dry spell technology innovation, which sets a new standard for waterproof breathability. Additionally, Mountain Hardwear's new Lightness of Being brand campaign will emphasize innovative equipment and technical apparel for the trail elemental protection from the sun and rain as well as seasonal sportswear styles inspired by consumer insights. We'll now discuss our financial outlook for the second quarter of '26 and for 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 related to those statements. While Q1 results exceeded our expectations, we've noted that part of the outperformance was timing related with some wholesale shipments occurring earlier than planned. The partial and likely temporary reprieve of Section 122 U.S. tariffs also presents some favorability to our initial assumptions as discussed. On the other hand, the impacts associated with supply chain disruptions and inflationary pressure from the ongoing conflict in the Middle East represent key risks that were not contemplated in our initial guidance and that we currently cannot forecast. Based on the information we have today, we are maintaining our full year outlook for net sales growth in the range of 1% to 3%. We now expect gross margins of 50.3% to 50.5% or down 20 basis points to flat versus the prior year. The improved outlook reflects the termination of IEEPA rates by the Supreme Court and our assumption that rates will remain at current levels through July. Before reverting back to tariff rate levels approximate to the IEEPA rates, subject to the uncertainty of future actions by the U.S. administration. 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 net sales growth. Based on these assumptions, we are raising our operating margin guidance to 6.7% to 7.5% for the year, leading to diluted earnings per share in the range of $3.55 to $4. In addition to stronger gross margins, this range also reflects the benefit of our accelerated first quarter share repurchase activity relative to our prior assumption. For the second quarter, which is our seasonally lowest revenue quarter of the year, -- we anticipate sales in the range of down 1% to up 1% versus the prior year. This will result in slight SG&A deleverage and when combined with our anticipated decline in gross margin, result in a loss per share of $0.46 to $0.37. In closing, while I'm not satisfied with our overall financial performance in Q1, I'm pleased with the continued strength of our international business and our team's ability to execute and start the year off on a positive note by driving upside to our initial plans. Further, I'm encouraged by the additional signs of underlying momentum in our business under the ACCELERATE Strategy, particularly with the Columbia brand in the U.S., our largest market. Although the operating environment remains highly dynamic and uncertain, our fall 2026 order book and positive early indicators of our ACCELERATE Strategy provide us with confidence that we're on the right track. Thanks again to our global workforce who are instrumental in the execution of our strategies and business success. That concludes my prepared remarks. Operator, could you help us facilitate the questions?

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

Tim a couple of questions, if I could. I guess on the first part, from the last time you spoke where the order book was to where you are today, were there any surprises around the remaining, I think, 20% that you were booking? And then I guess just geographically around the order book, can you talk about the trends in Europe? And I guess, just any disruption whatsoever? I know Middle East is a risk that you call out. Can you just talk through those 3 things for us?

Certainly. Well, as it relates to the order book for fall, we were pleased -- we expected it to come in at a number, and we were pleased that it came in north of that number. So we're excited about the strength there. And again, we're cautioning because there are so many unknowns today about the Middle East conflict and the potential for increased tariffs beyond where we've estimated. Geographically, I think we're in a good place. We had strong reports from many of the markets, including Europe was good despite the fact that they had sort of a tough early winter in Europe as did we here in North America. So it was really quite broad. I might just point to the continued improvement and strength in our international distributor markets, which -- and despite those that are in the middle of the conflict in the Middle East are doing well.

Bob, I would just add, as we look at that order book and we take our advanced orders combined with our anticipation of in-season business for the second half of this year, we do contemplate growth across all geographies led by international and growth across each of our brands. So we're quite encouraged by the order book that's come in.

Great. And then if I could just sneak in one more. On the tariffs, in terms of the application for the refunds, I guess if you are successful in getting those refunds, Tim, what would be the plan with that money that you would do for the business?

Well yes. Thanks, Bob. As we know, the administration may or may not allow us to get the returns timely. We have filed all of the documents required to get the tariffs back, but we clearly haven't contemplated those in our plans for '26. We certainly hope we'll get them back promptly. As it relates to where -- what we will do with those funds, we have our standard allocation of capital rules that we use, which will follow. Some of our vendors were contributors along the line to helping us sort of in a spirit of partnership, and we want to make sure that those folks are well taken care of. But we're in discussions. We want to make sure that we utilize it correctly, but we're going to be leaning on our historical capital allocation plans.

Next question comes from Peter McGoldrick with Stifel.

I wanted to ask about your engagement efforts to recruit younger consumers. Can you share any KPIs supporting your progress here and how that's -- how growth is trending with that cohort and how that's embedded in your outlook today?

Well, at the end of the day, it's really the acid test is a larger order book and a bigger revenue. So that's -- we're pleased to see that coming along nicely. But I guess I would say these activations that we've engaged in with our ad agency, An, which would include the Expedition Impossible flat earth challenge and the hacking of the big game in Santa Clara in January. Those are primarily focused on a younger consumer, and it's great to see the reaction from those people in terms of visits to our website and important connections in that way. So we're going to be leaning on the acid test to make sure we've got growth growing across the business.

Very good. And then I was hoping you could help me think about today's revenue guidance in terms of price and volume. There's an 11 percentage point spread between inventory dollars and units. I'm curious of how to think of that spread flowing through the P&L. Is there anything you could share on like-for-like price increases and mix embedded in the outlook?

Well, the biggest place where we've taken price increases as we've previously communicated, some targeted price increases for both our spring '26 and fall '26 product lines in the U.S. And those have been a high single-digit percent of increase. And as you look at the comments we've made with regard to our wholesale order book for the fall '26 season, we anticipate the wholesale business being up a low single to mid-single-digit percentage. So certainly implied in that would be that there's less unit volume on that growth. So hopefully that answers your question, Peter.

The next question comes from Jonathan Komp with Baird.

I want to follow up on the momentum you're seeing for the Columbia brand in the U.S. specifically. Could you share any more direct feedback you've had from your wholesale partners and the positive developments you mentioned for the Amaze product, especially at DICK'S Sporting Goods. Is there a potential to replicate that across some of your other partners?

Yes. So the Amaze product for fall of '25 was quite broadly distributed across our better customers and better areas of distribution. So we're thrilled to see the results there. I mean it's primarily a women's product. So that area has been very good and sold through at very high margins. We've also taken the learnings from Amaze and extended it into our spring '26 product line, where we have a number of products which are following in the amaze learnings, including soft hand on the fabrics, stretch and colors that are very attractive and are complementary to younger females. We intend to, for Fall '26 to extend beyond those categories of merchandise into some rain and some fleece products where we think we can make the entire Amaze family a much bigger part of our business and frankly, a full franchise where we can be very successful and especially with younger consumers.

Great. That's very helpful. And then, Jim, if I could follow up, apologies if I missed this, but I think for the full year, you brought down the tariff headwind assumption by 100 basis points. You raised the gross margin by 50 basis points. So could you be a little more specific about the difference between those 2, what you're embedding today? And then as you think about the broader uncertainties not captured in your current guidance, which ones are sort of the biggest swing factors or the biggest incremental risk factors as you sit here today?

Yes, John, the delta between the 100 basis point benefit that we're picking up from the reprieve of tariffs and the gross margin outlook improvement of 50 basis points. There's no one discrete item that I would necessarily point to that's driving that, that we're seeing in the business. From an overarching standpoint, if you look at the revenue and margin that we achieved in Q1, it was in line or slightly better than where we had anticipated. So it's really just an acknowledgment of the overall macro environment that we're operating in and the potential risks around that. And I think that part of it is in the latter part of your question as well, just in terms of as we think about ultimately delivering on the guidance that we put before you today. And certainly, we've called out the Middle East risk. The main pressure valve there is just going to be how this weighs on the end consumer worldwide as it relates to gas prices and overall inflationary pressures.

The next question comes from Tom Nikic with Needham.

I want to ask about the U.S. direct-to-consumer channel. You've had, I guess, a bunch of negative quarters in a row. And it seems like there's been a lot of excitement around the new product and great marketing, et cetera. I guess kind of why do we think it's sort of taking so long to get that business back to growth? And I guess, if we kind of think about, I guess, by channel, like should we think that like digital should turn first or brick-and-mortar should turn first? Like how do we kind of think about the progression about getting U.S. direct-to-consumer growing again?

Yes. I would think that when we talk about our brick-and-mortar channel, you have to remember that we're comparing it against a much smaller number of stores since the bulk -- we had many, many stores that were temporary in the effort to liquidate inventories from the logistics logjam that we had. Additionally, we had a high percentage of liquidation inventory in those stores, which typically have a lower -- an impact and a lower rate on our gross margins in those stores. And so that's, I think, is the primary way you're seeing the decline in sales in those numbers. we've always considered ourselves to be a wholesale primarily business and retail is used as a steam valve, escape valve for the company to liquidate inventories in the right way. And so that's the primary use on the outlet channels. On the full-price channel, it's a newer category of retail that we use, and we're still learning our way around that. And we expect that digital is going to be the primary way that we expose our brands to consumers in the best possible light. So that will come, we believe, as the ACCELERATE program becomes more fully established.

The next question comes from Laurent Vasilescu with BNP Paribas.

I wanted to ask, I think you guys called out that there was a shift from 2Q to 1Q. Is it fair, Jim, to assume that it's $20 million shift and should it be just in EMEA? And then second part of the question is really around the call out that there were some cancellations with Middle East distributors. Is it fair to assume that Middle East is low single-digit percentage of sales and therefore, maybe like $70 million and maybe it was half of it was cut? Just trying to understand that. And then I have a follow-up on the oil input cost.

Yes, you bet, Laurent. So looking at the first quarter from a revenue standpoint, we beat by around $20 million. Roughly half of that was the timing shift that you're referring to. And the majority of that was European based. There's a little bit from a U.S. perspective. And then with regard to the Middle East distributors, you're a bit high in terms of what that represents in revenue, particularly in the Gulf Coast countries, it's going to be in the -- it's going to be the low single-digit percent range of our total business and the cancellation and forecast reductions that we've taken to date, as we've commented, it's relatively insignificant in the grand scheme of our overall outlook, which you can see that we're holding it. So it's not impacting that.

Very helpful. And then the second part -- second question is really, I think, to Tim's point, about input costs. Most of the products are oil-based derivatives. I think we heard from adidas yesterday calling out that, that could be a potential headwind. We're hearing tonight that it could be an impact for 2027 spring product. Can you help us frame how do we think about this? If oil hypothetically stayed at $100 throughout the balance of the year for structural reasons, how do we think about that as an increase to your cost of goods sold for at least 1H '27?

I think it'd be a bit premature for us to provide the exact framing on that. We're in the process of finalizing costing and beginning to buy for the spring season. There's no doubt that certain of those -- I should step back for a minute, certain of the raw materials have been already processed and ready in advance of the Middle East. So this is going to bleed in over some period of time. But there's no doubt that come the spring season, we'll begin to see that pressure. And these things don't calm over the coming months here and it increasingly bleeds into the fall season as well.

And Laurent, we also have other mitigation efforts, including engineering our products in a different way and changing the componentry. So we're not trapped with a single source like that.

The next question comes from Mauricio Serna with UBS.

Just a quick question on the direct-to-consumer business. Could you talk about in the U.S., how that business trended throughout the quarter? Curious to see if you can provide some context of how consumers have reacted to the high single-digit price increases. And on China, I think you mentioned the growth has been -- you noted wholesale as the primary driver of growth in Q1. Could you talk about the direct-to-consumer business there as well?

Yes. In terms of taking your first question with regard to the DTC business, I presume you're focused on the U.S. side of that. trending in the quarter, as you might imagine, certainly, the January, February was cold, but we did comment on the shortage of inventory that we had. So that certainly held things back increasingly as we got into the spring season and we're well supplied from inventory, and we were pleased overall with what we're seeing from a demand standpoint in that part of our business, both through our direct-to-consumer business and frankly, through our wholesale business, where the sell-through is outpacing the intake from retailers and where overall stock levels are. As it relates to the high single-digit price increase and from a price elasticity standpoint, because I think that's essentially where your question is at, it came in more or less where we would have anticipated it being. I think I touched on earlier from an overall revenue and margin perspective on the quarter, we were at or around where we would expect it to be. Certainly, there's elasticity in our product. I don't think that's any mystery. There are categories of our business where we've got more pricing power, we can pass along more of those price increases and others that less so. And certainly, we're adapting to that on the fly. And then as it relates to the China business, I guess what I would describe there is, yes, we grew 5% in the quarter. We still contemplate healthy growth out of the China business for the full year. We've got double-digit percent growth that's planned there. Our DTC business was down a little bit in the first quarter, nothing -- not down rather, but certainly not growing the way it had. I wouldn't call out there's anything specific there. We still think that's a healthy business.

Okay. And then just quickly on the commentary, to follow-up on the shipments. There was some -- it sounds like a lot of the impact on the earlier shipments was in Europe. Maybe just wondering if you provide a bit more context of how would that impact the second quarter, third quarter of that region as we think about how we model the next several quarters for Europe?

Well, certainly, the rate of growth that we achieved in Europe in the high teens rate in Q1. Given that shift, you're not going to see that rate of growth come in Q2. But that said, we were very pleased with the spring '26 order book that we took for Europe. It's in the double-digit percent level of growth. I don't have the fall '26 in front of me, but we'd anticipate our European business being healthy from an overall growth standpoint throughout the full year.

The next question is from Paul Lejuez with Citigroup.

Curious how much you think sales were hurt in the first quarter in the U.S. due to the inability to fulfill first quarter demand and also if that more sales in wholesale, DTC, both any color you can provide there? And curious what you saw at POS across markets. And maybe if you could provide more specific color on the fall order book that you're seeing in the U.S.

Well, specifically as it relates to the shortage, and again, I wouldn't want to speculate on what revenue would have been had we not had the shortage. What we can share is it was roughly about a $30 million reduction in our planned fall '26 or fall '25 inventory purchases. And from an overarching standpoint, I would describe that, that was probably more impactful for the wholesale business in Q4 '25 as we were continuing to ship in the season. And then the D2C business would have been a bit more impacted in the first quarter.

And then the order book U.S. for the fall?

Yes. The order book for USA was -- as we said, we're very pleased with it came in slightly north of where we thought it was going to end up. So we're thrilled. Of course, we have these 2 great -- in addition to a solid growth across the business, we have these 2 great categories of merchandise, the amaze and it's new entrants and then the ROC Pant, which is another great product that's doing very well for us.

I think the only thing I would add to the fall '26 order book is we previously communicated that we had anticipated the order book being up in the low single to mid-single-digit percent range. And as Tim touched on, the order book came in a bit healthier than we had even anticipated. So it's moving more into that mid-single-digit percent range. We're quite happy with how the order book landed.

That was overall, though, right? Not U.S.?

That's U.S. specifically. From an overall from a global standpoint, we're solidly in the mid-single-digit percent range based on the order book we have and what we anticipate the wholesale growth to look like in the second half. And then my comment with regards to the U.S. is initially, our projections were dated back in February that would be up low single to mid-single as we closed out the order book. And I think given the uptake of the ACCELERATE product in particular, that we ended up on the north end of that range.

The next question is from Mitch Kummetz with Seaport Research.

Just a follow-up on the $10 million timing shift. I'm just wondering if -- is that -- is your outlook for the second quarter, does that contemplate that as just being like a true shift? I would think that with the orders delivering earlier that, that would kind of lengthen the window for reorder potential. And I'm wondering if you factored any maybe stronger reorders into the guidance if that is an opportunity?

Potentially, Mitch. I mean, any time you ship into the -- and you're able to set the floors a little bit earlier and if sell-throughs holds up and the consumer is healthy, then certainly that would bode some opportunity. That timing shift, just to be clear, though, that's a timing shift relative to what we forecasted and planned for Q1, not necessarily a year-on-year change. I think, by and large, the year-on-year changes in timing shifts are not all that substantial. I mean there's a couple of pockets of it that you're seeing in the European business and so forth. But on the whole for the company, it's not a meaningful driver.

Okay. And then, Tim, I think on the last earnings call, you talked about how depleted channel inventory was coming out of the winter season on seasonal merchandise. I'm curious to get your thoughts if you feel like your fall order book is in line with kind of where channel inventory stands? Or do you think that maybe retailers have sort of generally under ordered just because they're being conservative? And does that provide more of an at-once opportunity going into the back half of the year?

Yes. I think our retailers ended up quite clean, frankly. And so I expect that we'll be going into a season where we have lots of opportunity. The question is whether or not the consumer shows up in the kind of robust way. So that's why even though we've got indications across the business that we've got a better year looking at us than what we guided, we just want to make sure that we've got the appropriate conservatism. And frankly, we don't have a lot of extra inventory even if things go -- get wildly better, we just don't have a lot of inventory on a speculative basis.

We currently have no further questions in the queue. I would now like to turn the floor back to Tim Boyle for closing remarks.

Thanks, operator. Thanks, everybody, who's listening in today. I hope that you'll come away with our -- from this discussion today with a better appreciation of the progress that we are seeing and it gives us the confidence that we're on the right path. There is still much work ahead of us to fully realize our strategic vision and unlock the full potential of our brands. Our financial foundation is solid. Our international business remains robust, and we can now see our U.S. business starting to turn the corner with the traction we're gaining under our ACCELERATE Growth Strategy. In dynamic times like these, strong companies emerge stronger, and I'm confident that our strengths and competitive advantage will position us to compete and win. I look forward to seeing you all on our next quarterly review in the next few months. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.